How to Start a Business in Dubai as a Foreigner

 

Welcome, fellow entrepreneur! We assume that if you have reached this stage, you are probably thinking of betting on creating your business in Dubai as a foreigner. Well, you are at the right place then! I am going to take you step by step in what you need to know starting with the great opportunities that Dubai offers through the tedious process of doing business in this great metropolis.

This proverb tackles the matter as if it were a Picasso painting, as most would state, it is only answerable from the field. So yes, it can be a freakin’ cool ride. Of course, there are some drawbacks too, but the gains may be immense. So go ahead and get yourself a cup of coffee (or go all the way and have an Arabic coffee since you are in Dubai), and let’s get to it!

Why Start a Business in Dubai as a Foreigner?

Believe me, the first time I thought about opening a business in Dubai, I just couldn’t believe that there were so many opportunities. It is not only the glamour, which the mass media presents, though it is certainly one of the reasons enjoying being there.

Dubai as a Global Business Hub

Imagine it this way: you are standing at Europe and Asia and Africa’s point. That is almost exactly what Dubai has in terms of its geographical location. It’s like being in the centre of a global network of trade which is a big plus to any company wishing to venture out to the world market.

I will never forget the first time I touched the ground in Dubai and the first thing that hit me was the top class facilities. I am talking the latest technology without exception – in roads; in the internet connectivity. It seems as if the UAE strives to foster business in every way possible.

Let us not fail to mention that there is the tax-free environment as well. For one, I come from a country where most people pay a heavy tax. And when they are told that they will be able to save more of their sweat earnings, one feels encouraged.

Government Encouragement to Pursue Foreign Business Persons

So now this is more fun. The Dubai authorities are bringing out the best for us foreign business persons. Some policies have been launched like the Golden Visa granted to overseas business people. It is like they are saying, “We want you here and want to pay you also.”

I have followed closely the development of the UAE 2021 Vision, and I can understand that it is really happening. They don’t just talk about it, they make it happen; they are through with lip service and are busy in the field looking for talent and investments.

And if that is the field that you like, real estate, technology, tourism or even logistics then you are lucky. The government is big on these sectors which means there are plenty of such projects waiting for one to grow and extend reinforcements.

Legal Aspects and Ownership Options for Foreigners

Ok, now we come to the relations and don't worry, this is going to be the boring legal stuff as fast as possible!

Ownership Regulations for Foreigners in Dubai

Here's some exciting news: the recent 2017 economic laws of UAE allows for foreign investors to own and register companies within the mainland without presenting a local sponsor. This is huge! When I first opened my company, it was necessary to obtain a local sponsorship, but today you don’t necessarily have to do depending on your business type.

If you are looking for free zones (more about this later), then they are happy for you. 100 percent foreign ownership of these areas is permissible in all activities irrespective of the area. This is how it is, it’s like having the cake and the icing on it!

Mainland vs Free Zone Business Setup

Now you have two primary choices you may have. That is a free zone or a mainland. I shall say based on my experience let me simplify it:

Mainland Setup

Pros:

• The advantage is that one gets to the local UAE market which is a good catch.

Con:

• May cause the need for local sponsorship in some activities.

Free Zone Setup

Pros:

• Foreigner can own the company 100%
• No customs taxes imposed
• Lesser complexities.

Con:

• Suitable only for business which is purely international oriented.

For my first Business, I chose to go with a free zone, and it turned out being a patently smart choice for me. Thirdly, it is apparent that the story will be different depending on the nature of the business, and the objectives thereof.

Steps to Establish a Business in Dubai and in the UAE as a Foreign National

Alright, let us get our hands dirty and deal with the fine details of how to establish your business – do not worry, I will take you through the process of each step.

Step One: Selecting Business Activity

Let’s start at the beginning, you should know the actual activities and operations your business is going to carry out. Quite pleasant to hear, isn’t it? Well, here’s the problem – the business activity has to comply at all times with the related rules of DED.

At the beginning, I never failed anyone else, however myself. One such area was Dubai’s official activity list. It is something one wouldn’t really look forward to reading but believe you me, it is important. This is also where you will make a decision that will influence your licensing options, so be careful!

Step 2: Choose the Legal Structure of Your New Business

Please move on to the next step. The legal structure which you shall adopt should also be furnished. The choices are the following:

• Limited Liability Company (LLC)
• Sole Proprietor
• Free Zone Incorporation

I took the Free Zone company for my first business and it was great. However, there are merits and demerits for each structure with respect to the risk and control, and operating the company.

Step 3: Filing for a Trade Name

Now that’s the most interesting task, I would say, the task of assigning your company a name. But slow down, it's not just about coming up with a nice name. There is one more step that involves registering the trade name with DED or with the free zone authorities.

Pro tip: Make sure you check if the name you have been brainstorming is available before getting too attached to it. I have to say this because I suffered really hard and went back to square one when my first-choice name was already snatched away!

Step 4: Get the Initial Approvals

This is the point at which the paperwork starts to grow one’s neck. You will have to be making applications for initial approvals including:

• DED
• Dubai Municipality (and also regulations depending on your industry)

I won’t lie, this is the boring bit, worse only because it is necessary. Just remain calm, organized and you will manage to complete it.

Step 5: Solicit a Trade License

This is the last step! You will be required to acquire a trade license from either the DED or a Free Zone Authority. It's common for there to be the following three broad categories:

• Commercial License
• Industrial License
• Professional License

Pick the one that fits your business activities most. And congratulations, once you get this, you are officially in business!

Costs of Opening a Business in Another Country

Okay now, money matters. Opening a business, of course, is very expensive in Dubai, nevertheless, it does not have to be overly costly. Here are some of the figures you should expect:

Business Set-Up Expenses

When establishing my business, I also encountered some unexpected various expenses. Here are some items you should aim to set aside funds for:

• Charges for registration
• Charges for licenses
• Office space, whether real that has to be taken or virtual one
• Visa fee
• Fees for services provided by the government
• Local sponsorship (if establishing on the mainland)

Particular low ball number ranges will depend on all those factors but in summary, if you are establishing a business, it will cost between AED 15,000 to AED 50,000 for the essentials.

The Expenses of Renting an Office

Should you require an actual office, brace yourself for some game-changing expensive sticker tag. Dubai is not exactly a budget-friendly city, especially in the most sought after business real estate areas. Since I was also starting from scratch, I explored places located within what we now know as Dubai Marina, Business Bay, and JLT.

Here’s how much you may expect to pay:

• Renting out a small room in a business center will cost between AED 25,000 – AED 50,000 per annum
• An office of average size within commercial premises would set you back AED 70,000 – AED 150,000 annually.

But do not panic! There are also cheap alternatives like virtual offices and co-working spaces that one can first begin with.

Visa and Residency Costs

Do not forget about the amount allocated for visa costs personally, for the employees and their dependents. This is what I had to allocate for:

• Fees payable for visa processing
• Required medical examinations for the visa
• To issue Emirates identification
• Medical coverage

When bringing a family member or two, that would be the average cost per person for a 3-year visa between AED 3,000 - AED 5,000. So, in short, it adds up really fast if you are bringing over a team or family with you!

Visa and Residency – What They Require From Foreign Entrepreneurs

What type of a visa did you get is really important – after all, what is the use of trying to run a business there if you cannot stay in the country in a legal way? This is everything that you need to know:

Business Visa For Foreigners

Let us start with a business visa. It is quite simple to obtain and will facilitate your entry in Dubai for business establishment as it is not available in other forums. The procedure is as follows:

1. Seek a sponsor (it is customary that one’s business setup consultant assists in locating such)
2. Lodge your application with detailed information and necessary documentation
3. Provide the specified charges
4. Follow-up the response (usually this takes about 5 to seven working days)

Thereafter, once your business is operational, you will be able to apply for and obtain a long term residence visa. And here is good news – Dubai has recently introduced the Golden Visa, meant for selective investors and entrepreneurs providing a 10-year residence visa.

It’s one of those things that you should certainly try.

Employee Visa Sponsorship

As your company continues to expand, it is most likely you will have the need to recruit employees. Great news – as a business owner, you are able to apply for visas for the employees in your company. Here’s what you need to know:

• The number of visas you are able to sponsor depends on the size and structure of your business
• A labor contract and health insurance are a must, along with certain legal minimums regarding salaries
• The Ministry of Human Resources and Emiratisation has to approve the process

My first experience of hiring an employee came as a pleasant surprise. As they say, the right paper makes the business smoother-sailing. Keep your papers ready!

Family Visa Sponsorship

Should you decide to move with your family members (and who wouldn't – Dubai is quite an attractive place for families) you can apply visas for your family members as well. Here is a list of what you will have to have:

• Evidence of satisfactory income (this goes for AED 1080, it usually earns around AED 1080 monthly)
• Evidence of housing
• Marriage certificate for the spouse and birth certificates for the kids

I relocated my family about six months after I set up a business, and it is one of the best choices I have ever made. Being with them in Dubai made me feel at home rather than being disoriented.

Banking and Financial Requirements

One necessity which is critical to the success of any business is how to source funds and spend them efficiently. Here’s an overview of how the banking system works in Dubai:

Opening a Corporate Bank Account

To open a business bank account in Dubai doesn’t pose any problem; however, it requires time. Here’s what I did:

1. Chose a bank (I went with Emirates NBD, but there are other good options like Mashreq Bank and Dubai Islamic Bank)
2. Collected all supporting documents required (trade license, passport copies, proof of residency)
3. Completed the application form
4. Waited for approval (this took about 2-3 weeks for me)

Pro tip: For some banks, business accounts can be switched on to priority service. It may cost you some money but it can save you a lot of time and trouble.

Capital Transfer and International Payments

Capital inflow into Dubai from those who reside abroad has certain restrictions when it comes to international transfers. Most of the banks in Dubai have proper arrangements for international transactions, but the costs may be too much.

I also worked on unheard-of methods saying that I used smart ways like using TransferWise (now Wise) when doing international transactions in order to pay less in fees as well as achieve better rates.

Taxation and Compliance of Foreign Owned Business

One of the greatest benefits when it comes to business in Dubai is the tax regime. Still, there are things you need to understand:

Tax-Free Benefits in Free Zones

If you decide to establish in a free zone (as I did) you are in for a treat. Most free zones provide the following:

• 0% corporate tax
• No customs duties
• 100% foreign ownership

It's pretty sweet, I have to say!

VAT Implications

Now, before you get too carried away with the excitement of the tax-free life, there is one thing I have to introduce you to: VAT. If total business revenue surpasses AED 375,000, it is necessary to register for VAT as well as impose a 5% tax on the majority of goods and services.

In my second year of business, I hit this threshold, and while establishing it was a bit of a nuisance, I find it practical once you know whatever it is you must know.

Compliance with Local Regulations

Don’t forget about other compliance issues:

• Obtaining annual renewal of the trade license
• Complying with the Dubai Municipality regulations
• Following up on additional reforms in local business laws

I set these reminders in my calendar for all these things to ensure that I do not forget anything important.

Free Zones Most Suitable for Foreign Investors

If you have made up your mind to set up in a free zone (and there are some good reasons to do so), here are some of the best locations, which you may find useful:

Best Free Zones with Business Setup

There are various famous ones such as:

• Dubai Silicon Oasis: A good host for tech startups
• Dubai Multi Commodities Centre (DMCC): Trading businesses require this
• Dubai International Financial Centre (DIFC): Place for finance and fintech based companies

Advantages of Free Zones

As a brief conclusion, these are the main advantages offered when registering a new business in a free zone:

• Foreign company can own 100% shares
• Cost-effective operations
• Ready access to international business
• Free import duty for bona fide investment only.

On top of that, most of the free zones provide supportive activity and network activities that would really add value to your business.

Deciding on the Free Zone that Suits Your Business

On the following lines:

• Your business (because some Free Zones are appropriate for a particular industry)
• Region
• Prices
• Services provided

I decided to establish a tech-related consulting firm using the Dubai Silicon Oasis and that has worked out well for me.

Employing Personnel as a Foreign Owner of Business Assets

As your business grows, you will probably start to gather employees. Here is what you should be informed about:

Visa Procedures for Employees

One instance of employee visa procedures is a visa procedure for getting the employee visas for oneself. However, there are additional procedures to be observed:

1. Get the approval from the Ministry of Human Resources and Emiratisation
2. Apply for the visa
3. Arrange for medical tests and Emirates ID
4. Get the visa stamped in the employee’s passport

It might sound complex, nevertheless, the majority of this can be carried out over the internet nowadays, which makes things more convenient.

Dubai Labor Laws

You must be aware of the regulations pertaining to labor in Dubai. Several pointers are worth noting:

• Minimum salary specifications which depend on the industry and nature of the job
• Hours of work (over 8 hours per day or 48 hours a week for others)
• Some paid annual leave (yeah the normal billing system is that: 30 calendar days, for most employees in a year)
• End Of Service Gratuity

I found that dealing with good HR consultants helped me figure out these laws when I began hiring people in the first place and they helped me avoid any pitfalls.

Support Services for Non-Local Entrepreneurs

Starting a business in an unfamiliar country can be frightening. Nonetheless, there is a lot of assistance to be had:

Business Setup Consultants

I highly recommend working with a business setup consultant, more so on your first business trip in Dubai. They can assist with the:

• Choosing a business structure
• Submitting a lot of forms, and writing applications
• Complying with legal requirements in the area

Just make sure you choose a DED-approved consultant for peace of mind.

Government Grants and Incentives

Do not hesitate to look out for initiatives that are targeted at foreigners doing business. Some suggestions to explore:

• Dubai SME: Assists small and middle-sized businesses
• Dubai’s Startup Hub: These present customized advisory services, working exposure and funding sometimes.

Incubators and Accelerators

If you happen to fall into the technological angle of business or rather if your company is a Startup then go for incubation and acceleration centers like:

• Dubai Startup Hub
• AstroLabs
• Dtec

These can help get you into an office and offer guidance, or even opportunities for investment.

Conclusion

Phew! We must have really gone full circle in this particular discussion. The journey of setting up a business in Dubai as a foreigner has potential, fun and yes, it has plenty of hitches too. On the other hand, it can indeed be a very gratifying experience as long as there is adequate preparation and assistance at hand.

On top of that, bear in mind that no two entrepreneurs’ stories are ever the same. The strategy that led me to success may not be successful in quite the same way for you. All the way through, however, I increasingly rely upon sharing and hope that by sharing my experiences and views helped in making up your own picture of Dubai business.

On the other hand, if you are over-stressed, there is no cause for alarm – that is quite reasonable! Look at it as a series of individual steps and remember that if you are stuck, ask for support. Generally speaking, the business environment in the UAE is quite encouraging and hospitable to its residents especially the newbies.

So, are you up for the challenge? The offer is on the table, the city awaits you and all that it has in store for you. It just might be that a couple of years down the line, you would be the one at the front distributing this article, having been successful and we all learn from you.

Good luck and who knows, maybe I will meet you in Dubai in the near future!