How to Start a Business in Dubai: A Comprehensive Guide

 

Starting a Business in Dubai: A Comprehensive Guide

Hi there future, Dubai entrepreneur! I appreciate the fact that you want to do business in this dynamic city. Personally speaking I have walked that journey and I can assure you it is an adventurous one. So, allow me to take you through all that you need to know in order to open a business in Dubai.

Why Start a Business In Dubai?

Let me tell you; the first time I stepped into the country getting these opportunities seems impossible. The media does not show only the glitter and glamour that is the reason there is developed business opportunities for people like us.

Entrepreneurial Friendly Culture

Shifting to business, the business climate in Dubai can be quickly summarized as a welcome mat. You can rest assured that the government here understand it quite well, they do understand that facilitating businesses is how a country’s economy grows. Here is what makes it so appealing:

• In many of the jurisdictions, both personal and corporate income taxes do not exist. Yes, you heard it right!
• Good and reliable facilities that even angel investors find hard to resist.
• Ideal location it is right at the crossroads between Europe, Asia, and Africa. This is what you can call an international trade lottery.
• Ever-evolving policies of the government aimed at business enhancement.

I remember the time when I was setting up my consulting firm for the first time. It was so simple to do, and the help I got was an absolute wonder in regard to my whole experience back home.

The Industries are on the Rise

It’s not enough to say, Dubai is developing. Instead it is more appropriate to say, Dubai is developing at a rapid rate. There are so many sectors that are available on a grab:

• Real estate (as usual, this is a hot cake here)
• Tourism (who will want to miss the opportunity of visiting Dubai?)
• Retail (shopping is almost a national recreation)
• Information Technology (there’s a lot of emphasis on becoming a smart city)

The government’s Dubai 2021 plan is primarily targeted at people like us that is: business people and foreign investment partners. In fact, they are rolling out the red carpet, which one will want to take a walk on.

Choosing a Business Structure in Dubai

Okay now let’s go to the formal part. Establishing a business framework is quite important, and here in Dubai there are some interesting alternatives.

Mainland vs. Free Zone vs. Offshore Companies

This was quite a puzzle for me in the beginning, but in any case, let me simplify it for you –

Mainland Companies:

• Under the regulations of the Department of Economic Development (DED).
• Are able to do business in UAE’s domestic market directly.
• Sometimes, a local sponsor is needed.

Free Zone Companies:

• Benefits from great incentives.
• Who owns free zone companies? 100% of foreign ownership.
• However, there are restrictions regarding such markets and residing within the UAE territorial countries.

Offshore Companies:

• Good for doing business globally.
• They maintain a solid level of confidentiality.
• They are not permitted to set up a business in the territory of the United Arab Emirates.

I went with a Free Zone company for my business because the tax benefits were too attractive for me, and I did not want to engage in direct business operations in the local market.

Common Business Structures

Here are the main types you will be considering:

• Sole Proprietorship: All you. Easy to understand, but possesses unlimited liability.
• Limited Liability Company (LLC): Insurance against liability is crucial. The most popular one type.
• Branch Office: This is for already established companies which wish to enter into the Dubai market.
• Representative Office: This kind of office does not earn revenue directly but it is effective in the areas of relations management and doing market research.

Which Structure is Right for You?

This really varies based on your nature of the business and what you want to achieve. Here is what I would say:

• For those targeting the local UAE, very much go for Mainland.
• In case you want complete ownership along with tax benefits and do not need to trade within the country, Free zone is the best option.
• For those who are all about international business along with absolute privacy, you should look into offshore.

Steps to Start a Business in Dubai

Ok, let's do away with all the theory and proceed to the core area – the actual steps. I'll take you through it stepwise just the way it would have pleased me if others did to me at the start.

Step 1: Choosing a Business Activity

Before beginning anything else, you must figure out what it is that your business will offer. The Department of Economic Development (DED) has categorized over 2000 areas of specialization to be undertaken. This is important because getting this wrong is going to affect the license that you will hold.

Some popular activities include the following beneath:

• Trading for profit.
• Informal industries.
• Building and construction.
• Services relating to technology.

It was fascinating to look through this list for hours and ensure that all functions related to one’s consulting profession were accurately penned down. Well-worth the effort here!

Step 2: Choosing a Legal Structure

This was alluded to above, but this is the moment to put it all down on paper. This is all about control - who owns it, who is responsible, and how you can do business. I went with an LLC in a Free Zone, which allowed me to own everything and be shielded from risks – sweet in my view.

Step 3: Securing the Business Name

Okay, now this is the part where the wigs fly off! But wait; there are risks:

• Choose a name that reflects your kind of business
• You have to avoid vulgar or blasphemous words
• Respect existent trademarks (except when it’s your own)

Tip: Head over to the DED website to check whether the name you fall in love with is still available. I had to go through three before I found one that wasn’t taken!

Step 4: Seeking Preliminary Approvals

We are now moving into the boring part…it’s called paperwork. For this stage, it will probably be preferable to seek initial approvals from:

• DED
• Dubai Municipality (depends on your business nature)
• Additional relevant authorities

This step can be a bit of a waiting game as all you have to do is wait blue. I found it a bit tricky to avoid the eagerness to call them every day though…I think I pleasantly stressed them out with phone calls. Persistence pays off!

Step 5: Making a License Application

This is a biggie. There are three main types of licenses:

• Commercial License
• Industrial License
• Professional License

There will be submission of:

• Application form
• Shareholders’ passport copies
• NOC from current sponsor (if applies)
• Other documents specific to your business type

There was a lot of information presented at this stage that was quite stressful, but as the case would be, take it one document at a time. It can be done!

Step 6: Leasing Office Space

This implies that there will be a business place address for the business. Available options include:

• Traditional office space
• Co-working spaces
• Virtual offices (available in some Free Zones)

These spaces were made easy because I began with a small office in a free zone which suited my needs. Space came with growth of the team too!

Step 7: Finalizing Legal Documentation

Almost there! This involves:

• Filing your Memorandum of Association
• Filing all the legal documentation with DED or the Free Zone jurisdiction of your choice

We had approximately 2-3 weeks for me to get everything set. Patience people, Patience!

Legal Requirements for Business Setup

Let us now take a further plunge into the law part of this. I know it’s the boring bit, but it is important which needs to be done well.

Business License Types

I will go back to this issue as I mentioned before, but let us split it some more:

• Commercial License: For trading activities, retail etc.
• Industrial License: For manufacturing and industrial activities.
• Professional License: For service providers, consultants, artisans.

Opting the correct one is very important. I opted for a Professional License to run my consulting firm, which was spot on except for the fact that a delay in submission of such application is feast or famine.

Visa and Residency Requirements

If you are not a national of UAE, you are going to require a residency visa. Here’s the scoop:

• You as the business owner can sponsor yourself and your employees.
• The number of visas that can be applied for is dependent solely on your office space as well as the company structure.
• In Free Zones the quality of the work is usually on a high level, and the quotas are easier to reach.

I quickly got through all of the steps which I expected to find more complex. The Free Zone authorities were super helpful in guiding me through it.

Opening a Corporate Bank Account

You will also have to open a local bank account for your business which is quite necessary. Some of the favourite options are:

• Emirates NBD
• Mashreq
• Dubai Islamic Bank

Usually one will be asked for:

• Trade license
• Passport copies of shareholders
• Company documents

Pro tip: Know your bank manager. This has been useful on more than a few occasions for me.

Costs of Starting a Business in Dubai

Well, let’s move on to the important part money. Dubai business set up cost is exorbitant but this is a way of planning for one's future.

Business Registration Fees

These costs will differ depending on all the following conditions:

• Mainland setup: AED 15,000 – 50,000+
• Free zone setup: AED 17,000 – 30,000+

Do keep in mind that these are estimation figures. You might incur actual costs which are going to be higher or lower than this.

Average Office Rent Per Month

This may well be one of the major areas of your budget:

• Prime locations in Dubai: AED 70-130 per sq. ft.
• Free Zones: Usually less pricey, around AED 50-100 per sq. ft.
• Virtual offices: Over AED 15,000 per annum.

I started with a small office and upgraded as the business progressed. Do not bite off more than you can chew in the beginning!

Employee Visa and Residency Costs

For every worker, please set aside:

• Visa costs: Roughly AED 3,000 - 5,000
• Medical costs and Medical insurance

Legal and Administrative Costs

Do not put aside any expenses regarding the following:

• Judicial assistance (in case you need them)
• Corporate management consulting, etc.

I incurred approximately AED 10,000 as Legal and administrative expenses while in the course of setting up. It was worth every dirham for the peace of mind.

Taxation and Compliance

I do know that there are tax advantages in Dubai, yet there are still some things that you have to know.

VAT Registration and Compliance

• VAT was imposed as of 2018 as 5%
• You need to apply for registration if your taxable supplies and imports in one year exceed AED 375,000

I completed the VAT registration as soon as I breached the threshold. It is not too complicated, although it is vital to coordinate your records in accordance with the developments.

Corporate Tax Norms

• Free zones usually have some tax exemption features
• Local companies have corporate tax obligations (very recently instituted)
• Watch out for the new changes – they are always subject to change

Continuous Obligations

• Renew the trade license every year
• Adhere to the Dubai Municipality regulations
• Keep books of accounts up to date

I set reminders for all these to make sure I do not forget the due date.

Business Areas in Dubai

Free Zones are the greatest attraction for many businessmen, including myself. The reason is as follows:

Best Free Zones with Business Setup

There are various famous ones such as:

• Jebel Ali Free Zone (JAFZA)
• Dubai Multi Commodities Centre (DMCC)
• Dubai International Financial Centre (DIFC)
• Dubai Silicon Oasis

Advantages of Establishing a Free Zone

• 100 percent foreign in all shares
• No customs duties
• Tax benefits
• Less complicated visa processes

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.

Recruitment of Employees and Work-related Visas

Through the expansion of your enterprise, it is unavoidable that at some point you may have to hire employees. This is what you have to understand:

Employee Visa Application Procedure

1. Step 1: Ministry of Human Resources and Emiratisation Approval
2. Step 2: Application of Work Permit
3. Step 3: Arrange Medical Examination
4. Step 4: Apply for Residency Visa

Human Resource Policy & Employment Agreements

• Understand the employment regulations in the United Arab Emirates (UAE) rather well.
• Prepare proper and reasonable employment agreements

I always have my contracts canvassed and evaluated by a lawyer. It is worth the money.

Sponsorship Of Employees

You will also become the sponsor of your employees’ visas as an employer. This is not a walk in the park and it has requirements so be fully aware of what is entailed. Respect to

Support Services for Entrepreneurs

You do not need to do this by your own! There is too much assistance that you can choose to use.

Business Setup Consultants

These persons can be lifesavers. They know the ins and the outs of the process and there is no point of wasting time and headaches.

Government Support Schemes

Have a look at:

• Dubai’s SME
• Dubai’s Startup Hub

These present customized advisory services, working exposure and funding sometimes.

Startup Incubators And Accelerators

Such as in5 and astro labs provide good assistance especially to tech start-ups. If you are not in technology, look for incubators in your field.

Wrapping Up

Wow! An amazing amount has been addressed in this section. It is great to know that starting a business in Dubai is an amazing adventure. And even though at first it might seem hard, it is not impossible given the required information and help.

However, each entrepreneur has a different story in which you could be the helping officer or the one being assisted. I say so because my case might be your points of criticism. But the principles already outlined in this article are universal.

I would like to invite you to share any thoughts, stories or even questions you may have. Please feel free to leave me a message or get in touch – let’s help each other out in this wonderful entrepreneurial paradise located in Dubai!

We hope you enjoy your new business. You look at Dubai and see the next place where you will conquer the world!