How to Launch a Business Venture in the UAE
The United Arab Emirates is a free market with a wonderful business infrastructure. Highly beneficial fiscal policies attract entrepreneurs from around the globe: they are eager to use the fantastic business opportunities that the Emirates offers. How can you launch a business company in the UAE? We discuss the matter in the text below.Thank you for reading this post, don't forget to subscribe!
You have probably read about the advantages about opening a business company in the UAE many times. The venture is so beneficial that a large number of agencies sing praise to it. We are not going to dig deep into the advantages of starting a company in the UAE but briefly dwell on the most important of them instead.
- Taxes close to zero. It would be a mistake to claim that no taxes at all are charged in the UAE. The VAT is 5% and the corporate tax is 9% (it has been payable by the Emirates companies since July 1, 2023). But even though some taxes are payable in the UAE, their number and their rates are obviously smaller than in most other developed countries.
- A stable banking system. Many UAE banks are among the top 100 banks of the world. According to Moody’s – a highly reputable agency – the banking system is stable in the Emirates, the capital resources are secure, and the liquidity buffers are strong.
- To continue the topic of banking in the UAE: the financial institutions in the country treat the matter of banking privacy very seriously. The account holders’ data are well protected and they are not disclosed to any third parties. Only in extreme cases, can the data be disclosed to the UAE authorities.
- Intolerance towards corruption and its total lack as a consequence. All business operations are maximally transparent in the UAE. No gray or semi-legal schemes are applied. Bribery is also inexistent in the Emirates.
- A large number of Free Economic Zones to choose from. You can domicile your company in the Free Zone that suits your type of business best of all. For example, the IFZA Zone gives access to vast markets by land and by sea. If your company is engaged in trade operations, you can benefit greatly from the transportation opportunities available in IFZA: you can sell your products with ease.
- The geographical location of the United Arab Emirates makes the country a key transportation and logistics center of the world. The logistic chains are truly perfect in the country.
- The UAE is a politically neutral country and it is open to business persons from all parts of the world.
One of the key trade centers indeed, the UAE attracts business of all sizes: from small companies with just a few employees to giant transnational corporations. If you would like to establish a business in the UAE, you would have to go through several stages of the process.
1. First of all, you have to decide if you want your company to be registered in the mainland UAE or in one of the Free Economic Zones (FEZ).
Any foreigner is entitled to register a company in the UAE no matter if he or she does it in the mainland UAE or in a Free Zone. What is the difference?
- A mainland (or a local) company brings the largest number of opportunities to the company owner(s). You can do business both inside and outside the UAE. The local legislation allows registering companies of different forms of ownership. Similarly to many other countries, you can establish a sole proprietorship, a limited liability company (that has to have from 2 to 50 co-founders), or a public company in the UAE.
Since recently, local companies have had an additional important advantage. Today, a UAE-registered LLC can entirely belong to foreign nationals. Previously, a local resident had to have at least 51% of company shares. If you are engaged in offline business operations, a local company in the UAE will suit you perfectly well.
- A FEZ-registered company will give you access to global markets but you won’t be able to do business with companies based in the mainland UAE. At the same time, FEZs offer substantial tax incentives to the companies registered there. For example, a FEZ-registered company does not have to pay the 9% corporate tax. Currently, you can find over 50 FEZs in the UAE and each of them is adjusted to the needs of a certain business area. With some serious research, you can find the FEZ that possesses the characteristics most important for you and your future company.
Then you have to determine what business area your company is going to work in and apply for the corresponding license. All types of business activities are licensed in the UAE. The license fee will depend on the license type and the license can be acquired within one week. The License Department is responsible for issuing business licenses in the UAE. You can apply for a license after the Ministry of Economic Development gives provisional approval to your business project.
Please note that the license is normally valid for one year. When the period expires, the license needs to be extended. Licenses cannot be extended automatically, so you will have to ‘manually’ extend yours. When you do so, you will have to demonstrate that your business company still conforms to all the requirements including the amount of charter capital, the economic substance, the spheres of business activities, and so on.
After that, you have to find a unique name for your company. You can check is a certain company name is ‘vacant’ or ‘occupied’ by logging onto the official website of the Ministry of Economic Development. The same Ministry has to provisionally approve your business project. You have to submit your business plan and a few other documents to the Ministry to get the approval. In particular, you will have to draw up a Memorandum and Articles of Association in any case. The document has to contain basic information about your prospective company: its name, directors, registered capital, etc.
You will have to rent or buy office space for your company in the UAE. Please bear in mind that finding the right company office can take a couple of months. Certainly, you can find numerous classified ads online. You will need to supply your company registration certificate to make a rent agreement:
When the agreement is signed, you will obtain an Ejari – a special document confirming the legality of the rent agreement.
You cannot do business in the Emirates unless you have a bank account. You have to prepare the following documents to set up a bank account in the UAE:
- Statutory documentation: Memorandum and Articles of Association, license, company By-laws, and Registration Certificate;
- Your residence visa and Emirates ID.
- Rent agreement (or a property ownership certificate) for the company office;
- A detailed description of the company’s business activities;
- Personal documents for the company owners and CEO;
- … and some other papers.
Please note that opening a corporate bank account in the UAE takes time. The process can become even more complicated if you hold a business license of a certain type that makes the banks especially cautious. If you have a general trading license, for instance, you should expect to undergo enhanced due diligence procedures.
To finalize the company registration procedure, you have to register with the fiscal authorities of the UAE as well as the Ministry of Human Resources and Emiratisation.
If you have not registered foreign companies before, the process can extend over months for you. You will be well advised to hire an experienced lawyer who can help you accelerate the process and avoid various traps and pitfalls.