UAE Business Set-up

Investors, all across the world, see the United Arab Emirates (UAE) - the geographic and economic backbone of the Middle East - as a vital element of their operations. It is one of the prime destinations for multinationals to set up their regional base and serve their high growth clients in the Middle East, Africa and South Asia. It is also the perfect location for new business setups across diverse sectors.

Dubai is ranked as the UAE’s most important port and commercial center. It has transformed itself into a widely diversified economy, focusing on all the major sectors, such as, manufacturing, logistics, financial services, information technology, retail, travel, tourism, healthcare, education, and green technologies.

Dubai is considered as an ideal location for business setup and company formation because of the many initiatives it has taken, which range from investing heavily in its transport, telecommunications, energy and industrial infrastructure, to levying no income or capital taxes, except for oil and domestic banking, and withholding taxes, to having zero foreign exchange controls, trade barriers or quotas.

A foreign company, wanting to start a business in the UAE, can either set up a branch office, a representative office or a registered company, or appoint a commercial agent to sell its products in the UAE market or export them to the UAE market. New companies can also choose to conduct their activities from a Free Zone, which is a designated, self-regulated area, set up to catalyze an economic activity within an emirate, and is governed by its own rules and regulations.

It is important for a company, wanting to have a presence in the UAE, to have a full understanding of its options regarding the establishment. One wrong choice and the overall growth of the company may get hampered, so we, at Indigenesis, are here to help you decide the best structure for your needs.

Planning to set up a business on the Mainland:

Key Government entities

Generally, a company, wanting to set up its operations on the mainland, needs to contact the Department of Economic Development of the respective emirate, to seek the initial approval and register the trade name. This can be done either by visiting their office or through their eServices. Once the initial approval has been sought, one can proceed for additional approvals by other authorities, which are required in case of certain business/ trading activities.

Where to begin?

Following is an order of things that a company needs to keep in mind before planning to start a business on the mainland:

1. Cost of setting up a business

The cost of setting up a business involves components, such as raising capital investment, paying for licenses and employee visas, and depends on:

  • the nature of activity and license required; whether it is commercial, industrial or service-oriented, and
  • the legal form of the company; whether it is an establishment, a company, or a branch of a company.

2. Capital requirements

Capital requirements for a company on the mainland are determined on the basis of the legal form of business. For eg, for a Public Joint Stock Company (PJSC), the minimum capital required is AED 30 million, whereas for a Private Joint Stock Company (PrJSC), it is AED 5 million, paid in full.

The UAE Commercial Companies Law did not specify a minimum capital for other type of businesses. But, it stated that the minimum capital:

  • should be mentioned in the Memorandum of Association, and
  • should be sufficient to achieve the purpose of business incorporation.

3. Nationality of partners

The nationality of partners is important to determine the type of business they can set up on the mainland. Following are the type of companies which can only be set up by UAE nationals:

  • Joint liability companies
  • Simple commandite companies (SCC)
  • An industrial or commercial type sole proprietorship
  • Licence for home-based businesses
  • SME licence (in Dubai)

People of other nationalities (excluding the other GCC countries) can conduct other types of businesses, but need to involve a UAE national as a sponsor. The UAE national could be:

  • a partner with at least 51 per cent ownership of the business, or
  • a Local Service Agent (LSA), with the investor having a 100 per cent ownership of the business.

Company types that require a UAE national partner:

  • Limited Liability Company (LLC)
  • PJSC - it must have at least 5 founding members who are UAE nationals, owning between 30 per cent and 70 per cent of the capital shares
  • PrJSC
  • Civil company, with an engineering activity

Company types that require an LSA:

  • A professional type sole establishment
  • Civil company, with no engineering activity
  • Branch of a foreign company

Please note that a GCC national can be a partner in any form of business, except the following:

  • A representative office
  • Simple commandite companies (SCC)

Benefits of setting up a business on the mainland

Some of the benefits of setting up a business on the mainland are as follows:

  • Flexibility to do business in any part of the UAE
  • Convenient registration and approval processes
  • No limit on number of visas
  • More business activities available for licensing
  • No minimum capital investment requirement
  • Permission to undertake government projects
  • Exemption from any business or personal tax charges

Planning to set up a business in a free zone:

If a company does not know a UAE national, to partner with, or wish to partner with a UAE national, it can set up a business in a free zone. A free zone offers 100 per cent foreign ownership to the enterprise.

What is a free zone?

According to Dubai Multi Commodities Centre (DMCC), a free zone or a free trade zone or a free economic zone is a designated geographical area, where certain taxes or restrictions on businesses, employments or trades do not apply in the same manner as they apply to the country in which the zone is located.

In a free zone, goods may be landed, handled, manufactured, reconfigured or re-exported without the intervention of the customs authorities. They become subject to the prevailing customs duties only when they are moved to consumers within the country in which the zone is located.

A free zone is often organized around areas, offering many geographical advantages for trade, such as major seaports, international airports, and national frontiers.

Benefits of setting up a business in a free zone

Some of the benefits of setting up a business in a free zone are as follows:

  • 100 per cent foreign ownership
  • 100 per cent repatriation of capital and profits
  • 100 per cent exemption from import and export tax
  • 100 per cent exemption from corporate and personal tax
  • Absence of currency restrictions
  • Easy start-up and licensing procedures

Planning to set up an offshore company:

An offshore company is a legal business entity, set up with an intention of operating outside its registered jurisdiction and/or the location of its ultimate ownership.

Benefits of setting up an offshore company

Some of the benefits of setting up an offshore company are as follows:

  • 100 per cent foreign ownership
  • No requirement of a physical office in the UAE
  • Ease of international market expansion
  • Access to a stable and business-friendly legal system
  • Access to a more flexible regulatory regime
  • 100 per cent exemption from all annual accounting and tax obligations
  • Better access to global funding

Registration of an offshore company in the UAE

An offshore company can be registered in the following ways:

  • Ras Al Khaimah (RAK)
  • Jebel Ali Free Zone (JAFZA)
  • Ajman

All, stated above, are tax free jurisdictions, levying no income or corporate tax, and permit 100% foreign ownership.

A. JAFZA offshore company incorporation:

JAFZA is an industrial area surrounding the Jebel Ali Port, one of the world’s biggest shipping ports, which allows international companies, based there, to enjoy the special privileges of the free zone. Some of the special privileges include exemption from corporate tax for 15 years, no personal income tax, no import or export duties, no restriction on currency, and easy labor recruitment.

B. RAK offshore company incorporation: 

Ras al Khaimah is one of the fastest growing of the seven Emirates that form the UAE. It has the highest level of industrialization in the UAE, with the manufacturing industry contributing to 26% of the GDP. It has become a business-friendly investment arena, with competitive costs. Here, the cost of doing business is 25-50% lower than the average of all of UAE, allowing companies to maximize their return on investment.

C. Ajman offshore company incorporation:

Ajman offshore comes under the regulations of Ajman Free Zone Authority. Just like the above two offshore jurisdictions, it offers a zero taxation system and the company’s confidentiality/ privacy & security are kept intact. Cost to set up an offshore company in Ajman is the cheapest in the UAE and the time taken to establish it is the least.