Tax exemptions, ease of business setup, relatively fast procedures, growing economy, political stability, and … are just some of the perks of starting a new business in Dubai and other UAE emirates as a foreigner.

If you’re interested in these advantages but are wondering if it is even possible to start a business in UAE as a foreigner, the short answer is yes, it is possible to register a new business in UAE for expatriates. But there are so many details to know before starting the process.

Make sure to read this guide for more practical details and everything you need to know about starting a new business in UAE.

Get to know UAE corporate structure

The first thing you need to know before starting a business in the UAE as a foreigner is how the corporate structure works and what types of companies you can establish.

The most common company types in the UAE corporate structure are:

  • Limited Liability Company (LLC)
  • Sole proprietorship

There are other types as well such as branch companies, private shareholding companies, and … .Which type you choose, purely depends on your own conditions and business goals.

Forming an LLC company in UAE

LLC companies are formed with a minimum of 2 and a maximum of 50 shareholders in UAE. Therefore each shareholder’s responsibility is only limited to their share as is their profit and loss.

LLC companies can be set up in both mainland and free zones.

Previously it was only possible to form an LLC company only with an Emirati shareholder who owns 51% of the share. However, following new changes in the law, it is now possible to start a business in Dubai and UAE as a foreigner without an Emirati sponsor for specific activities.

Forming a sole establishment company in UAE

Sole establishment companies are 100% owned by 1 single shareholder.

100% foreign-owned sole proprietorship companies can only be formed for professional activities (mainly services). For commercial and industrial activities an LSA (local service agent) must be appointed.

Get to know UAE jurisdiction for setting up business

The next important decision for starting a business in UAE as a foreigner is to pick a jurisdiction.

You can either set up your business in the UAE mainland or in one of its free zones. If you already have an established business elsewhere, there’s also the option of incorporating your business in the UAE and registering an offshore company.

Business setup in UAE mainland

UAE Mainland businesses are registered through the Department of Economic Development (DED) in any of the 7 emirates in UAE (Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Fujairah, and Ras Al Khaimah).

UAE mainland businesses can operate and trade within UAE boundaries as well as the free zones, and also internationally.

Business setup in UAE free zones

UAE Free zone companies are registered through each zone’s authority. Free zone entities can conduct business within the free zones and outside UAE.

Free zone business setup often gives advantages such as lower levels of regulation and more affordable costs compared to mainland licenses.

Offshore business setup in UAE

Offshore companies are set up for operating outside their registered jurisdiction or the location of their primary setup. So UAE offshore companies can’t trade within UAE.

Offshore companies don’t provide UAE residency visas for their owners.

What is the difference between the mainland and the free zone?

Setting up business in UAE mainland vs free zones is usually confusing for expatriates as there are so many different rules and regulations.

There are a few important distinctions between mainland and free zone in UAE:

  • A mainland company license has the advantage of providing more choice with respect to office/industrial space.
  • Almost all free zones require any office space to be secured within the free zone affecting the scaling and presentation of the business.
  • If you wish to physically trade with customers in the mainland, you will require a mainland license, dual-license, or you would need to operate from a free zone and engage a third-party distributor who holds a mainland license.
  • Business setup costs in the free zones are often lower than in the mainland.
  • Company setup in free zones is usually faster (2-4 days for obtaining a trade license).
  • If handled by a business setup expert, the whole process can be done 100% virtually without the need for the owner to be present in the UAE, making the procedure more time and cost-effective.

Need help deciding between the free zone & mainland?

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UAE trade license types

The 3rd step in starting a business in UAE is obtaining your trade license based on the activities your business is planning to conduct.

The number of activities that are covered by each trade license is different in each jurisdiction.

For instance in mainland businesses, trade licenses cover 10 activities from the same category by default. You can always add more activities to your license later with separate fees.

The most common trade license types in UAE are:

  • Commercial license
  • Professional license
  • Industrial license

Steps to start the business setup process in the UAE

  1. Decide on jurisdiction and company type
  2. Choose the final area in case of the free zone or offshore company formation based on your main business activities
  3. Consult with a business setup expert from Nexus Partners before finalizing any details
  4. Reserve and register a trade name
  5. Get necessary pre-approvals
  6. Lease an office/virtual office
  7. Apply for and obtain your trade license
  8. Apply for and obtain a company establishment card
  9. Apply for and obtain an investor’s visa
  10. Open corporate bank account in UAE
  11. Register for TRN number

How long does it take to establish a new business in the UAE?

The time frame differs based on factors such as the jurisdiction and necessary approvals from related authorities.

  • Generally, the establishment of the company is achieved after the trade license is issued which is about 3-5 days for a free zone and 10 days for a mainland business.
  • Obtaining a visa and UAE residency for investors usually takes about 2 weeks.
  • Opening a corporate bank account usually takes between 2 weeks to 3 months.

How much does establishing a new business in the UAE cost?

It is perfectly understandable that knowing the cost for company formation in UAE is necessary for budget estimations and making final decisions. Unfortunately, there’s no fixed cost for setting up a new business as multiple factors affect it.

Company type, trade license type, number of business activities, number of shareholders, are they individual or corporate, office requirements, … are just some of the elements impacting the final price.

However, you can get a quick quote from us in a matter of hours. After we get to know your business conditions and details, we’ll be able to provide you with a quote you can count on, without hidden fees and extra charges appearing as you go forward.

Things to know about the business environment in UAE

UAE’s index for “ease of doing business” is relatively high, pointing out its business-enabling environment in the middle east and MENA region.

However, “starting” a new business in Dubai and other UAE emirates as a foreigner can be hard as it would be in any new country.

Therefore it is best to consider this and seek advice wherever possible in order to avoid likely budget waste or strategic errors.

Hidden costs of company setup

While looking for help to start a business in UAE as a foreigner, you will come across multiple service providers with different costs and packages. While it is normal to try and cut costs as much as possible by considering lower prices, bear in mind that most cheap offers come at a price and that is the quality of the service offered.

In addition to that, most company formation packages offered at lower prices will ask you for future spending on items not been mentioned in the initial estimation that has to be paid nevertheless.

We strongly recommend looking into the details and professionalism of the advice you receive rather than solely relying on costs as they can result in hidden costs later on.

Opening a corporate bank account

Having a corporate bank account is necessary for conducting any business activities in the UAE. However, it is not an easy process for expatriates and will require much time and energy.

Tax and VAT

Most UAE businesses are required to present financial audits to their respective authorities, although many Free zones do not require annual audits. Each Free zone has their own requirements

The mandatory registration threshold for VAT is AED 375,000. Any business with exceeding taxable supplies and imports must register for a TRN number and VAT.

Businesses whose supplies and imports are less than the mandatory registration threshold, but exceed AED 187,500 may also voluntarily register.

Economic substance report

All UAE businesses must provide annual statements regarding their Economic substance. Failure to meet these annual deadlines can result in penalties of up to 50,000 AED.

More specifically, those businesses active in the following fields are required to present an annual economic substance report to the Ministry of Finance, showing their proper economic presence in the UAE:

  • Banking
  • Insurance
  • Investment
  • Finances
  • Shipping
  • Distribution and service
  • Intellectual property business
  • Headquarter business
  • Holding company business

Hiring staff

When hiring employees for your new business in UAE, you must provide valid work visas and run security checks that would determine they have no criminal records.

It is also the business owner’s responsibility to provide health insurance for all employees.

Recent labor law changes have impacted contract length, holidays, and a number of other HR elements that one should familiarize themselves with prior to taking on staff. Nexus Partners can provide support in this regard.

Work premises

It is mandatory for all businesses to have work premises in UAE, with the exception of a few free zones where virtual offices are allowed.

The options include normal office spaces, co-working spaces, warehouses, studios, showrooms, and factories.

Local sponsors

Following recent changes in UAE regulations, there’s no need for a local sponsor for most mainland businesses.

Some business activities with strategic impact, however, still require to have a local Emirati sponsor.

The local sponsor will own 51% of the share but usually acts as a silent partner. Legal agreements ensure the Emirati has no management control of the business or any share of the profits and company assets.

Free zone businesses do not require any local sponsorship for any activity.

UAE residency through business setup

All expatriates working in UAE must have a valid UAE visa. As an investor, you can apply for a UAE residency visa through business setup.

Once your company’s trade license and establishment card are issued, you can apply for an entry permit and then change the status of your visa from visitor to resident. This process can be done both from inside the UAE and outside.

The next step would be to go through medical tests and application for an Emirates ID which is mandatory for all UAE residents. The last step would be final visa stamping.

Once your visa is stamped, you can apply to get residency visas for your dependents.

Benefits of starting a business in UAE as a foreigner

  • 0 corporate tax (Will rise to 9% for most mainland activities in 2023)
  • 0 personal income tax
  • Stable economy
  • High ease of doing business
  • High living quality
  • Open economic diversity
  • Various business facilities

Should you outsource your business setup?

When starting a business in UAE as a foreigner, the list of things that must be considered, decided on, invested in, and done seems to never finish. With the added complexity of UAE’s ever-changing rules and regulations, registering your company in UAE can be extremely time-consuming, confusing, and risky.

Although using services from business setup providers adds to your costs, if done professionally, it will certainly provide a long-term cost-benefit by avoiding business disruption through incorrect setup, faster access to corporate banking and facilitating your decisions, and providing true and reliable advice.

Therefore if you have no prior experience of business operations in the UAE, it’s best to engage experienced business setup consultants.

At Nexus Partners, our main goal is to provide you with practical advice for setting up a business. We will recommend professional solutions based on your business objectives and goals in line with UAE’s business environment that will enable your business to grow and thrive.

Our experts will listen to your needs, advise you on the best approaches, and manage the entire process on your behalf. Throughout this whole process, we will maintain clarity by providing clear costs and constantly communicating with you.

Read more on starting a business in UAE as a foreigner

You could never get enough information when it comes to making such an investment as setting up a new business in a foreign country. Here are some links to other resources that can provide you with more information.

Published On: February 25th, 2022 / Categories: Company Formation /

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