Dubai being the second richest city in the United Arab Emirates (UAE), with a GDP of 3.90%, attracts investors worldwide. The Expo 2020, which has Dubai as its venue, is expected to create approximately 270,000 jobs in the nation.
This, is, not all!
Global recognition, no dearth of international clients, business-friendly environment, excellent infrastructure, special taxation policies, stable financial climate with a diverse and growing economy and a large labour force are instrumental factors that lend Dubai a mass business appeal. Additionally, it welcomes foreign investments and is a leader in the government, health, and educational sector.
However, before starting a business in Dubai, there are certain things you need to keep in mind.
Extensive research on the region and sector is required to find a locality that is convenient and affordable. Take for instance; if you opt for a Free Trade Zone, then you must consider the following factors like distance, rentals, trade requirements, etc.
You should be prepared to invest using your resources, especially if it is the first time you are operating in Dubai. You are required to show the Ministry of Commerce that you have a certain amount of money to invest (varies from state to state) as a guarantee against liabilities.
If you wish to trade in one commodity, special permissions are required to switch to another. Hence, a Trade License, issued by the Dubai Economic Department (DED), is required to carry out any business activity within the UAE. These include a Professional License (Professionals, Artisans, Services Providers, etc.), an Industrial License (Manufacturing or Industrial activities) and a Commercial License (Trade).
What is the procedure for business setup in Dubai?
- Choosing a local Sponsor/Partner
- Obtaining approval for company name and business activity by the DED
- Getting a Tenancy Contract
- Drafting the Memorandum of Association
- Submitting the required documents (6-month bank statement of Shareholder, bank reference letter, residence proof, passport, and application form), MOA, License Application and Tenancy Contract to the DED
What are the different kinds of businesses you can set up in Dubai?
One important thing to consider is the type of activity you are looking to set up in Dubai. It offers investors a choice between different jurisdictions where one can start a company, i.e. an Onshore, Offshore and a Free Zone Company. Each has its pros and cons, and a clear understanding of the same is required before setting up a business in Dubai. Following are the features of the jurisdictions as mentioned earlier.
Free Zone Companies in Dubai
- Allow for 100% foreign ownership
- Exempt from Import and Export Tax, Corporate Tax and VAT
- Can avail 100% profit repatriation right
- Cannot carry out business activities outside the Free Zone
- Are activity-specific, i.e. you cannot run a ‘media-related business’ in a ‘creative free zone’
- Requires a minimum capital which is different for every Free Zone
- Allow for 100% foreign ownership
- Cannot carry out business activities within the UAE
- Exempt from Corporate Tax
- Not required to have an operating license in Dubai
- Cannot have a real office in Dubai and the owner can run the business from his/ her country
- Does not require audit
- Does not require minimum capital
- Registered with the sole purpose of conducting activities within the UAE
- More expensive to incorporate than an Offshore Company
- Liable to pay Corporate Tax
- Shareholders and Directors can belong to any nationality but a Local Partner is required to own 51% shares, and the Foreign National contributes to 49%
This brings us to yet another question. Should you opt for an Onshore, Offshore or a Free Zone Company?
If you are interested in the Dubai market, only because of the benefits it has to offer and are not looking to carry out activities within the UAE then you can opt for Offshore Company formation in Dubai, especially if you are looking for an affordable option and do not require a residency visa. On the other hand, if you want to carry out business activities within the UAE parameters, require a resident visa as well as a real office, then an Onshore Company is the way to go. If you want to avail Free Zone benefits and target only the Free Zone market, then Free Zone Company formation is ideal for you.
However, without proper knowledge, setting up a company in Dubai can turn out be expensive and taxing. Finding a local sponsor, opening a local bank without any knowledge or choosing the right type of company, license and jurisdiction can pose to be a problem and therefore requires professional help.
Nonetheless, Dubai offers an excellent investment opportunity that cannot be missed. It’s tax incentives and investor-friendly environment allow a Businessperson the freedom to run a business like no other city. Dubai is truly an entrepreneur’s paradise that promises to turn your stellar idea into a thriving business.
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