Setting up a business in Dubai

Increasing numbers of expat entrepreneurs are relocating to Dubai, attracted to the dynamic atmosphere of the city, safe living environment, excellent location for trade and favourable tax policies.

Records show that Dubai issued 72,152 new business licences in 2021 compared to 42,729 in 2020 – representing annual growth of 69%. Currently, Dubai is home to more than 650,000 private sector companies, representing 46% of the total licensed businesses in the entire United Arab Emirates (UAE).

In this article, we explore the reasons why increasing numbers of expats are choosing to set up their businesses in Dubai, how to determine whether you can establish your business there, and the processes you’ll need to follow.

Why set up a business in Dubai?

Many expats set up a business in Dubai as a route to obtaining a residency visa. There are many reasons why expats might choose to relocate to Dubai including:

• It is an exceptionally safe place to live, with a stable political environment and supportive government policies
• There is a vibrant business culture and plenty of cultural and international diversity – it’s estimated that 75% of the population are expats
• All-year-round sunshine as well as excellent hotels, retailers, hospitals and schools
• Favourable tax policies with no income tax and one of the lowest corporate tax rates in the world (9% until to reach $400k+ turnover)
• Optimum geographical location with access to vast markets in the Middle East, Africa, South Asia and Europe – making Dubai a strategic location for international trade and mobility
• It’s an affordable place to live, with consumer prices estimated to be 6% lower in Dubai than in London (restaurant prices are 27.6% lower and grocery prices are 20.1% lower)

Who can set up a business in Dubai?

Generally, it is easy for expats from the UK, Europe, the US, Canada or Australia to set up a business in Dubai, though restrictions are placed on some nationalities.

Most business activities are permitted in Dubai, but there are some industries (including food and drink) which are restricted. Therefore, before taking any steps to start a company in Dubai, you must ensure you have thoroughly researched the permissible and non-permissible business activities.

How much does it cost to set up a business in Dubai?

The cost of setting up a business in Dubai varies depending on each company’s specifics, including:

• Choice of freezone
• Role of the owner
• Number of employees and visas
• Number and type of activities
• Whether office space is needed

When you consult with a reputable expert, they will take your details and provide a free initial estimation of the costs involved.

In terms of basic costs, the average amount for setting up a business in the Dubai IFZA freezone requiring no visas, no employees and no office would be AED 15,000.

Your company’s registration must also be renewed yearly unless you choose to register for two, three or five years, in which case you will get special discounts.

How long does it take to set up a business in Dubai?

Setting up your business in Dubai as an expat can take as little as 7 days if all paperwork is completed properly, you will then receive all legal documents pertaining to you company registration at that time.

At this stage, you can start the next step which is obtaining the residency visa. This can take a further 15 days (including passing the medical visit).

Opening a corporate bank account can take up to 30 days.

6 steps to setting up your business in Dubai

1. Define your activity

The first step in setting up a business in Dubai is to define your business activity. Once your activity is officially registered it can no longer be changed, therefore if you are unsure, it is best to seek expert advice from the beginning of this process.

Defining your business activity will determine whether your company is best suited to the mainland or a freezone area – and getting it right will ease the process of obtaining proper approvals, location, number of visa quota, bank account facilities and more.

The key questions you will be asked to determine your business activity are:

• What will be the source of your revenue?
• Who will your clients be?
• What type of products or services will you provide?
• Are you offering professional services or commercial trading?
• Will your business be import-export?
• Will you need a physical location (e.g. an office, shop or restaurant) or will you mainly be conducting business online?

Be aware that in the UAE, registering with a business agent is a binding contract. If you later wish to change agent, you will need to get a non-objection letter from them which can be tricky. 

This is why it is particularly important to select a trustworthy agent and establish a good rapport and communication from your first appointment.

2. Choose the right administration to register your company

In Dubai and the rest of the UAE, there are three main jurisdictions where you can choose to set up your business and obtain your trade licence. This depends on your activity and will either be mainland, freezone or offshore.

Mainland

A mainland trade licence is part of the UAE territory and jurisdiction regulated by the Department of Economic Development (DED) and is mostly suited for restaurants, shops, and manufacturing businesses.

The advantage of a mainland trade licence is that there are no geographical restrictions in terms of commercial transactions, but there are several disadvantages:

• You will require a physical location with a rental contract, called an “Ejari”
• Even though you have 100% ownership of your company, you are obliged to pay an annual fee to a local entity called “local agent” on the trade licence
• Dealings with government departments are not always straightforward and rules and fees change quite regularly

Freezone

A freezone trade licence offers 100% ownership of your business. The process is more straightforward and faster than on the mainland. This licence is suitable for a range of professional and commercial businesses including freelancers, e-commerce and even cryptocurrency.

There are more than 50 free zones to choose from in the UAE, some of them are more specialised in specific activities.

Benefits of a free zone trade licence include:

• No currency restrictions and the freedom to repatriate capital and profits
• No need for a physical office, you can obtain a virtual rental contract which allows you to rent meeting rooms and flexi desks whenever you need
• Corporate bank accounts are easier to obtain when your business is set up in the most reliable free zones
• Goods imported into UAE Free Zones are considered outside of the customs territory and are therefore exempt from customs duty until they are imported into the mainland

The main disadvantage of a freezone licence is that business transactions are limited to the free zone area unless they are professional services or freelancing. However, you can still sell your online products in the UAE via a mainland trading partner such as Amazon or Careem.

Offshore

Offshore trade licences are only suitable for businesses that deal exclusively with internationally based clients.

3. Ensure you have the necessary documents for the registration process  

When you are ready to submit your application for a trade licence, you will need to provide three potential names for your company, ensuring they adhere to Dubai's regulations and do not contain Dubai trademark names (such as Dubai, UAE, Burj Kalifa for example) or any potentially offensive language.

As your business name must be unique, the freezone will allocate the first available name and register this as your company’s trading name.

You will also need to provide the following:

• A passport with more than 7 months validity
• A digital photo of yourself with a plain white background
• Details of your business activity

Some business activities will require proof of a school or university degree. If you are required to submit a birth certificate or proof of your degree, the documents will need to be notarised, translated into Arabic, and attested by the UAE embassy of the country of origin, then attested by the MOFA ministry in the UAE.

Finally, you will need to complete the online Know Your Customer (KYC) compliance which safeguards against financial crimes such as money laundering, bribery, corruption, and terrorist financing.

4. Obtain your trade licence

When you send your application, the jurisdiction authority of the trade licence will process it within four to five working days.

The set up of your company is complete when you receive the following:

• Trade Licence
• Memorandum of Association
• Company Certificate
• Employment Certificate
• Establishment Card (your company ID)
• Virtual or Physical rental contract “Ejari”

Your Trade Licence is a legal document and proof of your company’s registration. Once you receive this, you will be able to:

• Get a residential visa
• Sponsor visas for your family
• Sign contracts
• Invoice clients
• Open a corporate bank account
• Set up an office or shop
• Employ staff

5. Obtain your residency visa

Once you have your Trade Licence, you can start the process of applying for your residency visa with the immigration department.

This is a separate process from the business set up as it is under the jurisdiction of the UAE government. We usually recommend vip services for speedy results.

It is advisable to enter the UAE after the visa application is processed, and only once your medical visit is booked. Otherwise, the government will add an “in country” fee to your visa application.

To apply for your Dubai residency visa, you will need to take the following steps, (each step is dependent on passing the previous one):

1. Apply to the immigration office with all the necessary documents. After your application is submitted, you will be issued with a reference number, or a pink visa stamp.
2. Book your medical test. This is when your presence is required in the UAE. Anyone over 18 years old is required to pass a medical test, conducted in a dedicated centre. You will have a simple blood test and chest X-Ray to determine if you have any virus or disease such as tuberculosis, HIV or syphilis. If you do, your visa will be denied. Depending on the price of the medical test you choose, your results will be issued anywhere between 30 minutes up to a week.
3. Get your digital prints. If you receive a positive medical result, you can proceed with the digital registration of your fingerprints and photo ID at a dedicated centre.
4. Obtain your Emirates ID card. Finally, you will receive your residency card, called the Emirates ID Card, within 3-7 days via mail or courier.

The process of applying for your residency visa can take up to 15 working days after your company set up is complete, and you can only sponsor your family members’ visas once your Emirates ID card is issued.

Your visa is valid for 2 years.

6. Set up your corporate bank account

The ease with which you can open a corporate bank account depends on the activity of your trade licence, where it was issued (mainland or freezone, type of freezone), and your nationality.

To set up a bank account for your business in Dubai, you will need to provide the bank of your choice with:

• Your business trade licence
• Your Emirates ID card
• Your passport
• Copies of 6 months of bank statements in your name or in the name of a previous company
• A UAE phone number

Depending on the activity and jurisdiction of your business, some banks may require more information such as:

• A business plan
• An Ejari (proof of an office rental)
• An annual revenue estimate
• A list of your clients (potential or existing)

The process of opening a business bank account can take a month or more to complete. It will be faster and easier if your trade licence is from a Freezone as they often have agreements in place with the main UAE banks. 

Summary

With the increase in expats wanting to set up businesses in Dubai, many unregulated agents have appeared. Many of these agents have little or no experience, are not based in the UAE and are eager to bind expats into long-term contracts.

Therefore, be diligent in your research or request an introduction to one of our trusted experts.

When choosing an agent to support you in setting up your business in Dubai:

• Make sure the agent is a corporate service provider, well established in the UAE with several years of experience.
• Your initial consultation and quote should always be free, with no obligation.
• Do not sign any documents until you are certain the agent has a good understanding of your requirements
• Ensure you feel that a trustworthy, long-term relationship is possible with the agent

Remember, once your contracts are signed, you cannot change agent unless they issue you with a non-objection letter. You will have to go through the same agent to either renew your trade licence every year, amend it or even to expand your business – so choose wisely.