Over the past few decades, the United Arab Emirates (UAE) has enhanced its reputation as an excellent place to run a business. With its strategic location, diverse population, and tax regime, the Gulf nation is one of the most sought-after international hubs of business.

Effective from June 1, 2021, foreign investors are allowed to start a business in the UAE in most sectors without the need of a local sponsor. This change in ownership law is a great effort by the UAE government to improve ease of doing business and make the country appealing for entrepreneurs and foreign investors. 

The sectors with the highest demand and bright future prospects in the United Arab Emirates include construction Services, hotels and hospitality, Materials and Supplies, Alternative Energy, Professional services, and Medical Services.

There are several advantages of doing business in the UAE. Not only does the Gulf country have modern infrastructure required to support a twenty-first century business, it has Free Trade Zones which offer a multitude of benefits to businesses. The major benefits of setting up a company in the UAE are as follows:

Global Competitiveness Index

With a rank of 25  in the Global Competitiveness Index, the United Arab Emirates is considered an excellent place to operate a business. By starting a business in the UAE, you can have access to a diverse market, the latest technology, and a simple and advantageous tax regime.

Position in the Arab countries

The United Arab Emirates boasts the second largest economy in the list of Arab nations. The business environment of the nation is conducive to foreign investment, which is one of the main reasons why it is a popular hub for business. 

Simple tax structure

One of the things that make the country an excellent centre for setting up a business is the UAE’s liberal tax regime. Celebrated as being largely tax-free, it is only earlier this year (2022) that the government of the UAE have announced the implementation of a Corporate Tax from mid 2023. 

Free Trade Zones

Should you decide to set up your company in one of the United Arab Emirates' Free Trade Zones, you shall have access to a myriad of benefits, including tax savings, 100% ownership of foreign nationals, and repatriation of profits, to name a few. 

Access to a qualified and diverse workforce

One of the advantages of doing business in the UAE is that you get access to a multicultural and often multi-lingual workforce. Dubai is home to talented professionals spanning various fields of work, and the nation's liberal labor regulations make it easy for people to work there.

To set up a company in the United Arab Emirates, employers have to fulfill certain requirements.

Work pass: For a foreign nationals planning to start business in the UAE should have a proper work permit for the same. The UAE cabinet has recently introduced a new system of visa schemes. As per this scheme, entrepreneurs can get a 10 year Golden Visa. It will come into effect after the 90 days from its Publication date in the Gazette.

Identify a business activity: Employers should be clear about business activities they want to start in the country. It further decides many things  such as the registration process, business type, and license requirements. 

For company registration (LLC), employer needs following documents:

• ~Unique trade name and approval
• ~Apply for initial approvals from Department of Economic Development
• ~Memorandum of Association
• ~Registration application form
• ~Passport copies of shareholders and managers
• ~Passport copy of the local sponsor (if applicable)
• ~Bank reference letter for each shareholder
• ~Location plan and tenancy agreement

The business structure in the UAE is not much different from other countries. But, In the UAE, there are three jurisdictions for registering the company: Mainland, Free Zone, and Offshore. Understanding the registration process, tax liabilities and cost to set up a business helps employers make right decisions.

Mainland Establishment

If you are looking to establish an entity on the mainland of the United Arab Emirates, then your options as to the type of entity are as follows:

Sole proprietorship

A sole proprietor is a single individual who has full control on business operations and 100% shares of the company. There is no minimum business capital requirement for this type of business. But, for foreign nationals, he needs to hire a local service agent for registering this type of business entity. LSA helps with licenses and other government matters.

Partnership Company

There can be two and more partners in partnership companies and profits and losses are shared  according to  partnership ration. There are two types of partnership- General partnership and Limited partnership. UAE partners must be general partners in the company in case you apply for partnership company registration.

Private Joint Stock/ Shareholding Company

A Private Joint Stock Company is a company whose shares are held by a group of individuals or entities. The shares of this type of company are not open for subscription by the general public. A Private Joint Stock Company in the United Arab Emirates must have a minimum of 3 shareholders and a minimum capital of AED 2 million. 

Public Joint Stock/ Shareholding Company

A Public Joint Stock Company is a company whose stock is open for subscription by the public. Such a company is required to be listed on a stock exchange where its shares can be purchased and sold in a transparent manner. Public Joint Stock Companies in the United Arab Emirates are required to have at least 10 members and a minimum capital of AED 10 million. Each shareholder in such a company carries ownership and liability in the company to the extent of their stake in the total capital. 

Limited Liability Company

A Limited Liability Company is a type of company in which the liability of each shareholder is restricted to the proportion of the share capital held by them. Limited Liability Companies in the United Arab Emirates are required to have a minimum of 2 and a maximum of 50 members. The minimum capital for such a company in the UAE is AED 3 lakhs (varies depending on the jurisdiction of the company). 

Branch of a foreign company

A company can establish a branch office in the United Arab Emirates and conduct its business there through said office. A branch office can only carry out the type of business conducted by the parent company. It is also required to hold the same trade and legal name as the parent company, and is 100% owned by the latter.

The process of company registration in the UAE is  a bit complicated. It can be divided into three parts: Pre-registration, registration and post-registration

Pre-registration process

Finalize Business activity: It is important to finalize the nature of business before you jump for registration. Based on business activity, employers can further decide on jurisdiction and type of legal entity they should opt for.

Select Jurisdiction: In the UAE, there are three jurisdictions for registering the company: Mainland, Free Zone, and Offshore. The Department of Economic Development is the licensing authority for mainland establishment. Free Zone Authority and Offshore Authority for  registering companies in Free Zone and Offshore jurisdiction respectively. 

Type of legal entity: As per the business activity and jurisdiction, employers can opt for whether they want to register sole proprietorship, LLC, partnership, private shareholding, public shareholding, civil company, or branch office.

Share Capital: In order to start a business in the United Arab Emirates, the required capital must be deposited in the company's bank account in the country. This capital shall vary depending on the type of entity and the jurisdiction where it is established. 

Number of shareholders: LLC can have a maximum of 50 shareholders in the UAE. But, if an employer wants to register a sole proprietorship firm then there is no need for any shareholder.  

Registration process 

Reservation of the trade name:  

• ~Once there is a final decision on the line of business to be pursued, the next step is to select a trade name for the entity and check whether it is available for registration in the United Arab Emirates. 
• ~According to the laws prevailing in the UAE, trade names must not be in contravention of any moral codes, previously registered, or in contrast with the selected line of business. 
• ~After selecting a suitable and available trade name for the company, you must proceed with business name registration in the UAE. 

Apply for initial approval: 

• ~Before applying for initial approval, foreign nationals have  to get approval from the General Directorate of Residency and Foreigners Affairs.
• ~After this, foreign nationals can apply for initial approval to the UAE government. This approval states that the government has no objection. It allows the business to proceed with commercial licenses.
• ~For initial approval, you would need following documents:

• ~~Filled application form
• ~~Business plan
• ~~Copy of existing trade license/registration certificate (if you are an existing company, applicable for local company only)
• ~~Coloured passport copies of the company's shareholder/s and the appointed Manager/Director for the new company
• ~~Specimen signature of the company's shareholder/s and the appointed Manager/Director for the new company
• ~~2 years' audited financial reports for corporate entity or certificate of reference from a personal bank of the individual shareholder
• ~~NOC from current sponsor (for individuals)
• ~~Unit title deed
• ~~Letter of Intent
• ~~Registry Identification Code Form (RIC) for Manager/Director (Original and notarised)

Company registration

After getting initial approval, you need to apply for company registration with following documents:

• ~Filled application for registration
• ~Board Resolution appointing Manager/Director (Notarised and attested)
• ~Power of Attorney given to Manager/Director (Notarised and attested)
• ~Memorandum and Articles of Association (Notarised and attested)
• ~Specimen signature of Manager/Director (Notarised and attested)
• ~Passport-size photo of Manager/Director against white background
• ~Share capital information

Along with these documents, you will be asked to pay registration fee and license fee based on the type of license you want.

Select a location: 

• ~All companies must have an address for business and economic activities. It should be as per standard set by the Department of Economic development or relevant authorities.
• ~You may have to submit certified copies of lease contracts.

Apply for trade license: 

• ~Based on business activity, the employer has to take a trade license for business operation. Commercial, professional, industrial and tourism are four categories of trade license. It applies to mainland business only. 
• ~Free Zones have different license categories depending on trade activity.
• ~This license can be obtained by submitting the requisite application and supporting documents to the relevant government authority. 

Post registration

After registering your company in the United Arab Emirates and obtaining a trade license, you must also ensure compliance with the necessary post-registration formalities. The aforementioned procedures include registering with the Chambers of Commerce, the Ministry of Labor and Immigration, the Civil Defence Authority, the local Municipality, etc. 

Registering with the Chambers of Commerce: Business entities in the United Arab Emirates are required to become members of the relevant Chambers of Commerce. Depending upon the jurisdiction of the entity, one of the following Chambers of Commerce must be selected and the required application procedure be followed. 

• ~Dubai Chamber of Commerce 
• ~Abu Dhabi Chamber of Commerce
• ~Sharjah Chambers of Commerce 
• ~Ajman Chambers of Commerce 
• ~Ras Al Khaimah Chambers of Commerce 
• ~Um Al Quwain Chambers of Commerce 
• ~Fujairah Chambers of Commerce

Registration with the Ministry of Labor and Immigration: Another significant regulatory requirement of company registration process in the United Arab Emirates is registering the entity with the country's Ministry of Labor and Immigration. This step is also critical from the perspective of applying for work passes/permits for the employees of the entity during the hiring process. 

Corporate Tax registration:  Recently the Ministry of Finance (MOF) announced that companies have to pay federal corporate tax. It will start from 1 June 2023 and companies will be taxed for the financial year on or after 31 May 2024. 

• ~Tax will be applicable at the rate of 9% on profit over AED 375,000 (USD 102,110.28) only on businesses and commercial activities.
• ~There will be no corporate tax on personal income, real estate and other investments.

Online mode of registering a company in the UAE (Only for UAE Nationals)

In order to make it easy for individuals to register their companies in the United Arab Emirates, the government of the country has introduced a service named Bashr. Under the aforementioned facility, one can establish a business entity in the UAE through the online mode in less than fifteen minutes. 

Bashr is an integrated e-service portal that is connected to various government authorities and entities which are as associated with the approval and issuance of company licenses.

The cost of business incorporation depends on two factors: The type of entity that you  select and the area where you wish to establish (mainland, free zone, and  offshore).

• ~The registration cost to set up LLC onshore can range from USD 6,000 to USD 6,500. In the case of Free zone, it can be roughly USD 4,000. 
• ~If you choose to register a company offshore, as per the area, it can range from USD 2000 to USD 4,600.

Yes, foreigners living in the United Arab Emirates on a permit can start a business in the Gulf nation. As long as you fulfill all the legal formalities and requirements of setting up a business in the UAE, your nationality should not act as a hindrance in any way. The UAE government is renowned for its encouragement of foreign investment, and the tax laws of the country are also lenient.

There are several ways through which the government of the United Arab Emirates encourages and assists foreign businesses in the country, such as:

• ~The permission to set up businesses with up to 100% foreign stake in UAE free zones 
• ~A strong currency that is fully convertible 
• ~Low rate of inflation 
• ~The freedom for 100% repatriation of profits 
• ~The permission to start 100% foreign-owned businesses in 13 sectors 
• ~Easy visa issuance and renewal policy 
• ~Robust banking system 
• ~Low levels of customs tariffs 
• ~Access to an open economy and stable political environment 
• ~Availability of skilled labor

Although the government allows foreign investors to have a full ownership company, setting up a business in the UAE is a lengthy and costly process. Outsourcing a business incorporation process to a registration service partner can help employers to save plenty of time.  

But, still it does not end here. After registering, setting up a business, hiring talents, setting up payroll, etc. is another big list of tasks a business owner has to do to start running a business. 

If your plan is to analyze the UAE market and hire talents, you can collaborate with Employer of Record like Multiplier. 

Multiplier is a global employment solution that takes care of  onboarding of a global workforce, management of payroll and employee benefits, compliance with the local tax and labor laws, etc. 

You can get in touch with our team now to learn more about Multiplier’s products and services.