What are the 11 key considerations when setting up a business in the UAE?
Setting up a business in the United Arab Emirates (UAE) involves careful planning, here are some essential factors to keep in mind:
1. Industry & sector
The type of industry and sector will determine the type/number (and corresponding cost) of license(s) required and the licensing requirements. Some licenses require additional approval from governmental authorities.
2. Legal structure
Mainland vs free zone
There are different legal structures available for businesses in the UAE, such as mainland limited liability companies, free zone companies, etc.
Common law free zone v/s civil law free zone
UAE have 2 Common Law Financial Free Zones: DIFC and ADGM.
While the UAE companies law now allows for 100% foreign ownership for most mainland activities, it might still be favourable or necessary to take an Emirati national as a partner for some specific activities/contacts.
Regulated vs non-regulated
The specific requirements will vary depending on the nature of your business.
The UAE is divided into seven emirates, each with its own unique business environment. You need to choose a location that is right for your business, taking into account factors such as the cost of operation, cost of living, the availability of skilled labour, logistics, and the proximity to your target market.
Technically there is no UAE licensed company. Each emirate provides licences to businesses to operate within its own jurisdiction e.g. a Dubai licensed company wishing to open offices in the emirate of Sharjah will have to apply for another license in Sharjah. Some free zones require filing of annual audited financials.
UAE businesses are subject to economic substance regulations. Depending on the activities, there might be a requirement to show substance in UAE and submit corresponding filings.
6. Business model
You need to have a clear understanding of your business model, including your products or services, target market, and marketing strategy e.g. offshore and free zone companies work wells for business operations outside of UAE. You might start with an offshore company to limit set up cost, then migrate same into a free zone once the volume of businesses picks up and there is a requirement for UAE staff.
7. Incorporation paperwork
UAE is not a part of the Hague Convention, it does not recognise Apostille certifications. All documents of a foreign corporate shareholder will have to be attested up to the UAE embassy in the foreign country. You might choose a common law free zone or a UAE offshore jurisdiction to avoid the paperwork.
8. Bank account
Most UAE banks require a minimum balance deposit, office space and UAE resident signatories to guarantee the bank account opening. Some UAE licensing authorities require the deposit of the share capital of the UAE business in a UAE bank within a prescribed period following the registration of the UAE company, failing which there are applicable sanctions. Some licenses, such as general trading and management consultancy, are considered high-risk by UAE banks. Some free zones are also considered as high-risk by UAE banks.
All non-UAE employees will have to apply for UAE employment/residence visas. The visa cost, process and quota depend on the legal structure /free zone/emirate selected.
Businesses in the UAE are subject to a range of taxes, including corporate income tax, value-added tax, and customs duties. You need to be aware of the tax implications of your business and make sure that you are compliant with the relevant regulations. You might apply for a free zone exemption (subject to certain conditions) if the business operates in a free zone with no dealing with the UAE market.
11. Access to UAE Tax Treaties
There are some conditions for a UAE business to obtain a tax residence certificate to avail the benefits of the tax treaties of UAE. UAE offshore entities cannot satisfy these conditions.
How can Ocorian help?
Our primary focus in the Middle East is working with families, assisting them in setting up and supporting family offices, and structuring their wealth. We also collaborate with managers, including those based in Europe and the US, who are seeking investors. This link is important as it involves professionalising the family office and aligning with the requirements of international co-investors or managers.