Company Formation

Factors to be considered for Business Set Up in Dubai, UAE

Over the last decade, the UAE witnessed unprecedented development in terms of being a business hub. Home to almost 200 nationalities, it has attracted a plethora of business investors over the last few years. When it comes to company formation in the UAE, the investors often turn to its commercial capital, Dubai.

To be at par with these trends, Dubai set up Free Zones which are fundamentally special economic zones that provide tax concessions and customs duty benefits to the potential investors. As of now, there are more than 40 Free Zones in Dubai which offer numerous benefits such as there is no corporate or personal tax imposed on the companies.

However, in addition to this, there are also some restrictions. For instance, service and trading activities cannot be combined in the same licenses. Moreover, certain “special activities” like engineering, banking, audit, law, restaurants, etc are not directly allowed in the free zones.

So, it is worth mentioning that for the investors considering company formation in the UAE Free Zones or some kind of Business Set Up in the UAE, the following factors should be taken into account:

1 : The opening of bank account in Dubai, UAE in light of the recent Anti-money laundering and Countering of Financing Terrorism Measures

Owing to the recently issued AML and CFT guidelines by the UAE central bank, opening a bank account in Dubai (and by extension, the UAE) is no longer a child’s play. Consequently, small investors aiming at company formation in Fujairah Creative City or similar northern emirates such as the Hamriyah Free Zone, RAKIA Free Zone, SHAMS Free Zone, etc. are the ones to suffer the most.

In addition to this, investors opting for opening an offshore company in UAE Offshore (Jafza Offshore or Ajman Offshore or RAK Offshore) are also known to deal with a lot of hassle in order to open a bank account in the absence of KYC information and business module involving high risk sector and high risk countries.

2 : Choosing the right location

With more than 30 free zones to choose from, it might be quite overwhelming for the investors. Moreover, it might also happen that none of the free zones is suited to the business. For instance, if the business activity happens to be a special activity, construction and engineering, transportation, audit firm, legal services, restaurants, it is a must to set it up first on the mainland. Thus, it is quite evident that the choice of the appropriate location is an important factor to pay heed to.

3: Choosing an Activity

Though Free Zones are recommended for either re-exports or serving outside Dubai/UAE clients, some investors might want to serve the customers in the mainland or the local market. This comprises of retail stores, medical and health services, legal services, financing and money exchange etc. An LLC Company Formation (Limited Liability Company) is an efficient solution for such investors.

4: Choosing a legal structure

On the mainland, the Department of Economic Development (DED) issues all the trade licenses. In addition to this, special activities like health, medical, audit, legal, etc. are regulated by respective bodies and ministries. Most common legal structures include LLC in which UAE national, which is known as local sponsor, is 51% shareholder while 49% of shares are held by foreign nations.

Another is the Professional license which can be 100% owned by the foreign nationals while the UAE national remains as a legal service agent (agreement will be notarized in the notary). Appropriate choice of a legal structure is an important factor to consider.

5 : Understanding VISA requirements and their relation with activity, office space and legal structure

It is common knowledge that the Ministry of Labor issues one visa pr 9 sq. meter space. However, the ministry may consider more visas owing to the fact that the license fees for LLC is significantly higher than the establishment licenses( single owner, UAE National). In addition to this, businesses like construction, restaurants, supermarkets etc are allocated more visas owing to the nature of their business.

6 : The opening of the labour establishment card and computer immigration card

Once DED or the Free Zone authorities has issued a trade license, it is essential to apply for an establishment card (Labour computer card) and a computer immigration card. However, it is worth noting that the free zone companies are exempted from the Labour computer card.

7: Understanding VAT registration requirements in Dubai and Applying for a TAN Number

Every business with an annual turnover of at least AED 375,000 (USD 100.000/-) is required to apply for a TRN number. TRN stands for Tax Registration Number.

Leave a Reply

Your email address will not be published. Required fields are marked *