6 Things You Need To Understand About Setting Up A Business In Dubai
Dubai is a wonderful place for ambitious entrepreneurs. Setting up a business in Dubai will put you on the fast track to success.
But for the outsider, setting up a business in Dubai can be very confusing. There are a lot of options.
Therefore, we have created a list to help you navigate these options.
1. Choose The Right Activity
Choosing the right activity when setting up a business in Dubai is much more important than in other countries. Why?
For this we have to talk you through some history.
In earlier days permission to perform certain business activities were provided by the king. If you wanted to fish for pearls, you needed special permission. You needed a license. This practise still exists today.
This is why if you want to do business inside the UAE you need a “trade license”.
Different Types Of Activities
It is important to choose the right business activity from the start when setting up a business in Dubai.
The reason for this is that your activities will be restricted to the activity indicate on your license. You want some examples?
– If you are importing shoes, you cannot suddenly import wood.
– When you have a consulting license you cannot do any trading.
– If you run a designer company you cannot rent a warehouse.
So it is important to have a good plan and choose your activity that will suite your needs. Now AND in the future, when other opportunities may arise.
Note that certain activities are regulated and demand additional permissions by governing government bodies. For example in the medical, food or security industries.
2. Choose The Right Type Of Company
We have seen that there are different activities that you can choose from. But depending on your business model, there are also different ways how to set up your business.
There are three options: a local LLC, a free zone establishment or an offshore company.
You need a local LLC if you want to supply goods or services to the local markets in Dubai. This local LLC will always be a partnership with a local shareholder who owns 51% of the shares.
You will also need a local LLC when you want to rent an office or a warehouse outside the free zone or in one of the malls.
Free Zone Company
In case you want to retain full ownership of your company you can set up a business in a Dubai free zone. When you own a free zone company you can only do business from the free zone. With a free zone company you can also only rent an office space or warehouse inside the free zone.
When you set up a UAE offshore company you are not allowed to do business inside the UAE. However, you can use the UAE as a base to do business in the rest of the world. You can set up an offshore company in Dubai. But in most cases it is better to set up an offshore company in RAK with a registered office in Dubai.
We explained the different offshore companies in the UAE here: Different offshore companies UAE
3. Choose The Right Free Zone
Most foreign business owners prefer to set up a free zone company. What are free zones?
Free zones have been established by the government to offer foreign business owners a way to benefit from the business opportunities in the UAE while retaining full ownership.
To protect local interests, there are a number of restrictions when using a free zone company. This means that you have to do business from the free zone, you cannot rent an office or warehouse outside of the free zone and you cannot directly supply to the local market.
How to choose the right free zone?
Most of the free zones have been established with a goal in mind. They specialize in different fields. Dubai Healthcare City focusses on becoming a health care centre of international standards. The Dubai Media City offers media and technology companies a location to mix and advance together.
Note that different free zones offer different facilities. Not all free zones offer the opportunity to rent office space or set up a manufacturing company,
If you want to understand more about this, please read: Which Free Zone To Choose in the UAE
4. Look For The Right Location For Your Business
Another important decision that you have to make is what location your business needs. Does your business allow you to work from home? Do you need an office in a good location to receive your customers?
As mentioned, not all is available in every free zone.
If you are thinking about getting an office you want to be located in a nice office building in a central location. If you work from home you might not need to have an office at all. When you want to trade or manufacture you might choose a to be located near to a port.
Choose your location carefully. Dubai is very accessible by car. But if you have staff that needs to come with public transport you need to be close to the metro. The summer is to hot to walk long distances.
Also, make sure there is sufficient parking in your area (a major problem) and that no construction is planned that will mess up the traffic for years to come.
Visas are allocated based on the amount of floor space you rent. If you will have a lot of employees
that need visas make sure to rent sufficient floor space.
Free zone companies are required by law to rent an office space or warehouse. To comply with this requirement a lot of free zones offer the opportunity to rent a flexi desk. This is working space you share with other entrepreneurs. It is a physical location that you are allowed to use a couple of hours a week.
And finally: when renting, try to negotiate a long term rental contract to prevent having to move at contract’s end or get into discussions about the rent.
5. Choose The Right Bank
There are a lot of very good banks in Dubai. UAE banks are used to deal with international investors and they provide a level of service no longer found in the West.
Banks in the UAE offer conventional as well as Sharia compliant financial services. Sharia compliant products are based on profit sharing rather than interest.
In terms of process and paperwork opening a bank account in Dubai is one of the easiest places in the world. However, you do need to appear in person in front of the banker. They want to see who they are dealing with.
In Dubai they are used to large amounts of (cash) money without to much hassle and paperwork.
Foreigners without a residence permit can open corporate or personal bank accounts in Dubai.
6. Running A Business In Dubai
When you run a business in Dubai, you will experience a freedom you do not find anywhere else.
There are no VAT or income taxes that you have to worry about. You do not have to file tax returns. In a number of free zones there is not even an audit!
You keep all the money you make. This is the main reason why investors come here in their thousands.
The pace of life is quick. New ideas can pick up very rapidly and can become very profitable.
Dubai is also a place where a lot of things that you take for granted in your home country can be improved upon. There are opportunities everywhere.
A lot of businesses are clueless when it comes to marketing. They don’t come further than pushing business cards in the hands of unsuspecting by-passers. Or they walk into random offices to give a sales pitch. But even with these efforts they are succeeding!
The bottom line is that if you have a good idea, Dubai is the place to try it out!
6 Things To Understand When Setting Up A Business In Dubai – Conclusion
There you go. Setting up a business in Dubai has just become a little easier. Just remember this important aspects of setting up a business in Dubai.
1. Choose the right activity
2. Choose the right type of company
3. Choose the right Free Zone
4. Choose the right location.
5. Choose the right bank accounts
6. Run your business like a pro.
Good luck and remember:
Spend your tax free profits wisely!
You might also be interested in this:
If you think about setting up a business in Dubai, do also consider Using A RAK Offshore As Holding Company
Take a look at our general Dubai Free Zone And RAK Free Zone
pages to see which other services we offer.
If you want to use some advanced tax planning tools make sure to read our article about the Expanding UAE Tax Treaty Network