Business set up information in UAE

Business set up information UAE

Setting up a business in the UAE can be extremely rewarding but there are many things to consider. James Swallow of PRO Partner Group and his team have helped hundreds of organisations and foreign investors to set up a profitable corporate presence in the UAE, Qatar and Oman. Here, he shares his valuable expertise.

1. Where do I set-up a UAE company?

There are 7 different Emirates in the UAE, each one has the same federal structure but broadly different market conditions and legal requirements.

There are two major considerations when deciding which Emirate is right for your business – the market demand (target client location) and the legal requirements. Each Emirate has differing regulatory requirements, entry costs and Trade Licence and set up fees.

Even the markets in Abu Dhabi and Dubai are very different in certain sectors and it is important to research the pros and cons of each location for your business type. A business set up company such as the PRO Partner Group can assist at this stage.

2. What legal structure will be best for my UAE business set up?

There are three legal structures for foreign businesses in the UAE:

  • an Establishment (owned by one person)
  • a Limited Liability Company or LLC (owned by two or more people, or corporates)
  • a Branch of a foreign company (100% owned by a foreign company)

The rules, regulations and fees do vary widely and will be based on the type and nature of your business.

There are several entities within the government of Abu Dhabi and Dubai that issue licenses for new businesses. You will need to ascertain what type of legal form is appropriate and then investigate which authority issues that business license. A company such as PRO Partner Group can assist you in obtaining to correct information to prepare the correct set up to undertake the correct activities.

3. Do Foreign Investors need a Local Sponsor?

If you choose to set up your business in a Free Zone, then a separate local sponsor/partner is not required – the Free Zone itself effectively becomes your local sponsor and all government liaison and property related matters will have to go through them. If you are aiming to set up an Onshore LLC (or a Branch or Establishment) then you will need to have an individual Emirati national or a 100% Emirati owned company as a partner or sponsor in order to register the business.

Under UAE law, with an LLC structure, 51% of the shares need to be owned by your local Emirati partner or UAE corporate partner, however this does not mean that the same proportion of profits must follow. An agreement with your local partner can stipulate that the majority of the profits and management control is retained by the Foreign Party owning 49%.

If you choose to register the business as an Establishment, which by definition is a facility owned by one person only, then a foreign individual can own it 100% but must have a UAE national (or a UAE company) acting as a service agent for the Establishment. A Foreign Branch similarly can be owned 100% by a foreign company with a local UAE National or UAE company acting as the National Service Agent (NSA). In both cases the Individual or the company has 100% liability for the Establishment or Branch and must show qualifications and experience in the relevant field. The sponsorship requirements and regulatory requirements differ for different license types and legal forms of business – for example generally speaking a Branch cannot ‘trade’ in products.

4. What is a Free Zone?

A UAE Free Zone is a special economic zone usually attached to a port or linked to an industry sector. The advantage of Free Zones is that they allow for 100% foreign ownership. That means that the foreign investor can own the business outright in the UAE without a separate local sponsor. Some other benefits include 100% repatriation of capital and profits, 100% corporate and personal income tax exemptions and exemption from all import and export duties.

There are some limitations that you need to be aware of:

  • A Free Zone company is not normally allowed to trade directly with the UAE market and must go through locally appointed distributors that are set up ‘onshore’ – which means you can’t have a shop front unless its located in the Free Zone itself.
  • A Customs Duty of 5% is normally applicable when a Free Zone company sells in the UAE – the Free Zone is seen as not within the UAE
  • Employees holding visas issued by a company operating in a Free Zone are expected to work from the company office within that Free Zone.

5. What is a Branch?

Some companies choose to set up a Branch of their existing company in the UAE. For example a UK company can set up a branch of that UK parent company in UAE. A Branch is treated as an extension of the foreign company, which remains legally liable for their activities. The main thing to consider with a Branch here is tax. All taxes will need to be paid in the parent company jurisdiction. As the UAE has a favorable tax environment this may lead to extra costs for the company.

6. Do different types of businesses require special permits or have special requirements?

Yes definitely. The different legal forms of businesses each have specific requirements. Sole proprietorships (Establishments), LLCs and Branches of local and foreign firms must all meet certain specifications before the issuance of an Initial Approval, and eventually a full Trade Licence. A Law Firm or Set Up Company can assist you to understand exactly what is required for your company and your specific activity.

7. How much time and money do I need to set up a business in the UAE?

This really depends on the type of business that you want to set up and the industry that are looking to enter. On average, it is recommended that you allow 2+ months to set up a company. This allows time to complete the paperwork, regulatory approvals and any legislations and translation of documents.

For a low cost single person owned Free Zone company (with a virtual office space only) the usual budget range is approximately 20,00-50,000 AED for the Free Zone fees to set up. A key consideration for a Free Zone company will be office costs related to number of staff – this is normally the major part of the initial and ongoing costs when setting up in a Free Zone and will be on top of the above fees.

For an LLC onshore company it is wise to consider a starting budget of around AED 100,000 upwards as you have some fixed costs to consider, such as government licencing fees, legal and set up costs, compulsory minimum office space requirements and visa application fees.

A specialist firm such as PRO Partner Group can provide advice on how to proceed in your unique business model. PRO Partner Group will give you a realistic understanding of how much money you will need to invest and how much time it will take until you’re open for business.

8. Do I need to have an office in the UAE?

You can’t register a business without first having a lease on an address of some sort. In Abu Dhabi the minimum space is 14 sqm in Dubai it is 200 sqft – the space must normally have an external door and will need to be inspected for compliance.

Some Free Zones offer the option of renting a flexible-desk or virtual space that you share with other small businesses.

If you need physical office space, then you will have to register the company first to obtain the documents that will allow you to rent the office space. If you want to rent office space within the UAE (i.e. not within a Free Zone) then you will need a full Onshore UAE Trade License.

The size of your office will broadly dictate the number of staff you can have and some activities will need specific office types and locations – for example Retail activities will need a ground floor office with a shop front.

9. Does it help to have local advice when setting up my business?

Finding the right local advice can save an enormous amount of time, money and a great deal of stress.

The experts at PRO Partner Group specialise in providing foreign investors with advice on the most efficient and profitable way to set up your business in Abu Dhabi, Dubai, the wider UAE. Qatar and Oman.

10. What is the next step to setting up my business in the UAE?

Do some research and get planning!

The UAE can be a great place to open a business but you need to do your homework. A great place to start is to link up with other people in a similar industry who have made the move. Networking, especially amongst people in the same or similar fields can give you important feedback on your ideas and their feasibility. You can also research online.

Start to develop a business and marketing plan taking into consideration realistic costs and timeframes. And talk to an expert in the region who has in-depth knowledge on how to set up a business. They can give you a realistic perspective on setting up a business in the Gulf.

 

James Swallow is Commercial Director of PRO Partner Group. PRO Partner Group specialises in providing foreign investors with a seamless and financially efficient means to setting up a profitable corporate presence in Abu Dhabi, Dubai, the wider UAE, Qatar and Oman. Contact James direct on james@propartnergroup.com or call a member of the team on:

T: +971 (0)4 456 1761 (Dubai)
T: +971 (0)2 448 4810 (Abu Dhabi)
james@propartnergroup.com
www.propartnergroup.com