How do I set up a Trading Company in the UAE?
Why set up a business in the UAE?
In less than 40 years, The UAE has transformed itself into a major international trading hub and a sought-after destination in which to set up many types of business entities, from small start-ups to large, well established international enterprises.
There are many reasons why the UAE is such a desirable location to do business. Not least because of its strategic geographical position as the gateway between East and West, and with a centralised time zone that blends the business hours of both sides of the globe, providing access to 2.2 billion consumers worldwide.
This strategic location allied with attractive incentives such as 0% income tax, low import duty, free trade agreements and straightforward procedures for acquiring a trading licence and company registration have made it easier than ever for foreigners to invest and become part of the UAE’s thriving business environment.
What is a Trading Company?
A Trading Company is defined as a business which supplies or distributes various types of products to consumers, businesses or the government. Generally trading companies can be categorised into two broad groups: retailers who sell to the general public and importers or wholesalers who hold stock and deliver products to other businesses, who in turn sell those products to the public.
Steps to setting up a Trading Company in the UAE
- Create a business plan
The first step towards setting up a company is creating a comprehensive business plan. This requires thorough research and the more information that you can put together at this stage, the easier the decisions that need to be made thereafter will become. The following are some of the things which should be considered when creating your plan:
- Product and sourcing: What do you intend to sell and is there a need in the market for it? How will you source this product?
- Market analysis and competitors:Does this product currently exist? Is there a market for it? If it is being sold by other organisations, through which channels is it being sold?
- Cost analysis and initial investment: What are the costs associated with manufacturing/importing this product? What are the costs associated with setting up the company and obtaining a trading license?
- Logistics and import legislation: How will you transport the product from manufacturer to consumer? What are the costs? What are the import laws and duties in the UAE?
- Marketing tactics: How will you promote and effectively market this product to the public?Premises requirements: Does your company have a need for office space or storage facilities? Where should these be located?
- Select the company structure
It is crucial to accurately define the activities that you intend to carry out in order to select the best set up options and license for your trading requirements.
If you intend to trade in a small number of products within a certain category, then a specific trading activity would be the best option for you. However, if you plan on operating with distinct categories of products, a General Trading licence would be a better fit. - Jurisdiction
In order for you to select the correct jurisdiction for your company, it is important for you to be informed about all the jurisdictions available in the market. In Abu Dhabi, Dubai and the wider UAE there are three types. These are:- Free Zones
- Mainland
- Offshore
Trading in a Freezone
There are approximately 50 free zones in the UAE. Each Free Zone is focused on one or more business industry categories and only offers licenses to companies within those categories.
Some of the benefits of setting up within a free zone are:
- 100% foreign ownership
- 100% repatriation of capital and profits
- 100% corporate and personal income tax exemptions
- Exemption from all import and export duties in some Free Zones
One notable drawback of this set up option is that you cannot import into mainland UAE, you can only import into the Freezone and you can only ‘trade’ with other companies within that Freezone, or internationally. You will not be able to sell your product to the domestic UAE marketing, without using an onshore Agent in Dubai or Abu Dhabi.
Trading in the UAE Mainland
One of the main benefits to setting up on the mainland is that the company would be able to do business throughout the UAE market. It can work inside or outside the UAE and is not limited to doing business within a certain area, as is the case with a free zone company. It is a requirement for this type of entity to have a UAE national (corporate or individual) who owns a minimum of 51% of the shares - up to a maximum of 49% of shares in a UAE company can be held by foreign shareholders.
Offshore Companies in the UAE
An offshore company is one that operates outside its registered jurisdiction and/or location of ownership. Some of the benefits of setting up an offshore company are that it allows an existing business to expand into foreign markets and offers a means to separate assets, such as intellectual property from existing entities. However an Offshore company cannot trade within the UAE mainland, and offshore entities are often only used as holding companies for assets and IP within the UAE.
Find a Local Partner (also called a Local Sponsor)
If you choose to set up a mainland company, it is a requirement of UAE Commercial Company’s Law that you nominate a local shareholder (sponsor) to hold the majority share of 51% of the company. This can be a corporate nominee (a UAE national company) or an individual sponsor (a UAE national). There are differences between the two types of sponsorship and the choice of which option is best for your company will depend on several different factors.
PRO Partner Group provide a secure Corporate Nominee local partner service for international clients and can advise you here to help you make the right decision.
How can Pro Partner Group help with setting up a Trading Company?
PRO Partner Group has extensive teams, experience and knowledge across Dubai, Abu Dhabi, the wider UAE, Oman and Qatar, providing professional assistance and guidance for international companies, entrepreneurs and investors on the best way to set up to deliver services and sell products into the local GCC market.
Our dedicated operations teams and PROs have strong relationships with local government authorities to ensure that the correct information is provided, and requirements are met in a effectively and timely manner.
PRO Partner Group also provide a secure corporate Nominee Local Shareholder platform to allow foreign companies and investors to safely establish their businesses in the UAE, Qatar or Oman - we ensure that the foreign party has full management control of the business and full transparency with local on the ground support.
If you need assistance in setting up a Trading Company in the UAE, and for further information on any other related company set up, local partner or PRO service matter in the UAE and wider Gulf do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at info@ppg.ae or complete the contact form below and we will be delighted to assist you.
