How to start business in Dubai

25.07.17
6 minute read

The UAE is an attractive place to start a business, especially if you’re looking to sell goods in the GCC (Gulf Cooperation Council) region. Dubai provides plenty of commodities, easy access to flights and travel, and plenty of talent for hire; it’s no surprise that the emirate is becoming one of the most popular places to locate a business.

This guide will take you through the basics of what you should know before deciding to open up your company in Dubai, and the right steps for incorporating should you choose the region as your new venture’s home.

Should you set up your business in Dubai’s Free Zone (DMCC)?

For most entrepreneurs, getting started in Dubai’s Free Zone, the Dubai Multi-Commodities Center (DMCC), looks like a good option-- and rightly so. There are many advantages to operating out of the DMCC, but there are also some downsides to consider before choosing the DMCC as your business’ home.

Pros to operating your business from the DMCC:

  • Free zones are the only places in any emirate in which, as a foreigner, you can own 100% of your business.

  • There are (essentially) no taxes in the DMCC Free Zone. You won’t be subject to personal income tax, corporate income tax, or withholding tax for at least 10 years; and your business’ exemption is renewable. There are also no currency restrictions, and you’ll enjoy 100% full capital repatriation.

  • There isn’t a limit on the number of shareholders your business can have in a free zone.

  • Free zones are set up with great business infrastructure, and you’ll be surrounded by plenty of amenities.

Cons to operating your business from the DMCC:

  • Businesses set up in a free zones are restricted to conducting business inside of that free zone. They may not expand beyond the free zone or other UAE Markets, and business activities can’t be directed at UAE consumers outside of the free zone. Businesses may, however, do business overseas, and should they wish to sell their product or service within the UAE, they may work through an LCC outside of the free zone that has an import/export license.

  • There are restrictions on what types of businesses can be opened in each free zone. The DMCC, however, has more than 600 allowed business activities.

  • The DMCC is not located in central Dubai; however, it is only a 20 minute drive from the city.

Opening a business outside of the free zone

While Dubai is a fairly friendly place for expat entrepreneurs even outside of the free zone, there is one requirement for opening a business in the emirate that can be a deterrent: outside of the DMCC, you must have a local sponsor, and that sponsor must have a controlling share (51%) of the company.

Local sponsors can be either individuals or local businesses, and typically they don’t have any business responsibilities outside of leading government procedures like visa acquisition and obtaining licenses and permits. They must also sign all legal documents and official forms.

Businesses may also require specific licenses, some of which carry capital requirements. You can check out Dubai’s Department of Economic Development to find out what licenses you’ll need.

It’s also important to note that virtual businesses are not allowed to register in Dubai. Any company undertaking commercial activities is required to have a physical location in the emirate.

Visa requirements for Dubai

In both the free zone and greater Dubai, you’ll need a residence visa to set up your company. That being said, you’ll be allotted a certain number of visas by the square footage of office space you buy: i.e. setting up your company automatically makes you eligible for a visa. In order to maintain your visa, if you’ve set up your business within the DMCC, you’ll pay a fee of AED 3335 every three years, plus put down a refundable deposit of AED 3000.

There is a caveat for businesses forming outside of the DMCC: Your local sponsor, or the 51% local shareholder, must apply for your visa for you. Your sponsor then must allow you to apply for visas on behalf of your employees, or apply for visas for new employees directly.

What types of companies are typical in Dubai?

Both inside and outside the DMCC, the only type of new company that can be formed is a Limited Liability Company, or LLC. Alternatively, if your company already exists, you may open a branch or subsidiary of a local or foreign company.

What are the steps for setting up my business in Dubai?

The following list encompasses the basics of setting up a business in Dubai’s Free Zone. However, the process for setting up outside of the free zone is fairly similar, so these steps should still be of help.

1. Choose three preferred names for your business

In the online application, you’ll be asked to list three preferred names for your new business. The DMCC will then try to secure your first choice name, and will do the necessary research to make sure that the name isn’t already in use. If they find the name has previously been taken, they will secure your second or third choice name.

It’s important to note that your company’s name will always end in “DMCC”, and should you open a branch office the name will end in “DMCC Branch”.

2. Submit documents for pre-approval

Next, you’ll need to submit required pre-approval documents:

  1. For each proposed shareholder, manager, secretary, director, or legal representative, you’ll need the following documents for pre-approval:

    • Know Your Client (KYC) form

    • Letter of No Objection from any sponsors

    • Passport and Emirate ID (if UAE resident, the passport visa page, as well)

    • Proof of permanent residential address (generally a recent utility bill or a letter from one’s banker)

  2. Business Plan (if required for your business’ activities)

  3. If a consultant is acting on your behalf in Dubai:

    • Consultant’s Appointment Letter

    • Power of Attorney (if consultant has been given this power)

  4. Payment for name registration (AED 1000)

The pre-approval process generally takes anywhere between 7 working days and one month.

3. Submit registration documents

After your documents have been pre-approved, you’ll need to submit additional documents for registration:

  1. For each proposed shareholder, manager, secretary, director, or legal representative, you’ll need the following documents:

    • Specimen signature form signed in the presence of a DMCC Member Service Executive or notarized in one’s home country.

    • Passport to be reviewed by DMCC Member Service Executive or notarized in one’s home country (if UAE resident, will also need the passport visa page)

  2. Shareholders’ resolution (generated by the DMCC portal and signed in the presence of a DMCC Member Service Executive or notarized in a UAE embassy)

  3. Memorandum and Articles of Association (generated by the DMCC portal and signed in the presence of a DMCC Member Service Executive or notarized in one’s home country)

  4. Undertaking Letter to Comply with the DMCC’s Requirements (generated by the DMCC portal for the license manager to sign and upload)

  5. 3rd party approvals from relevant authorities (only applies to certain activities)

  6. Auditor appointment letter (optional)

  7. Payment, the amount of which will be calculated by the DMCC based on your previously submitted documents.

After you’ve submitted all of the necessary documents, the DMCC will issue you a Provisional Approval and Bank Letter.

Where can I go for help?

Both Dubai and the DMCC have comprehensive online resources for expats seeking to open new businesses in the emirate.

The Government of Dubai lays out steps, costs, and processes for forming a new business in Dubai, and includes many guides and how-tos.

The DMCC also provides step by step instructions for how to form a new company. You can choose to jump right to the company set up FAQs, or their guide on starting a company or, when you’re ready, do your business application online.

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