How to open a company in Dubai?

2.10.2022
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Many businessmen today are concerned about the question “How to open a business in Dubai”, due to the fact that they see great prospects for themselves in this emirate and the state of the Middle East. Currently, there are several ways to open a business in the UAE, and we will tell you more about them in this article. It will be very interesting and informative, so join us.

Anyone who wants to have a business in an Arab state should know at least basic information about them. First of all, the UAE is a federation that includes 7 emirates, formed in December 1971, in 2011 they celebrated 40 years of the federation’s existence.

Currently, the United Arab Emirates is the youngest state in the Middle East with a population of 9.4 million people. Almost 80% of the population is represented by immigrants who work in many sectors of the economy. Despite the fact that the state is famous for its oil reserves, it has managed to diversify its economy and become a global center of trade, financial and business activities. The first language in the state is Arabic, and the second is English.

What laws do you need to know to open a company in the Emirates?

The legal system is a combination of civil law and Islamic Sharia Law.

For solving civil issues, the following methods are used::

  • The Constitution;
  • laws and regulations of the Russian Federation;
  • Islamic Sharia Law.

The Constitution is a law that divides powers between the federation and local authorities. It is the basic law for the union and the entire legislative framework is built on it. According to the Constitution, the federal authorities are granted exclusive rights in resolving various issues, including foreign policy, defense and security of the state. The law, which is approved at the federal level, prevails over the local law established in each emirate. The local government of each individual region has the authority to regulate issues that are not related to federal legislation. As a rule, local authorities are involved in regulating business processes, issuing trade licenses, and registering firms whose activities are not covered by federal laws.

Although the Constitution stipulates that Sharia should be considered the primary source of law in the state, this does not mean that it is one, its application in the UAE is limited:

  • by the courts as an interpretative aid;
  • norms of religion, morals and law that concern Muslims;
  • specially expressed operations that comply only with Sharia Law.

The exception is cases when these provisions differ from the law of the federation. Here the idea of freedom of contract is recognized and allowed, which allows its participants to settle their relationships at their own discretion.

How do I open a company in the UAE?

Over the past few decades, Dubai has developed into an international business hub with a vibrant economy. Due to its strategic geographical location, it is the largest logistics hub in the Middle East. The city’s excellent infrastructure, increased security, high level of affluence of the population and free policy of local authorities have made Dubai interesting for investors around the world. The development of trade, manufacturing, transport and financial sectors has made the country’s economy diversified.

Dubai gives great privileges when registering and opening a company in the UAE, so many private entrepreneurs express a desire to register their organization in one of the free zones. However, many of them do not know some of the subtleties of legislation and nuances of business registration.

If you really need a company in Dubai, you should know the main points of opening a firm in this jurisdiction:

  1. There is no public register here. The FEZ government is responsible for registration.In other words, this process belongs to the frison authority.Nowadays, there are many companies that help with business registration in the UAE.As a rule, services are not cheap, so every entrepreneur wants to see for himself that he was not deceived.They will not be able to verify the contractor’s existence via the Internet. To find out this information, you need to personally report to the free zone administration with a passport or independently submit documents for registration.
  2. Along with the registration of a business in the UAE, various types of licenses are issued in some frizons.For example, an individual entrepreneur may obtain an industrial or commercial license.To develop your business in the Emirates, you will definitely need storage facilities, but it often happens that everyone in the selected free zone is already occupied or not at all.This point should be clarified immediately with the company that will deal with your registration issues.
  3. You should know that in some zones, when registering a company, they give you a virtual office.But to get it, there is a nuance that many do not know about.As a rule, according to the conditions of work in frizon, you are allowed to have such an office only in the first two years. After they expire, you will need to find a real office.
  4. It is not allowed to transfer an organization from one free zone to another, so carefully and seriously consider choosing a place of business, so that it is, as they say, once and for all.Therefore, take into account all the opportunities that each zone offers and choose the one that best suits you, since you will not be able to move to another zone.
  5. A company can only rent an office in the area where it is registered.This means that you will not be able to rent an office in another area or area of Dubai.
  6. Most free economic zones do not require an audit, but there are some where an annual audit is mandatory.
  7. According to the general rule in force in many frizons, the emirates do not require to pay the authorized capital or it has a nominal value, that is, it is fixed on paper, but it is not actually paid.

In reality, there are 5 options to open a company in the UAE, which can be used by foreign investors:

  • “shift” method, which is also called trading from abroad;
  • activities through an agency and distributor;
  • registration of a local company;
  • creating a joint venture;
  • merger and purchase.

1) The so-called shift method allows a foreign company to trade in the United Arab Emirates without leaving its home country. This option allows you to save on the need to stay in this jurisdiction. This method is usually suitable for trading special-purpose goods and services. Many foreign investors may find it impossible to establish a relationship that allows them to scale up their business without a personal presence. Often, UAE consumers require a foreign company to be legally physically located within the state.

The Companies Act insists that foreign investors who plan to conduct business in their territory should have a local registration and license. This requirement imposes a significant restriction on the types of activities that can be carried out in shifts.

how to start a business in dubai

2) Of course, you can organize activities through an agent or distributor. This option also eliminates the need for the company to be physically located in the country. Thanks to this solution, you can also save on the cost of actual presence and reduce risks. However, in this case, you need to be careful, before entering into an agreement with a local organization, conduct a thorough check of the partner. According to local law, agencies and distribution agreements are equivalent concepts. Currently, many types of intermediaries are known, and agreements with them can be registered or unregistered. A registered agreement can only be concluded if the distributor is a citizen of the United Arab Emirates or a company owned by its citizens. Such cooperation gives agents certain advantages from selling exclusive products. As a rule, the termination of an agreement can become quite a complex and expensive procedure due to the strict conditions and restrictions that are used exclusively for these cases.

3) Creating a local organization is a responsible mission. A business owner should not only be familiar with the administrative process, but also be aware of the importance of choosing the right form of business in Dubai. While this may seem like an easy process for most businesspeople, keep in mind that starting a business in Dubai has some features that only a few people are familiar with.

The most common forms of business are:

  • offshore;
  • firm in frizon;
  • a business with a local partner.

An offshore company in an Arab state is considered one of the most profitable options. On average, registration costs can range from $ 2,650 to $ 5,000, while license renewal and company maintenance costs $ 1,950 to $ 2,500 per year. This option is usually chosen by companies specializing in international trade.

What rights does an offshore company have? They can only work abroad, open accounts in Arab banks, carry out 1-5 licensed types of activities, and be a shareholder in any Arab company. In addition to rights, an offshore company has restrictions, in particular, it cannot carry out activities within the country, rent an office, or obtain resident visas for its staff. Also, they will not be assigned the position of a tax resident of the UAE, they will not be able to accept finances from other organizations that have been registered in an Arab state.

If the activity you want to perform meets the above conditions, then you can choose this option. If the solution is not suitable, you can choose a local company or a legal entity in Frizon.

A company in the FEZ is assigned the status of a resident of the state. The establishment of such an enterprise is possible in one of the 20 FEZs. Frizons now allow 100% foreign ownership. Frizona in a simpler sense is similar to an urban area, only in Dubai there are more than 20 of them.

The amount of registration fee in each emirate is different, the cost of opening and maintaining an enterprise annually depends on the zone. On average, registration fees are $ 6,700 – $ 1,1000, about the same amount of money is spent on maintaining the company’s annual activity.

A firm in frizon is allowed to:

  • engage in activities within and outside the state;
  • cooperate with legal entities of other frizons and with local firms to provide services within their location;
  • hire employees and get a resident status for them;
  • rent an office;
  • get tax residency.

With all these advantages of this form of business, a firm opened in one frizone does not have the right to rent an office in another, work outside its borders, trade and distribute goods in neighboring frizons, or participate in government competitions.

How to start your own business in the UAE in FEZ? Businessmen can create an LLC or register a branch in Frizon. FEZs represent certain areas located in the state, which are specially designed to attract foreign investment. Each free zone has its own regulatory body, which not only issues licenses, but also monitors the activities of foreign enterprises, mainly checks the counterparty’s compliance with the established rules and requirements. As a rule, each FEZ has a specific specialization, and therefore only certain types of business are subject to licensing

Despite the fact that FEZs allow full foreign ownership of property, companies registered in Frizon are not allowed to operate in an Arab state. As we have already said, each frizone has its own laws that apply to all companies located on its territory. This means that the business is regulated by federal and local regulations.

If this option is not suitable for you, we recommend that you pay attention to local companies. This legal entity must be registered in the mainland of the Emirate. It is desirable that the second founder of the organization is a citizen of the United Arab Emirates, and he must own 51% of the authorized capital. This form of business is the most expensive. Expenses average $ 13,500 in the first year, not counting the additional $ 10,000 you’ll need to keep your business active. Large organizational costs are compensated by the fact that a local company is allowed to do absolutely everything, even rent an office in any area of the emirates, as well as participate in state competitions.

opening a company in dubai

4) A joint venture is most often chosen by foreign companies that need access to the Arab market. Also, this option is chosen for those who want to organize work without agencies, distributors and other intermediaries.

A joint venture for a foreign investor is not just a block of shares, it is also participation in the management of the company’s affairs, as well as receiving all the advantages that the presence of a local partner gives. Together with a local partner, the investor gets a good financial position, technical skills, local connections and reputation.

The indisputable advantage of a joint venture is that there is no need to obtain a license or publish an agreement. The determining factor in this option is the right choice of companion. Only in this way and in no other way, you will get guarantees that the company will function in the planned direction.

5) mergers and acquisitions are the final strategy that allows a foreign investor to enter the Arab market. For this purpose, you can use an existing Arab organization or business. The Emirates allow the purchase of securities and other instruments. However, there are some nuances in this case:

  • limited public information and the need for inspections;
  • curbing foreign ownership rights and ownership of 51% of the authorized capital by UAE residents;
  • lack of an analog of regulatory rules in European legislation.

Each of these 5 opportunities to open a business in the UAE increases the need for a full due diligence process. Thanks to it, you will be able to avoid legal “terok” in the future and get a guarantee of commercial compatibility.

How long does it take to register a business in the UAE?

When starting a company in Dubai, it is very important that the licensed activity corresponds to the business processes that you will actually be engaged in. Registration costs often exceed those that apply in other countries. This difference is due to the fact that documents must not only be certified, but also translated and legalized. In addition, the key factor in the registration procedure is considered to be the presence of real estate.

Starting a company in Dubai can take much longer than registering a business in other emirates. This duration is explained by the fact that a large number of applications are received every day. Practice shows that on average, you can open a company in the UAE in 2-4 weeks in Dubai, while in other emirates this period can be reduced to several days. But we should not forget that some types of business require additional documents issued by local authorities — the Ministry of Health, the Ministry of Defense, etc., such requirements increase the registration process by several months.

What documents do you need to open companies in Dubai?

The list of documents that should be prepared for opening a company depends on the following criteria::

  • status of firm members (individual or legal entity);
  • number of shareholders;
  • a new company, branch, or subsidiary.

In situations where the founder is a legal entity or a branch or subsidiary organization is opened, you can request legalized constituent documents.

The Arab State is not a party to the Hague Agreement, which means that the apostille does not apply on its territory. Official documents will need to be translated and then notarized in the country of issue, then submitted for legalization to the representative office of the United Arab Emirates in the country where the legal entity has its initial registration, and then certified by the Ministry of Foreign Affairs of the Emirates.

An organization that has passed the registration procedure in Dubai or another emirate is issued a certificate, license, and charter. If a branch of the company is opened, the charter is not issued.

What is the authorized capital of a company in the UAE?

To open a company in the Emirates, it is necessary to form the authorized capital. Usually, the standard authorized capital is equal to 50 thousand dirhams, but it can be more, it all depends on the type of business that you will be directly involved in.

Some FEZs do not require actual crediting of funds to the bank account and confirmation by the bank of the fact of the authorized capital contribution, but there are zones where the actual crediting of the authorized capital is a mandatory requirement. For example, the DMCC insists that the founder of the company top up his own bank account for 50 thousand dirhams. Since the funds must be deposited to a bank account, the business owner must know how to open it for non-residents of the Emirates.

Many companies registered in the Emirates do not become its residents. However, this does not mean that they will not be able to open an account. Arab banks register 2 types of accounts, namely “Current Account”and” Savings Account”. The first differs from the second only by issuing a checkbook, which is usually assigned to an account in the national currency.

Non-residents are allowed to open only a “Savings Account”, which does not imply the issuance of a checkbook. This account is opened in any currency, be it dollars, euros or Arab dirhams. In addition to the account, the bank issues a debit card for a non-resident.

Many Emirati banks require the client to always have an average monthly balance on their account. If this condition is violated, the bank will charge you a fee for the periods in which the violation occurred.

If for citizens of the UAE, the amount of the non-reduced balance is relatively small, for example, $ 818, then a non-resident is subject to more stringent conditions — he must keep an average monthly balance of $ 100 thousand on the account. This discrimination against foreign citizens is due to the fact that their client information cannot be fully verified.

Opening an account in the Emirates is a rather difficult procedure for a non-resident. If you can’t just register an account, the financial institution will ask you to provide a reason that the client really needs an account in their jurisdiction. In other words, the potential client will need to prove their connection to the state. For example, the reason for opening an account may be whether the client has real estate in the UAE, which he plans to provide for rent. In this situation, the registration of an account looks very logical, since the rent here is paid by checks, which can only be deposited in the bank.

business registration in the UAE

Another reason for opening an account is the conclusion of a transaction that requires a foreign participant to have an account.

If the relationship with an Arab state cannot be confirmed or the investor refuses to leave a sufficiently impressive average monthly balance on the account, he can use another option, namely, to obtain the status of a resident of the federation. In the Emirates, you can quickly get a residence permit with a validity period of 3 years, if necessary, you can extend it. The easiest way to get a residency is to open a company in the UAE, see how to do this above. In the Arab state, there are a large number of free zones, by registering a company in one of them, you get the opportunity to apply for residency both for yourself and your relatives. However, the organization does not have to be engaged in actual activities.

Opening an account with an Arab financial institution requires the client’s personal presence. They must present the following documents to the bank: passport, proof of arrival in the Emirates, transferred bank statement for the previous 6 months and CV. You also need to submit papers that will confirm the need to register the account.

The bank will refuse to open an account for a non-resident if it considers that they need it to hide funds from the tax service of their state. Also, the account will not be opened for individuals who have the “Money laundering”mark.

Personal accounts are also opened in the international branches of the following banks: HSBC, Citibank, Standard Chartered. Please note that international banks often impose very strict requirements on their clients, so not all residents can open an account with them. The procedure for opening a bank account may take 2 weeks.

How to start a business in the UAE?

At the moment, there is a real construction boom here, the scale and projects of which amaze the world community. Today, profitable investments include the construction of commercial real estate, logistics sites, retail premises and industrial facilities.

The prosperity of the commercial property market, as well as the growth of business activity in the state, have made the services of real estate offices in demand, in particular, it concerns the comprehensive provision of real estate transactions. Today, specialized Internet resources and services are very popular that allow you to find real estate according to the specified criteria in a matter of minutes. Thus, the money should be invested in technological solutions that are related to the rental and acquisition of real estate.

The property needs maintenance regardless of its purpose. This means that the following works will be in demand in the market::

  • maintenance of engineering communications, air conditioning and ventilation systems;
  • fire safety;
  • cleaning services;
  • high-rise works.

The Emirates ‘ tourism activity attracts over 8% of total foreign investment every year. About 5% of the local population currently works in tourism. The development of tourism will certainly increase the flow of tourists. This trend makes investments in industries associated with tourism activities extremely attractive. Options for foreign investment:

  • hotel business;
  • travel agency;
  • organization of official events;
  • construction of real estate for the reception of guests.

Every year, the state creates a large number of organizations that need high-quality financial assistance from outside. The growth of business activity has made lending and financial transfer services popular for businesses in various fields of activity.

A good location, a well-developed logistics network, the availability of resources and the absence of taxation create good conditions for production activities. The state’s industrial strategy contains about 75 proposals that will attract more than $ 44 billion to the country.

The strategy framework includes the following points:

  • growth of manufacturing enterprises;
  • use of innovative technologies;
  • energy-efficient production facilities;
  • opening of the Islamic market.

One of the priority areas is the production of building materials, metal products, food products, perfumes, textiles. Thus, in the UAE, every investor will be able to find their niche and start a business using one of the following methods.

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