The United Arab Emirates is made of seven emirates, and Dubai is one of the most prominent and famous emirates. The city stands out due to its prosperous economic conditions, breathtaking modern infrastructure and highly attractive business environment.
Dubai’s geographical position places it perfectly as a gateway for business relationships between the Middle Eastern, African and Asian markets, making it an attractive market for international investments. The government also takes initiatives to provide various suitable entrepreneurial solutions for startups and large corporations.
Dubai has become an international business center that attracts global entrepreneurs and investors due to its strategic location, tax exemptions, developed business infrastructure and government initiatives. Without a doubt, Dubai is an ideal destination for starting a business. However, the process of setting up a new business in Dubai can be complex, especially for first-time business owners.
The comprehensive guide will explain each element of how to start a business in Dubai, including its procedures, advantages, challenges, costs involved and so on. Let’s dive in!
Read This – Cost of living in Dubai
Benefits of Starting a Business in Dubai
There are many perceived benefits of starting a business in Dubai today. Here are some of the most important and notable ones;
- Tax-Free Environment – Dubai has a very favourable tax regime with no personal income tax and no corporate tax except for oil and gas companies and foreign banks. There is also no capital gains tax. These tax exemptions make Dubai a favourable destination for business activities.
- Strategic Location – Dubai’s unique location makes it a perfect destination for effortlessly accessing global Middle Eastern, European, African and Asian markets
- Foreign Ownership – Dubai has opened its doors to investors and business personnel from all over the world with 100% foreign ownership of businesses in free zones and certain mainland sectors.
- World-Class Infrastructure – Fully developed modern business infrastructure, advanced facilities, and well-connected transportation and communication networks are a few of the many facilities available to businesses in Dubai.
- Ease of Doing Business – Dubai is very business-friendly with simple processes, government support and incentives.
Types of Business Structures in Dubai
Based on the business type, goals and objectives, it is imperative to choose the perfect business structure. Dubai has three main business structures to choose from, each with its own advantage. All business structures are discussed below in detail.
1 Free Zone Structure
Free zone structure provides 100% foreign ownership along with tax exemptions and other privileges. The process of establishing a business within free zones is also pretty straightforward. However, the free zone businesses can only serve international markets and operate within the zone. Free zone businesses need a distributor to operate in the UAE mainland since they cannot directly conduct transactions there.
Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), and Dubai Internet City (DIC) are some of the popular examples of free zones in Dubai.
2. Mainland Structure
This business framework enables operations throughout Dubai and other areas in the United Arab Emirates. However, to establish a business in any UAE territory, you need local sponsorship where an Emirati stakeholder must own 51% of the company unless your business fits specific professional guidelines where total foreign ownership is permitted. Companies with local customers should select a mainland business structure as their ideal business entity.
3. Offshore Structure
Offshore companies provide an excellent solution for organisations that want to maintain financial operations in the UAE without conducting operations on local soil. Offshore companies are restricted from doing business in the main territory of the United Arab Emirates.
Required Documents for Business Setup in Dubai
The exact documents required would vary based on the type of business, its structure and so on. However, here is a list of documents generally required to start a business in Dubai;
- Passport copies of shareholders and directors
- Visa copies (if applicable)
- Memorandum of Association (MOA)
- Initial approval from the Department of Economic Development (DED)
- Business plan
- Application form
- Proof of initial approval from the free zone authority (for free zone structure)
- Proof of address (utility bill or bank statement)
Step-by-Step Process to Start a Business in Dubai
The exact procedure will vary depending on the type of business, what structure has been chosen and so on. However, the steps involved more or less will look like the following;
- Choose Your Business Activity – Decide what business activity you will establish, whether it is trading, consulting or manufacturing. Your chosen business activity must receive authorisation from the proper government entities.
- Select a Business Structure – The next step is to decide the business structure by choosing between mainland, free zone or offshore setup to match the organisational goals.
- Register Your Business Name – You must select your business name in compliance with UAE naming requirements. The business name should not contain any offensive words and must include a legal structure like LLC, FZE, etc.
- Obtain Initial Approval – Initiate the process by submitting your application to the DED if you operate in the mainland or to the appropriate free zone authority.
- Secure a Business Location – The next step is to lease an office premises or obtain virtual office space according to your commercial nature. Free economic zones tend to offer many choices for office space.
- Apply for Licenses – Proper licensing is very important for business set up. Depending on the business type, you will need to obtain various licenses, such as a trade license for commercial activities, a professional license for service-based businesses and an Industrial License for manufacturing businesses.
- Open a Corporate Bank Account – Select a bank, then provide documents which include trade license together with MOA, passport copies and other specified documents to obtain a corporate bank account.
- Visa Processing – Apply for visas for yourself, your partners, and your employees. Medical examinations, together with the Emirates ID registration form, are a part of the requirements.
You may need to complete additional legal processes depending on your business. Once completed, your business will be legally up and running.
How Much Money is Required to Start a Business in Dubai?
The cost of starting a business in Dubai depends on the type of business, the location, the scale of operations and other similar factors. Here’s a detailed breakdown:
- License Fees – Depending on the business activity and the structure, a professional business license may cost the following;
- Mainland – AED 15,000 – AED 50,000
- Free Zone – AED 10,000 -AED 30,000.
- Office Space – Varies depending on the location, size, etc. Average annual costs are as follows;
- Mainland – AED 20,000 – AED 100,000 annually
- Free Zone – AED 10,000 – AED 50,000 annually (flexible options available).
- Visa Costs – Once again, it is a variable cost depending on a lot of factors. On average, it may cost anywhere between;
- AED 3,000 -AED 7,000 (including medical tests and Emirates ID).
- Sponsorship Fees – If applicable, the cost of local sponsorship may vary between:
- AED 15,000 – AED 50,000
- Miscellaneous Costs – Approvals, legal fees, and PRO services: AED 5,000–AED 20,000.
Challenges & Tips for Setting Up a Business in Dubai
Challenges
- Cultural Differences – Understanding the business customs and proper etiquette, along with local traditions, is important for the success of any new business venture in a foreign land.
- Legal Complications – Business operations experience difficulty due to complex local laws and regulations, especially if you are starting a new business abroad. It is vital to have local help.
- Competitive Market – The competitive nature of Dubai’s market demands powerful business planning and execution with meticulous details.
Tips to Overcome Challenges
- Do Your Research – Research the market deeply as new markets have tedious hidden rules and regulations, and you also need to comprehend all legal requirements before you can start your business.
- Hire Local Professionals – Partner with business experts. Hire services from consultants, market experts, local professionals and so on, who specialise in business set-up, leading to more easy and normalised business procedure.
- Network – Entrepreneurial success requires entrepreneurs to create relationships and network with like-minded business personnel and government representatives.
- Know Your Target Market – Research your target market through market analysis to determine your customers and competition.
- Budget Wisely – Budgeting requires considering all the expenses, such as licensing, payments, running costs, etc.
Government Support & Business Incentives
The government of UAE has undertaken various initiatives to help promote business startups and growth for various industries. As a result, there are many incentives offered to entrepreneurs starting their business in Dubai. Here are some notable ones;
- Free Zone Benefits – These are special business zones with complete tax exemptions, 100% foreign ownerships of business and no currency restrictions.
- Dubai Startup Hub – Startup companies can find mentoring services combined with funding options and networking support at Dubai Startup Hub.
- Dubai Industrial Strategy 2030 – The Dubai Industrial Strategy 2030 motivates investments towards manufacturing and innovation through its initiatives.
- Expo 2020 Legacy – Continued support for businesses in sectors like technology and sustainability.
Indian Vs Dubai: An Overview of Differences in Starting a Business
| Business Aspects | India | Dubai |
| Ownership | Very limited foreign ownership in many sectors | Complete foreign ownership is in free zones and in some businesses, even in mainland business structure. |
| Taxation | A complex and very detailed tax structure with GST, income tax, corporate tax and so on. | Tax-free environment. No personal income tax and no corporate tax except for certain industries. |
| Ease of Setup | The process of setting up a new business in India is lengthy and bureaucratic | The business set is very streamlined and quick as the government is actively working to make things easier for new entrepreneurs. |
| Cost | Lower setup costs | Higher setup costs (licensing, office space) |
Conclusion
Starting business operations in Dubai leads to rewarding outcomes when entrepreneurs follow specific planning and execution strategies. Business entrepreneurs who follow local regulations while fulfilling all legal requirements will establish a solid basis for organisational development.
Various professionals who assist in licensing and visa applications, along with operational set-up, can simplify the process of starting a business in Dubai and prevent major difficulties.
Dubai provides every business sector with extensive opportunities through its investor-friendly environment, a diverse economy, government initiatives and more.
The correct steps of starting a business, combined with information acquisition, will enable you to transform your entrepreneurial dreams into reality within Dubai’s thriving business environment.
Frequently Asked Questions
Generally speaking, it takes about 1-2 weeks for free zone companies to set up their business, whereas for mainland companies, the process is a little longer, taking about 4-6 weeks.
Yes, foreigners can have 100% ownership of businesses in Free Zones in Dubai. In some business sectors, complete foreign ownership is also possible in mainland companies.
Is it compulsory for a local sponsor to start a business in Dubai?
Except for a few professions operating in mainland Dubai, a local Emirati sponsor is compulsory, and they have to own 51% or more of the business.
Dubai is known for its very low to almost no tax policy, with no corporate or income tax for most businesses. However, VAT at 5% applies to certain goods and services.
Dubai offers three distinct business structures to operate through, namely Free Zone Companies, Mainland Companies and Offshore Companies. Each business structure in Dubai offers different advantages based on its specific requirements and legal constraints.
All business establishments in Dubai need to maintain a permanent office space, except certain free zone setups. A few free zone areas enable virtual office registration according to the chosen business license type.
Can I start an online business in Dubai?
Yes, e-commerce businesses can operate in Dubai by acquiring licenses either through a Free Zone authority or from the Department of Economic Development (DED).
