Dubai’s economy has been growing at a rapid pace. The economy is alluring for investors, businesses, and individuals who come from various corners of the world to be part of it. As the growth here is quite evident, those who join it experience inevitable growth themselves. Such an economy, along with robust infrastructure, a diverse pool of skills, tax benefits, and a strategic geographical location, makes company formation in Dubai attractive for many.
Starting any sort of business in Dubai is quite simple, but of course, there are certain legal rules, local regulations, and considerations you will need to keep in mind for a successful setup. This piece of article will provide all the essential legal requirements, financial considerations, and other aspects of successful business setup in Dubai.
Advantages of business setup in Dubai
Company formation in Dubai brings numerous benefits and opportunities for entrepreneurs. The process of setting up a company here has been made quite easy, with minimal administrative hurdles. The government has introduced many e-channels that allow applications for business licenses, visas, and more to be completed conveniently online. Dubai has been a leader in adopting new technologies and modern infrastructure. Having world-class facilities and services makes business operations smooth and efficient.
Foreign entrepreneurs can enjoy 100% ownership of their business along with full profit and capital repatriation. The tax environment is highly beneficial, with no personal income taxes and minimal corporate tax. As a business in Dubai, you gain access to a wider global market, enabling your business to become not just a local success but an international one. Business owners holding UAE residency visas can also bring their families to live here, enjoying a peaceful and prosperous life together.
Legal requirements for company formation in Dubai
When forming a business in Dubai, there are certain legal steps that you must fulfill. Here is an overview of the legal requirements for business setup in Dubai:
Choosing the right legal structure:
The legal structure of your business will determine its ownership, liability, operational rules, legal obligations, etc. In UAE, there are many types of business structures permitted that you can choose from. Few examples include sole establishment, partnership firm, limited liability company (LLC), branch/representative office, freezone company, etc. It is crucial to choose the one that aligns with your business nature and goals.
Registering a lawful business name:
For your business, you will need to choose a name that complies with the UAE’s naming conventions. For example, the name must not be blasphemous or hurt any moral sentiments in the nation. It must not already be registered or contain the name of any UAE government body. If you violate any of these rules, your chosen name will not be accepted. The name you choose must be registered with the Department of Economic Development (DED) or the respective free zone authority.
Getting the permits and approvals:
Company formation in Dubai requires approvals and permits from the concerned government authorities. First, an initial approval is needed from the Department of Economic Development (DED) or the respective free zone authority to proceed with the business setup. Additionally, certain business operations require permission from other government bodies. For example, a healthcare business needs approval from the Dubai Healthcare Authority, while a real estate business may require permission from the Dubai Land Department, among others. Without these permissions, you cannot legally proceed with company formation in Dubai.
Getting the trade license:
A UAE trade license is an official permit that allows you to conduct business in the nation. It must be obtained from the Department of Economic Development (DED) or the respective free zone authority. Depending on your business operations, you will need to apply for the appropriate license category. There are mainly three types of business licenses in Dubai:
- Commercial License: For operations like buying and selling goods, import/export, and trading.
- Professional License: For service-based operations, such as providing consultancy, IT services, and similar activities.
- Industrial License: For manufacturing and industrial operations like the production and processing of textiles, food, and other goods.
Obtaining the right type of license is mandatory for your business. Additionally, the license needs to be renewed annually, and you must meet all the requirements of the license you are applying for. Also make sure to present accurate and complete documentation while applying for trade license, including:
- Filled application form
- Business plan
- Lease agreement
- Passport and visa copies
- Initial approval certificate
- Additional approvals
- MOA and AOA
- NOC from local partner, if needed
There may be additional document requirements for company formation in UAE. Its best to seek guidance from experts like Dubiz Business Setup to avoid any issues.
Compliance with UAE business laws:
There are business laws applicable to companies and businesses operating in the UAE. You must comply with these laws, which include:
- UAE Labour Law: Governs the relationship between employers and employees, including rules regarding rights and obligations, employment terms, wages, working hours, employee contracts, and more.
- Anti-Money Laundering (AML) Regulations: Focuses on preventing illegal financial activities, ensuring transparency, and maintaining proper financial reports and records.
- UAE Commercial Companies Law: Covers the formation, management, and dissolution of companies in the UAE.
- Laws Concerning Corporate and Business Tax: Relates to taxes imposed on taxable income, exemptions, and compliance requirements.
Being aware of and ensuring compliance with these laws is essential for successfully operating and managing a company in Dubai.
Adhering to employment laws:
Understanding UAE labour laws and requirements is essential when hiring and managing a workforce in the UAE. To ensure a transparent and fair work environment, the UAE government is committed to protecting the rights of both employees and employers through well-implemented laws.
When employing workers, employers must prepare an employment contract that is signed by both the employee and employer. This contract outlines job-related essentials such as terms and conditions, working hours, wage rates, employment period, details of both parties, leave entitlements, and more.
Additionally, employees must hold a work permit issued by the Ministry of Human Resources and Emiratisation (MOHRE). For foreign employees, an employment visa must also be obtained. Ensuring compliance with these requirements is crucial for smooth and legal workforce management.
Applying for the visas:
As a foreign entrepreneur, you must obtain a visa to enter, stay, and work legally in the UAE. The types of visas you can apply for include investor visas, green visas, and golden visas. Additionally, you must secure visas for your domestic staff, if applicable.
You can also sponsor your family members, such as your spouse, children, and parents, to live with you in the UAE. Remember, obtaining a visa is the very first step that allows you to enter the country and stay for the designated duration legally.
Financial consideration for company formation in Dubai
Here are some financial considerations for businesses to keep in mind when operating in Dubai:
Opening a corporate bank account:
Every business in Dubai, whether well-established or a startup, needs a bank account to manage finances effectively. Such accounts are opened in the name of the business and help in recording and managing business expenses, funds, receipts, and transactions.
Dubai offers a wide range of reputable domestic and international banks where business accounts can be opened. You will need to prepare documents such as a UAE trade license, owner’s visa copies, passport copies, and other paperwork as required by the bank. Additionally, be prepared to provide a minimum initial deposit and maintain an average balance to operate the business bank account.
Remember, the legal requirements for opening and maintaining an account depend on the bank you choose.
Taxation rules in UAE:
The tax environment of the UAE is very favorable. In fact, it remains one of the top factors attracting foreign investors and businessmen. The nation offers a 0% tax rate on personal income as well as corporate incomes for most businesses. However, there are certain conditions that must be met for the 0% corporate tax. Additionally, free zones continue to be a popular choice for tax exemptions and favorable tax rates.
Value added tax (VAT) rate: The general VAT rate in the UAE is 5%, which applies to almost every good and service. Certain goods and services may be subject to a 0% rate or exempt from VAT. A business must register for VAT if their taxable supplies and imports exceed AED 375,000.
If one does not comply with tax laws, they may face penalties such as fines or even the closure of their business.
Process of company formation in Dubai
You can get your company up and running in no time. All you have to so is follow the steps properly. Here are the steps for company formation in the UAE:
1.Choose the jurisdiction: mainland, free zone, or offshore
- Choose your business operations
3.Choose the legal structure of your business
4.Select and register the business name
5.Obtain initial approvals
6.Obtain additional approvals if needed
7.Choose office space
8.Apply for the business license
9.Get the visas for self, staff and family
10.Open a business bank account
Get the right direction for your Dubai business
Starting a business in Dubai requires careful legal and financial planning. While the process of Dubai company formation is straightforward, it is still better to get assistance from professional business setup consultants. Dubiz Business Setup has been helping entrepreneurs for many years. They have a full team of experts from various fields who can help with every aspect of company formation in UAE. From company registration to obtaining the license, permits, and visas, they will ensure your business setup is not only fast but also legally compliant. Additionally, their financial experts can assist with accounting, bookkeeping, tax, VAT, AML compliance, and more. Reach out to them today for further information.