Challenges For Business Setup In Dubai – Are You Ready?
The UAE is made up of seven emirates – Dubai, Sharjah, Abu Dhabi, Ras Al-Khaimah, Fujairah, Ajman, and Umm Al-Quwain. Each emirate has specific rules and regulations. As a result, doing business here can be extremely challenging at times. Having said that, Dubai is an attractive jurisdiction for business setup.
It is predicted that the economic performance of the UAE shall rebound strongly in 2021, which is true. The oil prices performed well throughout the year, which led to the recovery of the UAE. The 40 free zones are now driving more foreign investments and offering 100% ownership.
The UAE boasts its infrastructure, liberal regimes of trade, and the political system of the Gulf. Because the UAE is strategically located, Dubai is the regional hub as well as the commercial capital of the MENA region and beyond.
Despite these conveniences, for a business setup in Dubai, foreigners may face a few challenges. Brace yourself for these challenges:
#1: Get a Setup
Companies wanting to set up a business in Dubai, or have their employees based in the city, should register their legal entity. Companies active in the UAE should possess a licence, which is directly linked to their registered entity.
There are two options to set up your operational entity – free zone and onshore jurisdiction.
Free zones are ‘free’ from certain regulations of the UAE. Businesses in these zones do not require a national sponsor or even a split collaboration. A foreign investor can have 100% ownership of the business. Each emirate has two free zones, and Dubai has over 20. Each zone follows its rules, regulations, and laws. There are jurisdictions for Common Law Free Zone having their court systems and regulators. However, companies in the free zones are restricted to do business only within the zone, with another free zone, or even internationally, but they have restrictions on doing business in the mainland of the UAE.
Likewise, the onshore jurisdiction includes areas not specified within the Free Zone. As a result, they are subjected to the UAE federal laws, rules, and regulations, with their Ministry of Economy handling the regulatory bodies. The common companies within onshore jurisdiction include representative office, Limited Liability Company, and a branch office. Depending on the company’s business activities, it may be 100% owned by foreign investors. Beyond approved activities, the LLC requires 51% UAE shareholder. Likewise, a representative or branch office requires a service agent as the point of communication with the authorities.
#2: Finding Proper Office Space
Setting up an entity in the UAE is a combination of a legal entity, facility, and licence. As the economy of Dubai is driven by the real estate market, it is a law to link the company licence to the physical office.
You can find flexible office space and desk solutions in free zones. However, the minimum requirement of office space varies as per jurisdiction.
Dubai’s official language is Arabic, though English is also commonly used. However, employment records like contracts and documents are in Arabic.
#4: Understanding Tax Rules
Dubai is a tax-free city. VAT was introduced in 2018. 5% VAT applies to all businesses. If not paid, a penalty shall be charged.
#5: Visas and Work Permits
Because the UAE is young as a country having a diverse population, foreign workers require either a residence permit or a work permit to live here and work. As such, it is pertinent to pay attention to making sure a business is compliant with all the rules and regulations under the General Directorate of Residence and Foreign Affairs and the Ministry of Human Resource and Emiratisation.
With some challenges, it is still relatively easier to set up a business in Dubai, UAE.