Things to know when you are setting up a company in UAE

 

Planning to set up a business on the mainland

This section provides information about planning a business on the mainland in the UAE.

Benefits of setting up a business on the mainland

There are many benefits of setting up a business on the mainland. Some of them are:

  • Flexibility to do business in any part of the UAE
  • No limit on number of visas
  • More business activities available for licensing
  • No business or personal taxes.

Key government entities

Generally, you need to contact Department of Economic Development of the respective emirate to seek the 'initial approval' and register the trade name. You can do that either by visiting their office or through their eServices. It is only after seeking the initial approval that you can proceed for additional approvals of other authorities which is required in case of certain business/trading activities.

Refer to the Department of Economic Development in the emirates of

In Fujairah, the activities are overseen by Fujairah Municipality.

In exceptional cases, such as setting up a private joint stock company (PrJSC), approval of Ministry of Economy is needed at first.

Where to begin?

If you are planning to start a business on the mainland, you need to know the following in order to know where to start.

Cost of setting up a business

Setting up a business involves raising capital investment, paying for licences and employee visas. The cost of setting up a business depends on:

  • The nature of the activity and licence required; whether it is commercial, industrial or service-oriented
  • The legal form of the company; whether it is an establishment, a company, or a branch of a company.

Capital requirements for a company on the mainland

Capital requirements for a company on the mainland vary according to the legal form of business. For a PJSC, the minimum capital is AED 30 million. For a PrJSC, it should not be less than AED 5 million paid in full.

For other type of businesses, the UAE Commercial Companies Law did not specify a minimum capital. But, it stated that the minimum capital:

  • should be mentioned in the Memorandum of Association
  • must be a 'sufficient capital' to achieve the purpose of the business incorporation.

For foreign companies wishing to establish a Limited Liability Company (LLC) in the UAE, they should seek guidance on the current practice of the relevant emirate regarding minimum share capital.

Nationality of partners

The nationality of partners is important to determine what type of business they can set up on the mainland. Only UAE nationals may set up the following types of companies:

  • Joint liability companies (partners must be UAE nationals)
  • Simple commandite companies
  • An industrial or commercial type sole proprietorship
  • Licence for home-based businesses
  • SME licence (in Dubai).

People of other nationalities (other than those of the other GCC countries) can conduct the other types of businesses. However, they need to involve a UAE national as a sponsor. The UAE national could be:

  • A partner with at least 51 per cent ownership of the business or
  • A local service agent (LSA), with the investor having a 100 per cent ownership of the business.

Company types that require a UAE national partner:

  • LLC companies
  • Public Joint Stock Companies (PJSC) - it must have at least 5 founding members who are UAE nationals, owning between 30 per cent and 70 per cent of the capital shares
  • PrJSC Companies
  • Civil company with an engineering activity

Company types that require LSA:

  • A professional type sole establishment
  • Civil company with no engineering activity
  • Foreign Company Branch

Note that a GCC national can be a partner in any form of business except:

  • A representative office
  • Simple commandite companies.

FAQs

What is meant by local service agent (LSA) and what are his liabilities towards the business entity?

A local service agent (LSA) is a UAE national who assists a foreigner in the licensing requirements and other government-related matters in exchange for an annual fee.

Can a foreign company open a branch in the UAE?

Yes, it can after maintaining a certified letter from the parent company and getting the approval of the UAE's Ministry of Economy.

What is the maximum number of licences that a foreigner can own?

In Dubai, it is unlimited.

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Planning to set up a business in a free zone

There are several differences between a mainland and a free zone. The main differences lie in the nature of ownership, extent of liability, involvement of UAE nationals as partners or agents and nature of trade and economic benefits that can be reaped.

If you do not wish to partner with a UAE national or you do not know any UAE national to partner with, you can set up a business in a free zone. Free zone offers 100 per cent foreign ownership of the enterprise.

What is a free zone?

According to the website of Dubai Multi Commodities Centre, a free zone or free trade zone or free economic zone, is a designated geographical area where certain taxes or restrictions on business, employment or trade do not apply in the same manner that they apply to the country in which the zone is located.

In a free zone, goods may be landed, handled, manufactured, reconfigured or re-exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties.

A free zone is often organised around major seaports, international airports, and national frontiers - areas with many geographic advantages for trade.

Benefits of setting up a company in a free zone

Some of the other benefits of setting up a business in the free zone include:

  • 100 per cent import and export tax exemptions
  • 100 per cent repatriation of capital and profits
  • No corporate tax
  • No personal income tax
  • No import/export tax
  • Easy start-up and licensing procedures

Benefits could vary with respective free zone authorities. Twofour54 provides 30 per cent cash rebate on international film and TV production spending.

FAQs

What are the benefits of setting up a business in a free zone?

You do not need to tie up with a UAE national. Apart from that, you need minimum paperwork and time to start a business in a free zone. In addition, you are exempt from customs duties.

What are the types of businesses I can do in a free zone?

You can do any business in the fields of financial, educational, retail, hospitality and media to name a few. Check with respective free zone authority for businesses permitted on their premises.

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