While the country is only a little over 50 years old, the UAE and its two largest cities have quickly made a name for themselves in the international business community. It has a famously favorable business climate and economic benefits that you can take advantage of without so much as a local sponsor for most sectors. There is absolutely no personal or corporate tax; registration is easy and fast, and with such an attractive business environment, the UAE is one of the fastest-growing business markets in the world.
So, if you're looking to start a business or eCommerce storefront, the UAE should definitely be a place to consider. There are, however, aspects of opening a business in the UAE that you should consider. Social and cultural challenges aside, getting a work visa or permit can be confusing, value-added tax (VAT) systems need to be obeyed, and payroll management is obliged to local laws, which can blindside new entrepreneurs.
Still, the benefits vastly outweigh the disadvantages presented by these obstacles, so you have to research a little before making your debut in the United Arab Emirates.
Why Register a Company in the UAE?
Simply put, you have to register if you intend to do business in the UAE through a green visa for investors or a 10-year Golden Visa. Even eCommerce businesses need to obtain an eCommerce license at the cost of AED5,750 or just $1,500. Whatever your outlook, you will also have to identify what kind of business you want to run. This can affect the registration process, licenses, and type of businesses available to you. In short, you will need to:
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have a unique name for your business.
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apply to the Department of Economic Development in one of the UAE emirates.
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draft a Memorandum of Association.
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submit a registration application form.
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provide copies of passports for shareholders, managers, and local sponsors (optional).
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provide bank reference letters for all shareholders.
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provide a location plan and tenancy agreement.
There are also several types of businesses available in the UAE.
What are the Types of Businesses in the UAE?
Sole Proprietorships
As the name might suggest, sole proprietorships are when one individual has control over their company's business operations. There is no minimum business capital requirement, but depending on your business sector, you may need a local sponsor. This is good for short-term or new businesses as there is little to keep track of.
Partnership Company
If you're going into business with one or more partners, you must file for a partnership company. Profits and losses are shared between the partners. There are limited and general partnerships, though general partners must be UAE nationals. The major difference is that general partnerships share all liability for the company's debts. In contrast, a limited partnership has one or more partners who are only liable for up to their capital contribution.
Public and Private Shareholding Company
Public shareholding companies are companies where at least 55 percent of the company shares are offered to the general public. The company must have a minimum of AED 10 million ($2.7 million). At least 10 shareholders are required (unless the government is involved), and the board of directors must have at least three individuals and no more than 12. The chairman and a majority of the board must be UAE nationals. Liability for shareholders is limited to their share ownership of the company's capital.
Private shareholding companies must have at least three shareholders and a minimum capital of AED 2 million ($550,000). Shares cannot be given to public individuals.
An important aspect to keep in mind for shareholding companies is that if the company loses half its capital, the board of directors must consider the dissolution of the company. If a decision is not made, board members are legally allowed to file lawsuits seeking this dissolution.
Limited Liability Company
Limited liability companies, just like in other countries, are quite popular in the UAE. Registration is fast and easy, has no restrictions on which business activities can be performed, and is affordable. They can be formed with just two people but can accommodate up to 50. Shareholder liability is limited to the value of the shareholders' shares with the company, and management can have up to 5 members, even if they are not technically part of the company.
Foreign Company Branch
A foreign company can open a branch in the UAE but can only perform the same type of business that the parent company specializes in. It is 100% owned by the parent company and must be named the same.
Naming Your Business in the UAE
Naming your business is already very hard. Companies, big and small, regularly change their names to better fit with the times or when an initial name doesn't represent the company's mission or trajectory.
In the UAE, naming a company gets a little more complicated because of the UAE Trade Name Guidelines. This means that your name can't just be a last name, must contain either letters or numbers, cannot include words like 'universal' or 'international' in any language, cannot be your company's activity alone (but can be added to a different name), cannot contain obscene or offensive language, or language that may offend modesty and contradict public decency (be sure to check UAE modesty laws!) It cannot have the name of any country, capital city, or government unless you obtain permission from the embassy, MUST be followed by the business structure acronym, and several other rules that should be followed before submitting your name. Also, remember that your name should be translatable into Arabic, as this is the country's most common language.
Once you have a name picked out, there is an AED 600 ($160) fee to reserve or change your trade name.
Registering Your UAE Business Name
Broadly speaking, in order to register your UAE company name, it must:
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be followed by the business structure acronym.
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be appropriate for the type of business being done.
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not violate public morals or order.
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not contain the names of any religion, government, or other entities' name or logo.
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How to Get a Business License in the UAE
In order to conduct business in the UAE, you need to get a business license.
In order to get a business license in the UAE, you will need to decide on a business structure, select the type of business you will conduct, pay a fee, choose your name, and determine an area to set up shop. There are six types of business licenses to choose from depending on your business operations.
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Commercial License
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Industrial License
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Agricultural License
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Tourism License
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Crafts License
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Professional License
While there are multiple licenses for types of businesses and business structures, there are also differences between getting a license for mainland UAE and a UAE free zone. Mainland UAE businesses must have a local sponsor and be 51% owned by UAE nationals. Free zones allow foreign investors to own 100% of the company and are popular with entrepreneurs and eCommerce companies. Over 40 free zones currently operate in the UAE.
As for fees, business licenses typically cost between AED 10,000 and AED 50,000, depending on multiple factors like location, business activity, business structures, visas, and more. Turnaround time can take as little as 15 minutes, though more typically will take up to 4 weeks.
Where is it Best to Open a Company in the UAE?
At this point, it's more likely that you heard about Dubai or Abu Dhabi before the United Arab Emirates. That's because these cities are often the centers of culture, business, and industry in the UAE, so knowing where you want to base your business is an important first step.
Opening a Business in Dubai
Dubai's cultural atmosphere is relatively liberal and has more than 20 free zones within the city, making it a popular place for foreign investors and entrepreneurs. The GDP of Dubai is growing rapidly and is projected to reach almost $13 billion by 2030. They have a friendly investment atmosphere with many options for government support, and the infrastructure is world-famous. The main sectors in Dubai are tourism, trade, logistics, and transportation.
Opening a Business in Abu Dhabi
The federal capital of UAE also has a relatively friendly business atmosphere, and entrepreneurs can typically establish a new company in Abu Dhabi in mere days. Exemptions from corporate and personal income tax from the Department of Economic Development are available, as are options for 100% ownership of companies for foreign owners. There are usually no foreign exchange controls, trade barriers, or even quotas, while the living standards are extremely high - great for owners seeking to move to the country.
Opening a Business in Sharjah
Behind the two behemoths of the UAE, Sharjah is relatively small but is rapidly catching up economically. It effectively functions as the UAE's tax haven, having no corporate or income tax, and does not have any foreign exchange controls, quotas, or trade barriers. The government of Sharjah has introduced sundry incentives for investors and has also improved its legal framework to make business in the city more attractive.
Opening a Business in Ras Al Khaimah
Ras Al Khaimah, known as RAK, has been the focal point of heavy investor attention thanks to easy and business-friendly legislation. There are government-sanctioned efforts to increase incentives for investors, and the process of setting up a company is relatively easy. While they do have multiple double taxation agreements, this can actually work in the favor of those who want to open a transit business.
Opening a Business in Ajman
Ajman is the smallest emirate in the UAE, but that comes with low initial business and maintenance costs. There is almost no bureaucratic red tape in Ajman, and corporate tax is exempted. Immigration policies are easy for workers, and the region supports repatriation of both profit and capital. With its business-friendly laws, Ajman is a great place to start if you want to open more operations inside the UAE.
Corporate Taxes in the UAE
Corporate taxes in the UAE work on the net profit of companies that operate in the country. This includes both mainland and free zone businesses but does NOT apply to businesses that extract natural resources, dividends, and capital gains from qualifying shareholders or qualifying transactions or reorganizations.
Corporate tax in the UAE operates on a progressive scale and starts at zero percent of income up to AED 375,000 ($100,000). For incomes above AED 375,000, a nine percent corporate tax rate is applied. Further changes may apply for large multinational companies, though this is determined by specific criteria. All corporate taxes are handled by the UAE Federal Tax Authority.
Getting a Bank Account in the UAE
There are several reasons you should consider opening a business bank account in the UAE. It improves cash flow, helps you keep track of spending and costs, helps when calculating taxes, gives your business the air of professionalism, makes it easier to get business loans, exchange foreign currencies, and, maybe most importantly of all, offers credit card payments.
To open a bank account in the UAE, you will need:
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an ID card - the company director should provide an Emirates ID card and residence visa.
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a CV - proof that you have 5 to 7 years of business experience.
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a utility bill - this serves as proof of your current address.
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business documents - this serves as proof that you are operating a business.
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company bank statements (if applicable) - should include the last six months of your business's bank statements.
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personal bank statements - shareholders must provide six months of their bank statements.
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proof of ownership - serves as evidence of ownership for your current business. They should include the last six months.
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a business plan - should include information on your business activities, clients, development plan, finances, suppliers, partners, and management background.
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a board resolution - proof that the board has authorized the opening of a business bank account.
Banks in the UAE do not charge for opening a bank account, but they do charge for falling under monthly balance requirements. This means if your balance falls below the agreed-upon balance, a fee will result. Generally, these are pretty mild, with most banks charging just AED 250 ($70), but they can build up over time. Balance requirements usually range from AED 50,000 ($14,000) to AED 500,000 ($140,000), and it will take between two and four weeks to open an account. Banks in the UAE allow accounts in multiple currencies, including USD, EUR, GBP, and CHF.
Conclusion
The UAE is a small but potent country for entrepreneurs and eCommerce businesses. The country is clearly interested in attracting investment and diversifying its industries, and this mentality has led to a universally favorable environment for businesses. Their purchasing power and GDP make it an attractive country no matter the industry, their strategic location is uniquely positioned, and the sheer modernity of their infrastructure makes it easy to recommend as a place to start a business.
The only real obstacles for foreign investors and entrepreneurs are cultural and logistical. Moving to the UAE can be challenging given its location, and services that want to operate within the country will have to learn about the unique needs and wants of the locals. Include options for both Arabic and English when you’re building your eCommerce website and ensuring you don't include any offensive language or imagery.
Nonetheless, as a relative newcomer to the global market, the UAE offers modernity and fresh perspectives for conducting business. If you want a more modern approach to your new eCommerce or physical storefront, the UAE should be one of the first places you look.