Companies are regulated differently in Dubai and the UAE than in most other countries.
Whether you are looking to open a company to obtain UAE resident visas, operate an international trading or services business, or open your own local restaurant or store, with the right company setup, all of these are now possible.
Up until recently, most business activities were strictly limited to so-called "free zones". This meant that as a foreigner, you were not allowed to open and operate a consulting firm or restaurant, to name two examples, in most of the country.
For foreigners, these activities were restricted to free zones. You were only allowed to serve customers outside the UAE or via the internet, online only.
If you wanted to serve customers in person in Dubai or Abu Dhabi, outside of your free zone, you had to share ownership of your company with a local, with the local owning at least 51% of the company
The good news is that in 2022, sweeping changes to the UAE's commercial law now allow foreigners to fully own and operate companies all over the UAE, with almost no restrictions regarding the business activity.
So far so good on the history of UAE company setups.
Do you want to open a company in the UAE? Here are the steps to follow:
Decide your company type (and size)
Do you intend to fully own the company yourself, or with partners?
Are you intending to hire employees?
Do you want to open subsidiaries (e.g., in other countries)?
Depending on your needs, you will need to choose a different, unique company type.
There are different company types depending on whether you choose to base yourself in a free zone or the mainland (more on that later). Some company types include:
Sole proprietorship (e.g., freelancer)
General/Limited Partnership
Limited Liability Company (LLC)
Public or Private Joint Stock Companies (PJSC/PrJSC)
Most businesses go for a limited liability company, as it allows for the issuance of multiple visas and more complex company structures if ever needed in the future. It also comes with more legal protections for investors than sole or general partnerships. Limited Liability Companies can be set up both as free zone and mainland companies.
Decide between a free zone and a mainland company
Next, you will need to decide whether you want to serve customers in the UAE, in person.
If yes, you will need to open a mainland company.
If you are okay with operating internationally only, or via the internet, a free zone company should suffice. Free zone companies are preferred in most cases as their cost is lower.
Decide on the location of your mainland or free zone company
Once you have decided on your company type, you will have to choose your company location.
There are around 50 free zones across the UAE.
Each of these has unique advantages and drawbacks. Some free zones specialize on certain industries such as media production and provide great networking opportunities.
Other free zones have port access and allow easy import, storage, and export of goods.
Again other free zones are close to population centers and contain apartment and villa complexes in them. These allow you to work with customers 1-on-1 in person from home.
There are also free zones in more remote locations that charge fractions of the other major free zones. Some of these cheaper free zones even operate "service centers" in different parts of the country so that you can apply for your visa and handle formalities without ever setting a foot in your free zone!
Regarding mainland companies, you will need to choose one of the 7 emirates as your "home" jurisdiction. Every emirate has slightly different restrictions on which business activities they allow and how to open your company.
We are experts at navigating clients through the maze of company options. Check out our services on business setups here.
Open your company and apply for your visas
Once you have decided on your company setup, it is time to apply for incorporation and your business license.
Any company you set up comes with at least one business license. A business license allows you to operate in one area of business, for example, media production.
If you want to perform multiple activities, you will need to get multiple business licenses. In that case, you will operate one company with multiple business licenses.
Both your company and business licenses are limited in time to usually 1-5 years and afterward need to be renewed if you want to continue your activities.
Your business license will allow you to apply for a partner business visa. These visas are valid for 2 years and afterward need to be renewed.
In case you are wondering: yes, in the UAE, setting up a company automatically qualifies you for a residence visa. There are no minimum requirements on income or revenue.
Depending on your business setup, you may also apply for multiple employment visas for employees.
Contact us for details. Let us know your objectives, and we develop an all-inclusive set-up strategy for you. On request, we may even handle the entire incorporation and visa application process for you.
Apply for a bank account
Your options to open a bank account depend greatly on your business type.
Bare-bones free zone companies without physical offices and no verifiable operations are severely limited in their ability to bank. In the UAE, just 1-2 banks work with such free zone companies. Outside the UAE, such companies will not qualify for bank accounts.
Mainland companies or businesses with physical office space have much greater choices, including opening business bank accounts with the world's safest banks, in multiple countries.
We constantly keep track of local banks and their latest policies to provide our clients with the best banking strategies available.
Maintain your company
Once your company is up and running, like anywhere in the world, you need to keep track of expenses and invoices. On an annual basis, you will have to prepare financial statements. You may prepare these yourself, or hire an accountant to do so.
Mainland and free zone companies have different regulations and requirements for auditing your financial statements. An audit involves you hiring an auditor to check and confirm the accuracy of your financial statements.
Some free zones do not require audited financial statements, while others do.
In some free zones, only certain activities require audited financial statements. Contact us for details.
Prepare your corporate income tax statement
Starting from June 1, 2023, corporate incomes generated by local companies through trading activities with UAE mainland companies are taxable at a 9% rate.
Due to the nature of their location, mainland companies will always be subject to this new 9% corporate income tax.
Free-zone companies are exempted from the 9% tax, as long as they fully honor their business license which restricts their operations to the free zone and international markets.
Despite the 9% introduction on profits of UAE mainland companies, there are effective strategies to reduce or avoid paying income taxes even if you operate in the mainland.
First of all, keep in mind that the 9% tax only applies to profits earned by the mainland company. As a company owner, you may increase your salary to the extent that your company makes little to no profit.
Furthermore, there is a generous AED375,000 deduction before the 9% tax rate applies.
This means that any company profits below AED375,000 continue to be taxed at 0%.
If your mainland company is larger with many owners, there are other strategies to reduce your mainland taxes. These include advanced multi-company, multi-country structures that take advantage of international transfer pricing regulations.
We are experts at developing strategies to reduce your taxes in almost any situation. Contact us for your very own bespoke 1-on-1 tax-optimization strategy
As in most countries, if you operate a mainland company, you are required to file an annual corporate income tax statement, no matter whether you have to pay taxes or not.
Free zone companies are exempted from this filing requirement as long as they meet the respective regulations of their free zone.
Conclusion
If you are overwhelmed by the complexity of setting up a business or company in the UAE, do not worry.
We are here to support you every step of the way.
The UAE continues to be the world's most popular destination to set up a company. The cost to do business, specifically license fees, has come down over recent years, making an offshore UAE-based company more accessible than ever before.
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