What you need to know about businesses in Dubai
Dubai is one of the largest and most dynamic global centers for trade and tourism. It is regarded as one of the Middle East’s most cosmopolitan cities, and is both an emirate within, and the capital city of, the UAE. Dubai has the second largest economy of all 22 countries in the League of Arab States, second only to Saudi Arabia. Many attribute this to the fact that Dubai’s government is stable, and has created an environment that is very welcoming and conducive to business. In fact, it is ranked #22 in the world for ease of doing business.
That number is reflected in the surge of businesses flocking to Dubai to do business. In 2016, there were 127,000 businesses in Dubai—many of which were owned by foreign nationals. Foreign Nationals also comprise the largest segment of Dubai’s population, along with Emirati Nationals. Obviously, doing business in Dubai is very attractive to Foreign Investors. However, its customs and processes can be somewhat tricky to master without a little background and professional guidance.
Here are some of the main things to know about business in Dubai:
Dubai—and the UAE in general—has successfully diversified its economy to be less far less reliant on oil production than it has in the past. Its leading business sectors include construction, travel & tourism, technology, healthcare, real estate, job placement, along with oil & gas exploration, extraction and distribution.
Mainlaind vs Freezone
In general terms, foreign nationals setting up a business in Dubai can either choose to do it on the Mainland or in one of Dubai’s 30 Free Trade Zones.
Free Trade Zones. These are essentially offshore zones best suited for manufacturing or distributing goods. Expatriates can retain 100% ownership of their businesses within a Free Trade Zone, and are generally exempt from paying taxes for 10-15 years.
Foreign investors can repatriate 100% of their profits to their country of origin if they so choose. Free zones offer other business incentives including easy setup and no interference from customs authorities. A Free Trade Zone company may not trade outside of the free zone, however, without hiring a local distributor.
Mainland. If you set up your business on the Dubai mainland, you will need to secure a local sponsor, or local service agent (LSA). The government requires this since the sponsor can both translate contracts and documentation (since they are written in Arabic), as well as vouch for the investor’s trustworthiness, and act on their behalf.
Sponsors must be citizens of the UAE, and either government officials, business owners or other professionals. The sponsor will own 51% of the business and the foreign investor will own the other 49%. However, sponsors will not be involved in the operation of the business, nor take any profits. It is customary to pay the local sponsor an agreed-upon salary for their services.
The Department of Economic Development (DED) issues business licenses, depending upon the nature of business activities an organization will undertake.
There are three categories of licenses the DED issues in Dubai:
- Commercial Licenses — cover trading activities
- Professional Licenses — cover professional services such as legal consulatants, craftsmen, medical personnel and other professional services.
- Industrial Licenses — cover manufacturing and industrial activities
It is important when choosing a license category to make sure it allows for all activities you’ll need for your business model. It’s always best to choose a wide category, and confirm whether or not the category will allow you to perform all of the activities you’ll need to sustain the business you are planning.
Branch Offices vs Representative Offices
A foreign investor bringing a franchise to the Dubai market requires either a Branch Office or Representative Office set up.
Branch Office. If the franchise’s parent company has been in existence for at least two years, the branch office set up in Dubai is free to engage in the same activities as the parent company. This is allowed provided that local authorities have given prior approval for this type of business activity, the branch office meets all regulatory requirements.
Representative Office. This option limits activity to mainly marketing and developing leads for the franchise’s parent company (in another country). No direct profits from sales can be made by this office without hiring a commercial agent.
Foreign entrepreneurs need to secure visas for the themselves and any employees that will be living in Dubai. How many a business can get depends on variables such as the category of investor, how large the office is, and the nature of the business.
This is an area in which a local sponsor or LSA will be of great service to the business owner. Although the Dubai government has made the business visa application process fairly easy, they do require a letter from the sponsor for the first application. Your sponsor may give the investor the authority to apply for visas themselves—after that initial application.
This information has scratched the surface of everything you need to know about running a business in Dubai as a foreign investor.
Dubai is a unique place. Although the government makes it as easy as possible to set up shop there, the process is multi-layered. There are many administrative and legal matters to attend to and approvals to secure.
Hiring a firm that handles PRO services is seen by many as a necessity. They are fully immersed in the logistics and quirks in setting up a business in Dubai, and can save expatriates time, money, and stress in making their business dreams a reality in Dubai.