For a foreigner, having a business setup in Dubai is a lucrative and exciting opportunity that has attracted entrepreneurs from all over the world. Dubai is an emirate whose main characteristics are its strategic location and its 0% tax rate. Another important and attractive point for foreigners is its simple incorporation procedure. Currently, the government has introduced several measures to further encourage foreign investment. For example, allowing expats to own 100% of their businesses in most cases.
In this article, we will provide you with a complete guide on how to start a business as a foreigner in 2023. The intention is to cover all relevant aspects. That is, from the basic concepts of company formation to company structures for expatriates. In addition, we will give you a step-by-step guide on how you can create a company in this wonderful emirate.
Business Ownership Rules for Foreigners
If you want to setup a business in Dubai mainland and other freezones as a foreigner, you should know about business ownership. In this way, foreign investors have full ownership of specific companies. In addition, the participation of foreign investors will no longer be limited to a maximum of 49% as before but may reach 100%.
This is based on the provisions of Federal Decree Law Number 26 of 2020. Where this law nullifies the requirement that commercial companies must have a major Emirati shareholder or agent. In this way, full foreign ownership is provided to non-Emiratis of all nationalities.
In addition, companies can become joint stock companies, after approval from all relevant authorities; They can even sell no more than 70% of the company through initial public offerings. All this instead of the previous limit of 30%.
Benefits for Foreign Entrepreneurs
Currently, the United Arab Emirates (UAE) has some prosperous cities. For instance, Abu Dhabi and Dubai. These cities have become the best centers for doing business, which attracts investors and entrepreneurs from all over the world. If you are a foreign entrepreneur who wants to expand your horizons to form a company in the country, you can obtain many advantages.
Below, you will see a list of all the benefits you can access to start a business in Dubai as a foreigner.
Access to a strategic location and global markets: The UAE has a strategic location at the crossroads of Asia, Africa, and Europe. As a result, the country becomes an ideal launching pad for international businesses. Additionally, it offers easy access to markets beyond the Middle East.
Business-friendly environment: This country has taken the task of fostering a business-friendly environment using various incentives. For example, the creation of numerous free zones, which offer 100% foreign ownership and tax exemptions. Furthermore, the best free zones in Dubai cater to various sectors. Among them, are technology, finance, logistics, and manufacturing.
Economic stability: The United Arab Emirates has a diversified and stable economy, thanks to prudent fiscal policies and strong governance. One of the most significant advantages for foreign investors is that the risks involved in starting a business in Dubai as a foreigner are reduced.
Tax benefits: One of the main attractions for starting a business in Dubai as a foreigner is the favorable tax regime of the UAE. Currently, there are no corporate or income taxes in most of the country, businesses in free zones can enjoy tax exemptions. As a result, you can generate substantial savings and greater profitability.
Types of Business Licenses for Foreigners
To start a business in Dubai as a foreigner is to choose one of the ideal types of trade licenses. Before starting the process of forming a company, you have to know all these types to be able to make the right choice. In essence, business activities are mainly classified into four business licenses. Below, you will see a detailed explanation of each of these.
Commercial license: Commercial licenses in Dubai are issued to companies involved in the sale and purchase of products. The advantage of this license is that it allows you to start a business in Dubai as a foreigner who is dedicated to carrying out commercial activities.
In Dubai, there are different types of business licenses available, for companies that are in the process of formation. To choose the correct one it has to be according to the specific commercial activity.
Professional license: People who have academic achievements, competent skills, and intellectual abilities can access this license in Dubai. For instance, professionals, artisans IT service providers, and more. All of these can apply for a professional license.
Industrial License: An industrial license in Dubai is necessary for companies that are involved in manufacturing materials and products in industries. These companies must have a physical office before issuing an industrial license.
Freelancer Permit: If you want to be self-employed, you have to apply for the most popular business license in Dubai. That is the self-employed permit. It is important to mention that free zones offer this type of permit for individuals.
Tourism license: This license is issued to companies that are dedicated to providing travel and tourism services. As Dubai is one of the most attractive tourist places in the world, this license is one of the most common among entrepreneurs.
Step-by-Step Startup Process for Foreigners
Now if you want to start a business in Dubai as a foreigner, this is the moment when you will see all the steps you have to follow. This is a process that consists of five simple steps and below you will see a good description of each of them.
First step (hire experts): Although the process of starting a business in Dubai as a foreigner is simple, it is good to have the support of experts. Especially for you who are a foreigner since you do not know how the legal regulations are handled in the country. To find this expert company, it is advisable to look for reviews and comments from previous clients.
Second step (choose your commercial activities): This is the most important step since the type of commercial activities will define other essential aspects. These aspects are the best configuration and type of commercial license for your business. For instance, if your business activities fall into the manufacturing or industrial group, the best license is the industrial one.
Third step (choose between free zone and mainland): After doing complete research, you have to decide on the best location for your business. That is a free zone or continental zone. The truth is that there is no simple answer to this question because of all the aspects to take into account. For instance, the type of business.
Fourth step (choose the name of the company): For the process of naming a company, you have to research all the existing regulations for registering the trade name.
Fifth step (apply for business license): Finally, you have to apply for the business license. The process and the entity in charge will vary depending on whether you are in a free zone or a continental zone.
Required Documents for Foreign Entrepreneurs
The UAE government offers many incentives to foreign business owners to register their companies in Dubai. For this reason, documents are an important factor for you to register your company. Additionally, you must understand many free zones in the UAE and these are governed differently from mainland companies. Thanks to this, the necessary documentation will also change.
Below, the necessary documents will be presented so that you can register your company in Dubai as a foreigner:
- Submit the completed application form.
- Your company’s business plan.
- A copy of the Dubai registration certificate or business license.
- A color copy of all the passports of the shareholders that the company will have and of the managers designated for it.
- The signature model of the shareholders and managers designated for the new company.
- An NOC from the current sponsor for individual businesses.
Key Considerations for Expats Before Starting a Business
Certainly, before starting a business in Dubai as a foreigner, there are certain considerations that you have to know. Below you will see a list of all these relevant and essential considerations for expats.
Business culture in the UAE: Before starting a business in Dubai as a foreigner you have to understand the local business culture. While it is true, this nation is an attractive place to do business. In addition, the local government encourages investment and startups. Additionally, the government offers long-term visas for investors. As a result, there is currently a business boom in the country.
Business visas in the UAE: If you want to start a business in Dubai as a foreigner, you will have to obtain a business visa. Currently, there are different types of visas available depending on your circumstances and needs.
Business banking in the UAE: Once you begin business activities in the UAE, it is important to consider your banking options. In the country, there is a wide range of banking services for companies. For instance, the international Banks in Dubai.
Hiring staff: If as a foreigner you plan to hire staff for your business in the UAE, it is important to comply with certain regulations. That is local labor laws. Additionally, you have to understand the regulations that are specifically with hiring and employment.
Understand the legal structures for companies in the country: Currently, there are several legal structures for companies in the UAE. For instance, individual property, civil company, limited liability company (LLC), and others. The idea is to choose the one that best suits your business activities and needs.
Cost Breakdown for Expat Entrepreneurs
Business in Dubai for foreigners is a very important investment. Where the initial installation cost can reach 34,340 dirhams or 9,350 dollars. In addition, these amounts include various fees such as a general business license and charges for the Dubai Municipality, the Dubai Chamber of Commerce, and the Ministry of Economy.
You also find additional costs such as rent and prerequisites for free zone business licenses. All of this influences the price and many companies may need up to $25,000 to set up the business.
Business License Costs in Dubai: An industrial or service business license can cost between AED 10,000 and AED 50,000 per year.
Employee and labor costs: The monthly salary range of an employee is between AED 4,810 to AED 99,000 per month.
Operating costs and infrastructure: These costs in Dubai can change a lot. If you want to run a small business with an office size of 200 square feet you will need to know the following:
- Office rental costs between 14,400 and 36,612 dollars.
- Labor costs range between 160,138 and 214,744 dollars
- On employee benefits you can spend between $49,900 and $65,600.
- Internet and telephone would be 20,760 dollars
- Electricity and water 324 dollars.
Despite the costs, in the UAE the government has made launching businesses in Dubai easy. Furthermore, it is affordable through the implementation of new laws and policies. For this reason, pro-business tax policy is a very important selling point. Because, businesses do not have to pay local, state, or federal income taxes.
Company Structure Options for Foreigners
If you want to start a business in Dubai as a foreigner in the UAE, you have to first consider the type of structure you will form. Many different legal corporate structures exist in this nation. Below are some of the most common ones so you can make the best decision.
Sole Proprietorship: This type of company has the main characteristic that it is 100% owned by a single person. That is, that person has full control over profits and operations. While it is true, all nationalities can create a sole proprietorship. However, only citizens of the UAE and the GCC can have an industrial or commercial company.
Civil Company: All professionals with specific careers can open a civil company in the UAE. For instance, accountants, doctors, and lawyers. Of course, for this, an Emirati citizen must own 51% of the company’s shares.
Limited Liability Company (LLC): In an LLC, there can be a minimum of two and 50 shareholders. The condition is that each one is responsible only for his percentage of shares. In addition, you have to know that profits and losses are divided among shareholders according to their shares.
Foreign Company Branch: Foreign companies can establish a branch in this nation. In this case, the branches will be 100% owned by the parent company. However, the goods have to be imported through a local trading company.
Freelancers: Believe it or not, setting up a freelance business is extremely easy in the UAE. The first thing will be to register in a free zone with an application form. In addition, you have to submit a bank reference, your CV, and a notarized Registry Identification Code form. Another advantage is that you can apply for a freelance visa.
Conclusion: Expert Guidance for Foreign Entrepreneurs
Starting a business in Dubai as a foreigner can be a rewarding and profitable opportunity. Additionally, thanks to its strategic location, a 0% tax rate, and a simple incorporation process; They make it one of the best destinations for businessmen from around the world.
The UAE government has also introduced various reforms to encourage foreign investment. For this reason, foreigners are allowed to own 100% of their businesses in most cases. In addition, it introduced long-term visas. However, in order to start your own business in Dubai you need local knowledge and experience.
For this reason, we invite you to visit us on our website. This way, you can get all the information you need to start your business in Dubai. In addition, here at Connect Middle East, you can count on the help of experts in everything related to the UAE. On the other hand, if you want to contact us more easily, you can do so by calling the number +971 43 316 688 or writing to contact@c-uae.com.
