Opening a company in Dubai is becoming extremely popular in many different spheres of business, and for understandable reasons:
It is a major business hub globally, where major trade activity takes place and business opportunities are plentiful for your company.
Thus, business setup in Dubai is a popular activity, depending on the industry.
Also, Dubai has very favorable tax laws and conditions for business setup in Dubai and doing business there.
It is not excessively difficult to set up business operations there, but you should definitely familiarize yourself with the rules if you are thinking of doing so.
In particular, it is important to know the costs involved and how they break down in the process of company setup, so you can move on to your primary business activity.
If you employ the help of business setup consultants, it can make the task much easier for you.
Why Dubai? The Benefits of Starting a Business in the UAE
It is worthwhile to look at the reasons why business in Dubai is such a popular choice. There are several things involved in company setup and operation:
- It is in a very strategic location, at the crossroads of Europe, Asia, and Africa.
- There are many tax advantages of doing business there in comparison to other places, which we will outline below.
- Dubai has a well-established infrastructure for conducting business activity
- Regulations that are friendly to doing business
- A strong and diverse economy that lends itself to high-level business activity
- A thriving society with world-class facilities
- The advantage of having nearby free zones
- A government that is very pro-business
Beyond this, the process of obtaining necessary business licenses and visas to accomplish a business setup is streamlined and simple. It is part of the Dubai business set.
Because of the popularity of registering businesses in Dubai, the government has a straightforward, streamlined procedure.
Key Factors That Influence the Cost of Company Formation in Dubai
The cost of company setup in Dubai depends on different considerations, which we will describe below.
Jurisdiction
- One of the things involved in the cost of business setup is location. There are different rules for different jurisdictions.
- Mainland companies: Companies operating on the mainland can operate anywhere in the UAE, which includes local markets.
- Free zones: If you operate in a Free Zone, you will have complete foreign ownership over your company in Dubai, but you will be restricted to the free zone when it comes to trade activities.
- Offshore company in Dubai: If you are an offshore company in Dubai, you can enjoy the privilege of being registered in the UAE but cannot operate there.
- Each of these categories for business setup has different costs associated with it and requirements to fulfill.
In addition, operating in one of the other Emirates can entail different costs.
And you can pay different amounts for things like office rent depending in which neighborhood of Dubai you register in. While some neighborhoods are extremely posh and include many high-class trading companies, others are cheaper but not as prestigious, so company setup might be easier but less profitable. A local service agent can advise you on what the best neighborhoods are for foreign investors in the country and provide business support.
License type
Different business licenses have different costs associated with them for your company setup. These business licence types include commercial, industrial, professional, tourism, craftsman, and agricultural.
Legal structure
Another factor that influences the cost, licensing requirements, and approvals for setting up a business in the UAE is the company’s legal structure as part of the overall company structure.
Businesses in the country fall into the following categories:- Limited Liability Companies (LLCs). For companies wanting to operate on the mainland, LLCs are a popular option. This gives them full access to the local market.
- Sole proprietorships. This is a preferable option for individual entrepreneurs and freelancers.
- Branch office. Opening a branch office allows foreign companies to have a presence in the UAE market.
- Office space
Office space and location are additional considerations. Jurisdictions are important because free zones, for example, allow for the use of flexi-desks. Mainland businesses, on the other hand, have strict requirements with regard to office spaces and some locations are far more expensive than others. Therefore, you should meet a minimum capital requirement.
Visa requirements
Visa requirements play a role in costs and your setup in Dubai, as well. If you plan to work in a free zone, you will be eligible for a visa package for your staff. With mainland businesses, each individual must obtain their own visa. Getting your visas might also entail fees for medical tests and Emirati ID registration.
Talking to business setup consultants can help clarify many of the details of these requirements and help you through the UAE company registration process that will enable you to do business in Dubai.
Mainland vs. Free Zone: Which One Is More Cost-Effective?
Let’s now take a look at mainland and free zone business setup costs.
Mainland Company Business Setup Costs
If you choose to conduct a business setup a mainland business, it will cost you between AED 15,000 and 75,000.
Factors involved include licensing type, the size of your operation, the number of visas involved, the activities you will pursue, and other considerations.
Every business owner has unique needs with regard to business registration.
Advantages of doing a business setup on the mainland include flexibility in location and not having any trade restrictions.
You will also get a broader scope for your work in your industry than you would with free zones.
You will have access to government contracts, some of which can be very lucrative.
And you will have the privilege of having total ownership of your business and its entities.
Free Zone Company Business Setup Costs
If you choose to do a business setup in a free zone, the average cost of registering is approximately AED 30,000 and can be as high as 50,000 or possibly more if activities in the DMCC are particularly complex.
The cost generally depends on which free zone you choose to operate in. You will operate within the free zone authority.
Advantages of working in a free zone include easy company formation, and no need for a UAE sponsor. You can receive 100% repatriation of your profits.
You will be able to recruit more easily, and the details of your shareholders are not made public.
Company owners are free from personal income tax and will therefore benefit from tax savings.
Breakdown of the Costs: How Much Does It Really Cost?
There are distinct costs involved with every aspect of the business setup in Dubai process in a business owner’s company formation. These include:
Submission of trade name or company name
You must decide on a trade name or company name, and be sure to choose one that meets the requirements and has not already been taken.
This includes a services license fee of AED 776.50 and a general trading license fee of 776.50.
Initial submission approval
Before you receive your final approval to operate, you must receive initial approval. Both the services license fee and the general trading license fee cost AED 256.50.
Business licence fee
You will have to pay a business license fee of either AED 8000 for a services license fee or AED 30,000 for a general trading license fee.
Each of these is a critical part of the company registration process and must be calculated as part of the total cost, along with registration fees. Each license has unique requirements, though, so costs can vary.
Office Rental & Business Address
The cost of renting an office in Dubai to conduct business activity starts at AED 40,000 per year.
Operating in a free zone starts at AED 10,000 per year and can include licensing costs.
Visa & Residency Permit Costs
The cost of obtaining a free zone visa ranges from AED 3000-8000 per employee, and this includes medical tests and fees for obtaining Emirati IDs.
For mainland visas, visa fees have a wider range but are generally more expensive due to office space requirements.
Government & Registration Fees
You will have to pay different government and registration fees in the process of your company formation, registration process and business setup in Dubai.
This includes an application fee of AED 1035 per application. You will also have to pay a registration fee of AED 9020 per application.
In your application, you will have to compose and include articles of association (AoA), which cost AED 2020 per application.
And you must pay for your company license, which will vary in cost depending on the type.
Hidden Costs and Additional Expenses to Consider
Beyond the standard costs, there are also additional costs that you should take into consideration in your company formation. Business consultants can familiarize you with all of them.
- They include:
- “PRO” services. These are services that handle legal documents and the costs of going through regulatory processes. Costs can range from AED 2000-5000.
- Audit and accounting fees. Once you set up your business, you will likely have to undergo regular audits on your business activity. This can cost between AED 5000-15,000.
- Banking fees. You will likely have to pay fees on the bank account that you open in the UAE.
Also, you should keep in mind that changing exchange rates can affect costs significantly.
In addition, you will have to pay renewal fees for successive years of operation, and there could be other governmental services that you might need.
How to Reduce Costs When Setting Up a Business in Dubai
Despite the sometimes high costs of setting up a business, there are things that you can do to lessen the financial burden. For one thing, you can choose a cost-effective jurisdiction to operate in. Even the free zones have a range of costs associated with them.
If you choose to work in a free zone, you may be able to work in a coworking space, which can save you a lot on office rent.
One thing you should consider is working with a business setup consultants to optimize the costs.
Conclusion: Is Setting Up a Business in Dubai Worth It?
Different costs are involved in setup in Dubai and conducting business activity once you are established.
If you are trying to decide whether or not it is worth it to go through with, you should take the time to consider all the costs and how much your business will realistically grow in the region.
Costs include licensing, obtaining visa fees, application fees, medical tests, the cost off office space, and potentially other things, as well.
If you do choose to operate a business in Dubai, you will be working in one of the most dynamic and business-friendly places in the world.
If you have a solid business idea with strong growth potential, Dubai could be an ideal place for you to operate as the region offers innumerable business opportunities.
Just be sure that you consider all the factors carefully and have a realistic idea of the costs. Talking to business setup consultants can be very helpful when considering setup in Dubai.
