Establishing A Business In The UAE

Running Head: ESTABLISHING A BUSINESS IN THE UAE 1

Establishing a Business in the UAE

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ESTABLISHING A BUSINESS IN THE UAE 2

Establishing a Business in the UAE

Introduction

The United Arab Emirates (UAE) is a multicultural global business center. Over 80

percent of the UAE population is made up of expatriates. The UAE is a Muslim country and

Arabic is the official language, although English is used for many business transactions.

Establishment of businesses and monitoring of their conduct is regulated at the emirate level

and at the federal level. The normal business week in the UAE runs from Sunday to Thursday

– the weekend is on Friday and Saturday. The normal business day for government offices is

between 7:30 am and 3:00 pm. However, private offices and businesses can be open for

longer hours. Being an Arab region, business in the UAE is often conducted on the basis of

mutual trust and personal relationships. Culturally, business deals are binding even if the

agreement on the deal is verbal. The currency of the UAE is called dirham. One US dollar is

the equivalent of approximately 3.7 UAE dirhams.

Both UAE nationals and foreign nationals are free to set up businesses in the UAE

upon meeting a number of requirements. The nationality of the business partners and

proprietors is important since it may determine the kind of business that can be established.

Businesses can be set up either in the mainland or in the many free zones around the country.

Nearly any business can be set up in the UAE. However, the sectors with the most

opportunities and the strongest demand include: construction, materials and supplies, energy,

defense, tourism, high end and luxury hotels, medical care and professional services

(Embassy of the UAE, 2018).

Procedure for Establishing a Business in the UAE

The nationality of a prospective business owner is an important consideration in the

UAE. UAE nationals are free to establish and operate almost every type of business. The

businesses that can be established exclusively by UAE nationals include: joint liability

ESTABLISHING A BUSINESS IN THE UAE 3

companies, where all partners must be UAE nationals; home-based businesses; small and

medium enterprises (SMEs); sole proprietorships; and simple commandite companies.

Businesses which can be established by expatriates (and which UAE nationals can also

establish) include: limited liability companies; civil companies with engineering activity;

civil companies with no engineering activity; public joint stock companies; and private joint

stock companies (UAE Government, 2018).

UAE nationals can establish businesses the mainland. The first step in this process is

to decide the type of business or commercial activity that will be undertaken. Business types

are grouped into three main categories: commercial or trading businesses like retail,

construction and real estate; professional or vocational businesses like agriculture, education

and healthcare; and industrial businesses like manufacturing, mining and energy. The UAE

national should keep in mind the minimum capital requirements to set up his business. For

example, setting up a private joint stock company requires a minimum of 5 million UAE

dirhams to be paid in full. The next step is to contact the Department of Economic

Development (DED) of the desired emirate for approval and then register the trade name of

the business (UAE Government, 2018).

Trade names can be cancelled if the booking period expires, or they can be changed

under special circumstances. The trade name should reflect the general nature of the business

being established. Once a UAE national has secured the trade name for his business, he

should obtain the initial approval certificate. Once the initial approval is granted by the DED,

other approvals may be sought from other authorities depending on the type of business being

established. Examples of additional approvals include the approval of the Ministry of Justice

if the business is offering legal consultancy; and the approval of the Ministry of Economy if

the business conducts insurance activities. If the business will employ expatriates, the UAE

national establishing it should process employee visas (UAE Government, 2018).

ESTABLISHING A BUSINESS IN THE UAE 4

The next step is to secure a physical address for the business, since all businesses

must have a physical location. The location of the physical address should comply with DED

requirements and the local zoning regulations. After fulfilling all these requirements, the

UAE national should submit all necessary documents to the DED and make due payments in

order to be issued with a business license. The final step after obtaining the business license

is to apply for membership in the chamber of commerce in the emirate where the business

will operate. After all these steps are completed, the business can commence its commercial

activities (UAE Government, 2018).

Advantages of Establishing a Business in the UAE

A UAE national can enjoy a number of benefits when he sets up his business in the

UAE. First, the UAE national is flexible to conduct his business in any part of the UAE

without restriction. This would allow the UAE to take full advantage of opportunities that

come up in any part of the country. The second advantage is that the business will have no

limit on the number of visas it can process. This means that the business can employ any

number of expatriate employees, therefore giving the UAE national the opportunity to grow

his business without having to worry about labor limitations (UAE Government, 2018).

The third advantage enjoyed by UAE nationals when they set up their businesses in

the UAE is that they can select from a wider range of business activities open for licensing

compared to foreigners. Foreigners are usually faced with restrictions on the type of

businesses that they can set up. The fourth advantage for UAE nationals establishing their

businesses in the country is that they can have a single physical address for up to ten different

businesses. This reduces the cost of obtaining site locations to conduct business. Another

benefit for UAE nationals establishing their businesses in the country is that they get

exempted from paying personal tax or business tax (UAE Government, 2018).

ESTABLISHING A BUSINESS IN THE UAE 5

Disadvantages of Establishing a Business in the UAE

The main disadvantage that UAE nationals face when they establish businesses in the

UAE is that they cannot register businesses in the country’s free zones. These are

geographical locations in which restrictions on business or taxes do not apply in the same

manner as in the country in which this geographical location is situated. As a result of this

restriction, UAE nationals miss out on the range of benefits that free zones offer, such as: full

tax exemptions on imports and exports; corporate tax exemption; and easier licensing

requirements and procedures (UAE Government, 2018).

Another disadvantage that UAE nationals face when they set up businesses in the

country is the high cost of establishing the businesses. For instance, setting up a private joint

stock company has a minimum capital requirement of 5 million UAE dirhams. The third

disadvantage of setting up a business in the UAE is an oversimplified financial reporting

system which is different from other parts of the world. This may give the UAE national a big

challenge if he is decide to expand his business and venture into overseas markets (Alliance,

2018).

Conclusion

UAE nationals can exploit several advantages when they set up businesses in UAE,

like very low tax rates or zero taxes. Although there are some disadvantages to establishing

these businesses, in aggregation a UAE national will enjoy attractive benefits for setting up a

business in the country.

ESTABLISHING A BUSINESS IN THE UAE 6

References

Alliance Business Advisors. (2018). Incorporation of the company in Dubai, UAE: Pros and

contras. Retrieved from https://alliance-dubai.net/our-services/dubai-business-news-

newsletter/incorporation-of-the-company-in-dubai-uae-pros-and-contras/

Embassy of the United Arab Emirates, Washington DC. (2018). Establishing a business.

Retrieved from https://www.uae-embassy.org/services-resources/doing-business-

exports/establishing-business

UAE Government Portal. (2018). Planning to set up a business. Retrieved from

https://www.government.ae/en/information-and-services/business/planning-to-set-up-

a-business

UAE Government Portal. (2018). Starting a business in a free zone. Retrieved from

https://www.government.ae/en/information-and-services/business/starting-a-business-

in-a-free-zone

UAE Government Portal. (2018). Starting a business on the mainland. Retrieved from

https://www.government.ae/en/information-and-services/business/starting-a-business-

on-the-mainland

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