The reasons for founders to come to Dubai are various, as it is suitably located geographically, there is a large consumer base and in recent years the process of obtaining a license has become significantly more streamlined and digital. Often the aspect that surprises new founders is the fact that the registration of a company here is not a one-shot procedure. The process of setting up a business in Dubai relies greatly on the location of the business and the activities they plan to undertake, with each location having a set of authorities, documents, and procedures. It is a step-by-step guide to understand how to Register a Company in Dubai; from choosing a jurisdiction to receiving the Trade License, and what follows after.
What Registering a Company in Dubai Involves
To register a company in Dubai one needs to get a trade licence from the authority that oversees the territory the business chooses to operate in, and then complete the immigration and banking processes necessary for the company to operate. The emirate has three general types of settings.
The Dubai mainland, regulated by the Department of Economy and Tourism (DET, formerly the Department of Economic Development) offers licensed casinos. Casinos can be found in the Dubai mainland, which is regulated by the Dubai Department of Economy and Tourism (DET, formerly the Dubai Department of Economic Development). It is possible for a mainland company to trade anywhere in the UAE and directly service the local market. Generally organised around an industry,
Dubai free zones, which can exceed two dozen, have their own registration authority and rules, for example, commodities (Dubai Multi Commodities Centre), media and technology (TECOM zones under the Dubai Development Authority), logistics (Jebel Ali Free Zone), and general trade (zones like Dubai Meydan Free Zone and IFZA). Free zone companies have a greater percentage of foreign ownership, accelerated company registration, and are typically designed to be run within the free zone and abroad.
Dubai International Financial Centre (DIFC), a financial free zone with a common-law court system, its own courts and its own companies registrar. It can be suitable for financial firms, holding companies and regional headquarters and financial activities there must be authorised by the Dubai Financial Services Authority (DFSA).
There is also choosing the type of licence. Commercial Licences, Professional Licences, Industrial Licences and Tourism Licences are issued on a broad basis by Dubai. The work opted by one will decide the type of license and approvals required to work as a company.
The Legal and Regulatory Framework
Manadex companies in Dubai are regulated by the UAE Federal Commercial Companies Law that establishes the recognized company forms (most common form being limited liability company) and the ways in which they can be owned and managed. Licensing and registration is administered by the Department of Economy and Tourism, and by sector regulators, if applicable. A restaurant requires clearances from the Municipality, a clinic obtains clearance from the Dubai Health Authority and financial firms are subject to their own regulators. Free zones are legal, but work under their own laws, subject to the laws of each zone, but within the larger federal framework for most matters. The exception is DIFC. It operates its own company law, separate from the federal Commercial Companies Law, the DFSA regulates financial services and the DIFC Courts resolve any disputes. Ownership rules in Dubai has changed. With the enactment of the reforms to the Commercial Companies Law, it has become possible to have 100 per cent foreign ownership of many activities in the mainland, which was previously required to have a UAE national partner. The requirement for eligibility for an activity will depend on the activity itself and some activities have still got some conditions attached, the position of a particular business should not be assumed and should be checked with DET before taking any further action. Tax is now a part of the picture as well. The corporate tax will be levied at 9 per cent at a certain threshold from a financial year commencing from 1 June 2023 and there may be exemptions from a 0 per cent corporate tax rate on qualified income for free zones, subject to certain conditions. A 5% VAT is applicable on a wide basis. Of both should be analyzed for any specific setup in relation to existing rules.
Business Setup in Dubai, Step by Step
The following sequence is typical of the non-free zone setting up found on the mainland, and notes on the differences of free zones. Many of these can now be carried out online via a unified digital licensing platform and the timelines may differ depending on the activity and approvals required.
Decide the activity and jurisdiction. Decide the business requirements and identify if it should be in the free zone, the mainland or in DIFC. It is one choice that determines ownership, cost and these can effect tradability.
Select the legal structure. The limited liability company, sole establishment, civil company (for select professions) and branch of an existing company are the typical formations on the mainland. The free zones provide their own alternatives, typically a Free Zone Establishment (FZE) or a Free Zone Company (FZCO).
Hold the trade name. The name must be free and follow the naming guidelines, which prohibit offensive terms and shorten personal names, among other requirements. The authority reserves it once approved.
Obtain initial approval. This is the government saying that it does not object to the establishment of the business. It does not allow the business to currently run. Ensure external or sector approvals are obtained as necessary. Some activities may require approval from another regulatory organisation (such as health, food, education, transport or financial regulators) before the licence can be issued.
Sign the incorporation documents. In the limited liability company, this is the memorandum of association which contains details of ownership and management. Typical templates are found in free zones.
Establish premises and/or register tenancy. Registering the lease is done through Ejari on the mainland, a flexi-desk, office or warehouse can be obtained in free zones. Typically, the number of residence visas that the company can sponsor depends on the space taken.
Pay the fees and receive the trade licence. Business operation is actually authorised by the licence. Get the establishment card and file an immigration file. This is required to enable the company to sponsor visas.
Apply for residence visas and Emirates ID. This is usually the entry permit, medical test, biometrics and Emirates ID for the owner and staff.
Create a business bank account. Banks will take “know your customer” checks and will require good documentation of the business, its owners and its funding. This is typically the longest step.
Register for tax (if applicable). Register for company tax and VAT if the company is above the threshold for VAT registration.
The process is also similar in free zones, where the majority of the work is typically done by the zone authority in one application, although it also provides the office solution, and processes the establishment card and visas in its own manner. The incorporation of a DIFC entity is more document-focused, and there is an extra procedure when the activity is regulated.
Common Pitfalls and Key Risks
Selecting the incorrect jurisdiction for the model. If one is looking to register in a free zone but must sell to customers in Dubai, a company may end up not being able to do so without a distributor, or a branch office, on the mainland.
Choosing the incorrect jurisdiction for the model. Even a company that may just have to sell to Dubai customers will not be able to sell in the mainland without the help of a distributor or a mainland branch.
Selecting activities carelessly. Cost, approvals and eligibility for ownership is based on the activity list. Changes or additions to activities later in the day will be additional and will also require an additional paper. If foreign ownership is desired, it does so automatically.
If the full foreign ownership is assumed, then it is automatically applied. This will be dependent on the activity and will need to be agreed on with DET.
Too low estimate of total cost. In addition to the licence, the business must cover the cost of renting an office, visa and medical fees, Emirates ID, deposits (in some cases), annual renewal, tax registration.
Banking delays. Having documentation ready to open a corporate account can easily be the longest process, getting started early can prevent a launch from being stalled.
Missing sector approvals. Specialist clearance is required for regulated activities like health, food, education, finances and legal (such as lawyers). These take time and cost more.
Underestimating the amount of visas available. The number of visas that a company can sponsor depends on the space that the company is looking for and the type of licence it has and it should take this into consideration when selecting premises.
The processing time and cost of the activities are subject to change from jurisdiction to jurisdiction, depend on the activity, and vary in the number of visas applied for and the time of the application, therefore the processing time and cost should only be obtained from DET or a particular free zone at the time of application and not from a general source.
Getting the Foundations Right
Although business setup in Dubai can be daunting, it is made easier with careful early decisions. The two that are important are jurisdiction (mainland, free zone or DIFC) and selection of activity (which in tandem will define the ownership, where the business can trade, the costs of the business and what approvals are required). The procedure from there on is more or less sequential: name, initial approval, clearances (sectors), incorporation papers, premises, licence, immigration file, visas, banking, tax registration. The prudent final step before taking a decision is to verify the current requirements with the Department of Economy and Tourism or the selected free zone authority, or for professional advice. The details do evolve over time, such as who is eligible to own it, the present fees, the precise steps in a particular free zone and tax conditions. The right structure at the outset of a business saves the disruption and expense of restructuring later.
