Dubai is fast becoming one of the most sought-after cities in the world to set a business up for various reasons.. Whether it be for the year-round sunshine, tax-free living or being a hub for VC-backed start-ups.
Since moving to Dubai in 2020 I have set up 2 businesses; Pink Camel Recruitment and Pink Camel Gifts. In this article, I will explain the different business licenses that are available and the process of setting up a business in Dubai.
Business License
Before setting up, you’ll need to decide if you’d like to operate in a Free Zone or Mainland. Depending on your requirements, both options have their own requirements and benefits.
Free Zone
A Free Zone is a specified jurisdiction area within each Emirate. Free Zones are operated by the Free Zone Authority (FZA) and function based on their own regulations.
Free Zones provide various packages and benefits, including 100% foreign ownership and an income-tax-free environment.
A Free Zone company is any company registered within the 40+ Free Zones of the UAE. This type of company is only authorized to trade within the Free Zone and outside the UAE and cannot trade on the mainland.
Pros of a Free Zone business license:
- Complete Expat ownership with no other fees other than the business license
- No Corporate Tax (until April 2023)
- Import and export duty exemption
Cons of a Free Zone business license:
- The business license is more expensive
- Limited to office locations
- Can’t trade with Mainland businesses
Mainland
A mainland company is a business entity that has been registered with the Ministry of Economy under the Department of Economic Development (DED). A sponsor, who is a UAE resident, is required for the establishment of a mainland company.
A mainland company in the UAE is not restricted to trading and can conduct business within and outside the UAE.
Whilst Expats are able to now keep 100% shares of their company, they do require a UAE National to be their Local Service Agent (LSA). LSAs are not part of the board or have any shares of the business, but require a yearly fee which typically ranges from 5,000-10,000 AED per year in addition to the license cost.
Pros of a Mainland business license:
- Complete Expat ownership
- The cost of the business license is cheaper
- No Corporate Tax (until April 2023)
- No geographical restrictions
- More business activities
- Ease in obtaining a corporate bank account
Cons of a Mainland business license:
- The additional cost of the LSA
- The business license takes longer to obtain
Business Bank Account
After you have received your business license you will be able to open up a corporate business account. The UAE has many banks, both local and international, to choose from. These include HSBC, Citibank, Barclays, Abu Dhabi Commercial Bank, Commercial Bank of Dubai and many more.
Office Space
Depending on which business license you have will depend on where you can have your office space. For example, if you have a Free Zone business license, you are restricted to having an office within the area of that Free Zone. If you have a Mainland business license, you can have an office anywhere in the UAE, outside of the Free Zone areas.
If you are looking to rent office space, I would recommend looking at Property Finder and Bayut which are commercial and residential property searching platforms in the UAE.
Tax
There is 0 Income Tax in the UAE, and currently 0 Corporate Tax. However, from April 2023 Corporate Tax will be levied at a headline rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to a 0% rate of Corporate Tax. Income tax will still be at 0, however, the new changes to Corporate Tax are definitely something to consider when choosing to set up your business in the UAE.
VAT
The general VAT rate is 5% and applies to most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT (subject to specific conditions being met).
There are business expenses that are VAT deductible, these include:
- Fuel
- Transport
- Travel expenses
- Accommodation
- Food and drink
Hiring
The UAE has some of the best talent in the world. We at Pink Camel Recruitment help companies within the GCC with hiring and would be happy to help. Feel free to contact me directly at mollie@pinkcamel.ae for guidance, advice or hiring support.
Employee Requirements
Each employee that works for your company will need a work visa. In addition to this, you will need to provide private healthcare and 20 days of paid annual leave per year.
You can hire a PRO to help with all of the above, I would be happy to give the contact details for the company I use. Feel free to contact me if you would like them.
Good luck with setting up your business! It will be the best thing you ever did 🙂