How to start a business in Dubai?
Thousands of people are migrating to the UAE every year. Be it because many people want to live and work in this fabulous country, where others spend their vacation or because the want to start doing business here and use the tax advantages of Dubai.
100 % Tax-free
Dubai is a city of superlatives and offers a priceless advantage for companies and individuals:
100% tax exemption – in Dubai there are no taxes, neither corporate tax for companies nor income tax for individuals. The only exception is the VAT, which is only 5% and for companies, of course, only a pass through component.
Do I have to live in Dubai..?
It is not mandatory to live in the UAE when you own a company in Dubai. A Residence Visa in most cases is required but it is not necessary to live in the UAE as there is no reporting obligation. In order not to have the Residence Visa canceled one must travel to the UAE every 6 months, thats all.
What type of companies are there..?
The first step in opening a firm in Dubai is to decide which company form is the right one? Basically, one differentiates between three types of companies, each of which offers different possibilities but is also subject to different regulations.
What company suits me best..?
EXAMPLE 1:
Mr. Alcott owns several companies in London and would like to found a holding company in Dubai for these companies. He does not plan to do business with companies in Dubai or the other Emirates and does not want to relocate to Dubai. Company Form: Freezone with Zero Visa
EXAMPLE 2:
Mrs. Butterfield runs an online agency and exclusively deals with clients in Germany . Since she can carry out her work from anywhere, she wants to relocate her company and her place of residence to Dubai, but does not plan to have customers in the UAE.
Company Form: Freezone with 1 visa
EXAMPLE 3:
Mr. and Mrs. Smith work in the textile industry. They are now planning to set up a business in Dubai to sell their products there directly to customers within the United Arab Emirates. For this purpose, they also want to move with the entire family to Dubai and live there.
Company Form: Mainland LLC
1. OFFSHORE COMPANY
This form of company is currently still offered by many agencies. Since it is practically impossible to obtain a bank account for an offshore company, this form of company can actually be ruled out from the outset.
If you nevertheless decide on this form of company, please note the following:
– No residence visa authorization hence no corporate bank account
– No business relationships with companies within the UAE
2. FREEZONE COMPANY
A Freezone is perfect for individuals or existing companies that want to take advantage of the tax advantages of Dubai, but do not plan to have any business relationships within the UAE.
Freezone companies offer many advantages:
1. No corporate tax
2. No withholding tax on dividends abroad
3. No income tax if you live in UAE
4. 100% in your property
5. Limited visa authorization
6. No business relations with UAE companies
7. Costs: from AED 18.000, – (including our carefree package)
8. Founding period: 5-7 days
There are over 27 freezones in Dubai for foreigners to chose from. To determine which Freezone is the right one depends on the field of activity you are planning and your budget.
LIST OF ALL FREEZONES IN DUBAI
- Dubai Airport Free Zone (DAFZA)
- Dubai Auto Zone (DAZ)
- Dubai Cars and Automotive Zone (DUCAMZ)
- Dubai Design District
- Dubai Flower Centre
- Dubai Gold and Diamond Park (GDP)
- Dubai Healthcare City (DHCC)
- Dubai International Academic City (DIAC)
- Dubai International Financial Centre (DIFC)
- Dubai Internet City (DIC)
- Dubai Knowledge Park (DKP)
- Dubai Logistics City (DLC)
- Dubai Maritime City Authority (DMCA)
- Dubai Media City (DMC)
- Dubai Multi Commodities Centre (DMCC)
- Dubai Outsource City (DOC)
- Dubai Production City (DPC)
- Dubai Science Park (DSP)
- Dubai Silicon Oasis (DSOA)
- Dubai Studio City (DSC)
- Dubai Textile City (TEXMAS)
- Dubai – the Energy and Environment Park (ENPARK)
- International Humanitarian City (IHC)
- Jebel Ali Free Zone Authority (JAFZA)
- Jumeirah Lakes Towers Free Zone (JLT Freezone)
- National Industrial Park (NIP)
3. MAINLAND COMPANY
The Mainland Company setup in Dubai comes in 3 categories. This categories will dictate if there is need for a local sponsor or it is enough to have a local service agent. The three categories in question are Commercial, Professional and Industrial.
LLC Company with Local Partner – Commercial & Industrial License
The commercial & Industrial license covers activities which are related to trade and industry. The license for commercial activities include for example General Trade and car rental dealerships and industrial activities include, among other things, the manufacture, industry of food. This type of license requires a local sponsor and is the most common company model to date. The emirati officially holds 51% of the company’s shares in the trade license. Of course, this is only on paper. A side contract can be made and in this it is mentioned that the company is 100% owned by you. The local partner receives a fixed, previously agreed, annual sum and has no access to your company’s bank account or other internal information.
Features of a LLC company in Dubai:
1. No corporate tax
2. No withholding tax on dividends abroad
3. No income tax if you live in UAE
4. Local sponsor not needed for some activities
5. Unlimited Residence Visa authorizations
6. Business relations with all UAE companies
7. Costs: depending on the type of company – from AED 30,000
8. Formation period: around 1 week
Mainland Company – 100% Ownership with Local Service Agent – Professional License
A professional license covers activities that are related to services for example a beauty salon, accounting, consulting, restaurant and many more. The Professional license can be set up with a local service agent. The company is owned 100% by you and a so-called Local Service Agent is appointed. He receives an annual fixed sum and there are no other obligations to be paid. The
downside of this company is that it is not a LLC.
Mainland Company – 100% Foreign Owner ship without Local Partner or Agent
In 2019, there were some profound changes. Until then, each company needed a so-called Local Sponsor, a local business partner. In August 2019, these provisions were relaxed and the FDI approved a so called “Positive List” of activities that can be under 100% foreign ownership.
However, we have to point out that it is very difficult and costly to do without a local partner or agent at all. There are very strict requirements and you have to support several institutions. We therefore recommend one of the first 2 types of company formation.
The sectors that still require a local sponsor include the oil and gas sector, roads and air transport, postal and telecommunications, banking and finance, fishing and some other areas of activity, especially in the medical field. Below please find an overview of the sectors where a local partner or agent is no longer required.