Business Setup in the UAE

The United Arab Emirates, a federation of seven emirates, is on the path of transformation. It is transforming from an oil-dependent economy to a well-diversified one. In this journey, it has made strides by improving access to markets, developing business-friendly legislation, and offering tax benefits. All of these measures have helped attract foreign investments. This blog outlines the benefits and costs of business setup in the UAE, followed by a step-by-step process for setting up your company.

Benefits of Company Formation in the UAE

Business setup in the UAE is an ideal choice due to the numerous advantages it offers. Some of the main ones are discussed below.

Access to regional and global markets

The UAE is strategically located between Asia, Europe, and Africa. In the Middle East, as a member of the Gulf Cooperation Council (GCC), it has entered into free trade agreements with its neighbors. A well-developed multi-modal transportation network complements the UAE’s strategic location and trade policies, enhancing global and regional access for businesses.

Macroeconomic stability

The UAE dirham is pegged against the US dollar with no foreign exchange control regulations. This ensures economic stability and minimizes exchange rate risks.

Tax benefits

Businesses in the UAE enjoy several tax advantages, including:

• 0% corporate tax in the free zones and for income below $102,096
• 5% standardized VAT through a common agreement among GCC members
• 0% personal income tax

Note: 1 AED = 0.27 USD as of September 30, 2024

Business-friendly legislations

The UAE has developed mainland and free zone structures to accommodate various business objectives. Mainland businesses enjoy full market access and 100% foreign ownership. Free zone businesses enjoy 100% repatriation of profits and capital and reduction in import and export duties.

Costs Involved in Business Setup in the UAE

When assessing the financial viability of establishing a UAE business, we must consider both the costs and the benefits. The major costs involved are:

• License fees
• Rental contract
• Bank account opening charges

These costs vary with the jurisdiction chosen.

Streamline Your Business Setup in the UAE with Our Expert Guidance

Once you have decided to set up your business in the UAE, you could follow these steps.

1. Decide your business activity and license type

The area of your business operations determine the type of license you must apply for. There are around 2000+ permitted economic activities in the UAE for which you can obtain a license. The types of business licenses available in an emirate, mainland, or free zone may vary.

2. Choose your jurisdiction

The UAE comprises 7 emirates. In each emirate, you can establish your business in either the mainland or the free zones, each offering distinct advantages.

You can learn about the benefits offered by the mainland and free zones for businesses, from our previous blog.

3. Choose an appropriate legal structure 

Your company’s legal structure determines the rules and regulations applicable. Available structures vary based on capital, liability sharing, and business location (free zones or mainland).

Mainland

There are many more types of legal structures permitted in the mainland as compared to free zones. These are:

• Sole proprietorship
• Branch of GCC/local/ foreign company
• Civil company
• Limited liability company
• Holding company
• Public/private joint stock company

Free Zones

The types of legal structures permitted for businesses in the free zones of the UAE are:

• Free zone limited liability company
• Free zone company
• Free zone establishment

This list of legal structures covers the most popular types, but is not exhaustive. 

4. Register the trade name

Choose a unique trade name for your business to create a distinct brand in the minds of clients/customers. The availability of a trade name varies with the emirate. You can check availability of the name in your chosen jurisdiction on the UAE Ministry of Economy website, under the trade name section of business setup.

5. Obtain initial approval

To set up a UAE business, first obtain initial approval from the authorities, which serves as a ‘No Objection’ from the state. You can apply for initial approval after preparing the documents listed later in this blog.

Apply Online

You can apply for initial approval and license through the unified Basher platform.

Apply Offline

You can apply in-person by visiting any of these offices—government service centers, tasheel offices, OnTime offices, legal services offices, and customer happiness centers.

6. Submit the documents and obtain the license

After submitting the documents, you must pay the fees and obtain your license. The fees paid vary with the type of license applied for and the jurisdiction.

7. Choose an office space

Businesses that set up operations in the UAE must have a physical address. The office space can either be leased/ purchased after obtaining the license. The office space will depend on the number of employees and nature of business activity.

In free zones, if you are a freelancer/ professional, you can register with a virtual office to operate from anywhere in the world.

Documents Required for Business Setup in the UAE

The business setup process primarily involves preparing and submitting required documents with your license application. The document requirements vary for individuals and corporations.

For Individuals

Individuals can apply for business licenses in the UAE under the freelancers/professionals category. They would have to submit:

• A registration application
• Curriculum vitae/profile
• Reference letter from their bank 
• Original and notarized Registry Identification Code (RIC) form for directors

For Corporations

Corporations have a longer list of required documents compared to individuals to obtain a business license. These documents are:

• Registration application form
• Business plan
• Copy of existing trade license/registration certificate (if you already have a company)
• Passport copies of the company’s shareholders and managers
• Original and notarized Registry Identification Code (RIC) form for appointed managers
• Specimen signatures of the company’s shareholders and managers
• Letter of intent clarifying the investment idea
• Two-year audited financial reports or reference certificate from bank 

Types of Business Licenses in the UAE

The UAE Ministry of Economy issues various types of business licenses based on the nature of business activities.

Mainland

There are more than 2,000 permitted economic activities in the UAE. From these, six main types of economic licenses are offered in the mainland. These are:

• Occupational
• Tourism
• Industrial
• Commercial
• Agricultural
• Professional

While this is not the exhaustive list, the majority of licenses offered in the mainland have a broad domain.

To understand business setup in the mainland of the UAE, you can refer to our blog on business setup in Dubai mainland.

Free Zones

The UAE free zones offer more specific and custom licenses based on the nature of business activities. The types of licenses offered are:

• Commercial trade
• Consultancy services
• Industrial
• Educational
• Media
• eCommerce
• Offshore
• Freelancer
• Warehousing
• Manufacturing
• Innovation
• Others

To understand how business setups in free zones of the UAE work, you can refer to our blogs on business setup in Meydan free zone and Dubai free zone.

Common challenge: New corporate tax regime

The UAE’s new corporate tax regime requires businesses to manage multiple tax obligations—corporate tax, VAT, and excise duty. This change increases administrative costs for tracking due dates and ensuring compliance.

How to overcome it

To simply tax compliance, you can use a tax compliance platform like Commenda. We track the due dates and provide timely reminders to help fulfill your tax obligations.

Conclusion

The UAE offers significant growth potential and flexibility through its mainland and free zone structures. Before choosing the location of your business setup, evaluate how these options align with your business goals, target customers, and available capital. Seeking advice from trusted experts, like Commenda, can help you make a more informed decision. 

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