A Comprehensive Guide To Set Up a Business In Dubai

September 28, 2022

Dubai is a popular trading hub for North Africa and Middle East regions. It maximizes the room to succeed for businesses who want to connect with the rest of the world. But it can be confusing how to set up a company in the Emirate. This guide will explain everything you need to know. 

Economic Zone – Offshore Vs Free Shore

Prior to the setup, you need to decide whether you want to operate offshore or in a free zone. Based on your requirements, both options come with their perks and details.

Free Zone

If you prefer complete ownership of the company, try to apply for a location and license in any Free Zone of Dubai. This concept was rolled out by the government to produce foreign interest to implement businesses in the Emirate. Basically, it is a unique economic region where business owners can enjoy 0% tax and 100% ownership. 

But there is a heavy restriction on running a company in this zone – you won’t be permitted to make direct trade with the local market of UAE.

Currently, there are 30 free zones in the city, with each designed around an industry niche. Some examples are Dubai Internet City, Dubai International Financial Centre, and Dubai Multi Commodities Center.

Offshore

These companies can be registered in free zone as well, and enjoy similar perks. But this is not a substitute for a free zone company. The main difference between the two is the operations. Offshore companies are permitted to practice business activities outside the country, rather than inside. 

Plus, they have no requirements for minimum capital deposited prior to the incorporation. But unlike the free zone, a sponsor is a must, which can limit the foreign ownership to 49%. 

Categories of License

Aside from choosing the zone, you also need to recognize the type of license required. The Department of Economic Development is responsible for issuing licenses. The 3 categories are:

  • Industrial license 

This license category is issued to businesses that participate in manufacturing which convert natural resources and materials into end products – mechanically or manually. Industrial license covers businesses like metal manufacturing, textile manufacturing, and paper manufacturing.

  • Commercial license 

To settle a UAE business that engages with buying and selling or trading of goods, owners need to get a commercial license. This type can cover businesses that are in logistics, import and export, real estate, travel, general store, and tourism. 

  • Professional license 

This is issued to companies that are artisans, service providers, or craftsmen. Some examples include beauty salons, medical facilities, and repair services.

Sponsorship

Local sponsors are not demanded while setting up in a free zone, such as DMCC. A primary benefit of running your company in a free zone is that you will be allowed to form an entity with 100% foreign ownership without needing a UAE local as sponsor or partner.

A Step-by-step Guide To Set Up a Dubai Company in Free Zone

While setting up a company, free zones are especially famous among international entrepreneurs. This is for good reason as they offer 0% personal and corporation tax, 100% repatriation of profits and capital, 100% business ownership, and zero currency restrictions. Below are the 7 steps you have to follow in order to set up a Dubai business in the free zone:

  • Discover your business activity 

The first step in setting your company in the city and obtaining a license is to finalize the niche of your project. There are more than 2,100 business niches from which you can choose. They belong to different categories inside the commercial, industrial, tourism, and professional spaces. You can go through the complete list on the DED website.

  • Decide on the free zone 

As stated previously, there are more than 30 free zones in the Emirate from where you can choose. The niche of your company can have an influence on the free zone you decide to set up in. Usually, it makes sense to establish in the vicinity of the companies in the same sector. 

The world’s flagship Government of Dubai Authority on commodities trade and enterprise and Free Zone in the world – DMCC – has been awarded Global Free Zone of the Year by the Financial Times FDI magazine.

  • Select the name of your business 

While choosing your company name, it is crucial that it follows the strict and inflexible naming regulations of the country. For instance, names which include offensive language – whether offensive to a political party, religion, or the mafia are forbidden. 

In case you name the business after a person, you have to prove that this person is an owner or partner of the business. Plus, the abbreviations or initials of the person won’t be allowed. This truly shows that naming the business is a tricky process. But effort and time can be saved by consulting with an expert so that you don’t skip any convention and have your name approved.

  • Apply for the first approval 

You need to apply for the initial approval to make sure that the DED poses no objections to you setting up a business in Dubai. This will help you in getting started for the following steps for your license. 

Entrepreneurs can apply for this online, via a third party, or in person. The required documents you should offer will be based on the business niche, but usually are:

  • Feasibility study for the venture
  • Business registration
  • Articles of association
  • License form
  • Copy of your residency visa or permit
  • Copy of your ID or passport 
  • Launch a corporate bank account 

After you are approved and gained back your documents, you will be able to launch a corporate bank account. The country boasts plenty of banks, both foreign and local, for you to make your decision. Some examples are Commercial Bank of Dubai, HSBC, Citibank, Abu Dhabi Commercial Bank, Barclays, and so on. 

  • Set your office address 

It’s obligatory for Dubai companies to feature a physical location. Luckily, the free zones will get you to your office space quickly. At DMCC, there is sufficient variety of commercial properties, business center accomodation, and office buildings to hire, rent, or lease to any type and size of company. The offices are equipped with utilities, WiFi, and meeting rooms. 

  • Apply for the final approval 

For the final approval, you need to prepare your address, documents, and legal information. In some cases, you will have to apply for license approval from different authorities. After getting these things ready, you have to submit the following:

  • Approval from other government entities
  • Initial approval receipt and the previously submitted documents
  • Duly attested service agent contract. This is for the businesses that are completely owned by non- GCC nationals.
  • The lease contract offered by the Real Estate Regulatory Agency 

Finally, you will have to pay for the license via different approved payment channels.