Do you want to start a business in Dubai, UAE with no money of your own? If YES, here is a complete guide on how to start a business in Dubai as a foreigner.
Dubai is one of the most economically viable countries of the world, and also one of the topmost tourist destinations of the world. Because Dubai receives a great influx of tourists at any given time, entrepreneurs, both foreign and local, see it as a very viable business area.
Additionally, doing business in Dubai can be quite beneficial especially if you’re looking to sell goods in the Gulf Cooperation Council region. Dubai provides loads of commodities, both high end and otherwise, easy access to flights and travel, and plenty of talents just for the asking.
If you are considering starting a business in Dubai as a foreigner, here are things you need to know about doing business in Dubai, including how you can set up a business in this economically viable country.
Why Start a Business in Dubai?
Some of the good things going for Dubai is not only that it is an economically viable nation, but also that it is very visitor friendly and it is straddling the continents of Asia, Europe and Africa. Starting up a business in Dubai can help launch that business into these continents quite easily. Other advantages of starting a business in Dubai include;
- It has a vibrant and growing economy: Among the Emirates, Dubai is said to be the most successful in terms of economic growth, and has been exceptionally successful in diversifying away from oil, after the country hit recession in 2009. Sectors such as trade, logistics, transportation and tourism account for almost 60 percent of Dubai’s GDP.
- It boasts of visionary leadership: It is the amazing foresight and vision of Dubai’s leaders that has led to the creation of one of the most successful and modern cities in the world. The country was previously an obscure trading outpost in the desert, but it has been transformed into a major global destination.
- There is investment Support by the Government: Dubai’s Department of Economic Development (DED), which is tasked with setting and driving Dubai’s economic agenda, supports the emirate’s transformation into a diversified, innovative, service and knowledge-based economy to improve the business environment and increase productivity.
The DED and its four agencies develop economic plans and policies, identify and support strategic sectors, and provide essential administration services to domestic and international investors and businesses.
- It has free trade zones: Dubai has more than 20 Free Zones and they accommodate several industrial and business clusters. Here, investors from abroad can have complete ownership of their investments, along with repatriation of profit and capital.
- There is a benign tax regime: In Dubai, as in all the other emirates, all companies – be it joint partnerships registered in the mainland or companies formed in the FTZs- all of them enjoy a tax-free haven. This is a great impetus for people looking to invest in Dubai.
- Sustainable legal system: There are continuous and ongoing revisions of existing investment rules, regulations and incentive packages to promote foreign investment. Dubai was the first among the emirates to permit foreign ownership of property and stocks.
UAE is also a member of international bodies, treaties and conventions that safeguard intellectual property, including the World Intellectual Property Organization (WIPO), World Trade Organization (WTO), Paris Convention, Patent Cooperation Treaty (PCT), WIPO Copyright Treaty, WIPO Performances and Phonograms Treaty (WPPT) and the Rome Convention.
- Top notch Infrastructure: Dubai dominates the cargo and re-export markets thanks to the size and sophistication of its two ports, Port Rashid and Jebel Ali Port. The massive Jebel Ali facility is one of the most modern and busiest ports in the world and has 63 berths.
Jebel Ali port facility includes an economic free zone (Jafza or Jebel Ali Free Zone Authority) which is part of the Economic Zones World. Despite being the second port in Dubai, Port Rashid is still one of the busiest in the Gulf region with 35 berths.
Dubai is also home to two major airline carriers, Emirates Airlines and flydubai. Emirates is the Arab world’s largest airline with more than 120 destinations and 160 aircraft in 2012, and plans to increase its fleet to up to 280 by 2020.
- There is availability of manpower: Due to its liberal labour policies, it is easy and cost-effective to recruit employees from almost any part of the world. UAE governments from across the seven emirates continue to invest heavily in training the national workforce to play a greater role as competitive members of the UAE economy – out of the 1.3 million people now employed in Dubai, just 53,000 are Emirati.
- The geographical location of the state: The United Arab Emirates is located in the heart of the crossroads of the trade routes of East and West, Europe and Asia. It helps to organize effectively an international trade flow with minimal costs.
There are modern sea and air transport companies, ports and airports in the UAE, which are connected with all the leading international transport hubs, and which provide the possibility of delivering goods from and into any part of the world. Besides, the location of the country allows flying quickly to the UAE from a large number of the countries, and in the case of living in the UAE it is easy to fly to any country in Europe, Asia or Africa.
How to Start a Business in Dubai With No Money as a Foreigner
The following list encompasses the basics of setting up a business in Dubai’s Free Zone. However, the process for setting up outside of the free zone is fairly similar, so these steps should still be of help.
- Choose three preferred names for your business
When setting up your business in Dubai as a foreigner, you will be required to make an online application to that effect. In the online application, you’ll be asked to list three preferred names for your new business. The DMCC will then try to secure your first choice name, and will do the necessary research to make sure that the name isn’t already in use.
If they find the name has previously been taken, they will secure your second or third choice name. It’s important to note that your company’s name will always end in “DMCC”, and should you open a branch office the name will end in “DMCC Branch”.
- Submit documents for pre-approval
Next, you’ll now have to submit the required documents for pre-approval. For each proposed shareholder, manager, secretary, director, or legal representative, you’ll need the following documents for pre-approval:
- Know Your Client (KYC) form
- Letter of No Objection from any sponsors
- Passport and Emirate ID (if UAE resident, the passport visa page, as well)
- Proof of permanent residential address (generally a recent utility bill or a letter from one’s banker)
- Business Plan (if required for your business’ activities)
- If a consultant is acting on your behalf in Dubai: Consultant’s Appointment Letter
- Power of Attorney (if consultant has been given this power)
- Payment for name registration (AED 1000)
The pre-approval process generally takes anywhere between 7 working days and one month.
- Submit registration documents
After your documents have been pre-approved, you’ll need to submit additional documents for registration: For each proposed shareholder, manager, secretary, director, or legal representative, you’ll need the following documents:
- Specimen signature form signed in the presence of a DMCC Member Service Executive or notarized in one’s home country.
- Passport to be reviewed by DMCC Member Service Executive or notarized in one’s home country (if UAE resident, will also need the passport visa page)
- Shareholders’ resolution (generated by the DMCC portal and signed in the presence of a DMCC Member Service Executive or notarized in a UAE embassy)
- Memorandum and Articles of Association (generated by the DMCC portal and signed in the presence of a DMCC Member Service Executive or notarized in one’s home country)
- Undertaking Letter to Comply with the DMCC’s Requirements (generated by the DMCC portal for the license manager to sign and upload)
- 3rd party approvals from relevant authorities (only applies to certain activities)
- Auditor appointment letter (optional)
- Payment, the amount of which will be calculated by the DMCC based on your previously submitted documents.
After you’ve submitted all of the necessary documents, the DMCC will issue you a Provisional Approval and Bank Letter.
Once you have your legal procedures and forms ready to go, you can now shortlist some offices with their costs and other details. This would mean a clear path forward once you get your legal formalities out of the way. In free zones, you will get assistance to find premises suitable to your requirement along with help to set up electricity, internet, water and other amenities.
5. Rules on Employees
In most legal forms of the DED, you need to hire a manager to oversee operations and have him ready to be on board before your registration is approved. But in other cases, you may not be allowed to hire at all. For example, Intelaq license holders (license for home-based Emirati business owners) are not allowed to hire staff, but can engage contractors. For free zones, each zone has its own specific regulations regarding the structure of business.
6 Things to Keep in Mind When Starting a Business in Dubai as a Foreigner
- Type of business
Your type of business will determine the kind of license you require. Whether it’s commercial, professional or industrial licenses, these will define the basis of your operations. However, while selecting, remember that certain activities such as food trading, jewellery trade, veterinary activities and legal consultancy require further approvals from other governmental departments.
As a foreign national, if you’d like 100 per cent ownership of your company, you need to opt for a license and location in one of the many free zones of the UAE. There are specific kinds of activities that each free zone caters to and clarity in the first step will help you find your best option. There are over 45 free zones in the UAE with various categories of operations, so you don’t lack for choice.
If you need a local license or need to operate locally, you have to get a license from the Department of Economic Development (DED). The DED license comes with certain restrictions on share of ownership for foreigners, based on different legal structures under DED.
- Legal structure
Depending on your location and type of business, there are rules regarding the make-up of your firm. For example, if you plan on a legal consultancy firm, this can be done only as a branch of company or as a stand-alone company. A sole proprietor is not allowed to take up this activity. Each free zone has its own restrictions regarding company structure and you can look these up on the official website of the zone.
- Trade Name
Your trade name is a very important part of the legal procedure. The company name should ideally indicate the nature of business, unless it is a branch of another company. All the rules regarding trade names can be seen on the DED official website.
- Share capital
Minimum share capital is usually set out in the Memorandum of Association of your proposed company. In most cases, you do not need to pay minimum capital at the time of setting up.
6. Local support
For DED licenses, it is mandatory to have a local agent, partner or sponsor and this is a great support for foreign nationals. For free zones, having a local contact can help take the business forward effectively. However, this is not mandatory and Dubai as a business destination boasts easy set-up for all businessmen regardless of nationality.
Local partners can be individuals or companies and they are not required to contribute financially to the startup. There are various ways in which a local partner can be remunerated; it is important to set the expectations beforehand.
- Registering your company in a Free Zone without taking a look at the available office sizes and preconditions
Often the published information for a Free Zone gives a wide choice of offices. The actual availability keeps changing. A business startup would normally look for the cheapest option. It is probable that when you actually go for registration of the company you may find that only certain office sizes are available. This will throw your budget into disarray.
It may be too late to change your Free Zone then. Or it may happen that certain offices allow only 1 visa only for investor and not for the employees. So do not proceed until all aspects of the office are confirmed.
- Making firm plans based only on published information
Before you finalize the plans for your business startup ,it is prudent to confirm the validity of the published information. Rules change in Free Zones and also in the local Department of Economic Development for business registration.
Do not go ahead until you have confirmed your assumptions through a business set up consultant or by actually contacting the relevant authority. You may discover that some papers may be needed or that some nationalities need special permissions or that some requirements may be waived if you request or negotiate.
- Choosing a license category blindly without confirming if it is allowed for your business model
In the UAE, it is not difficult to devise a business model that will not need a change. Very often much change or at least some tweaking is needed.
Make wide possibilities and confirm whether your planned license category allows you all the activities that will be likely in the business model you are planning. Do not choose a license category that is too narrow.
- Opening a bank account without confirming the bank charges
Banks levy varying charges. For a business startup, these can amount to a substantial sum for a bank-dependent operation. Always confirm the requirements and charges beforehand. Do not choose a bank based on only the reputation.
- Signing a sponsorship with local sponsor without a written legal agreement
Your business startup may need a lot of support initially. A local sponsor may want to charge separately for some services. Do not go ahead with sponsorship until both sides have agreed on what to expect from each other and a written agreement is drawn up and attested in the local court. Do not rely only on verbal understanding.
How to Register a Company in Dubai as a Foreigner
When seeking to register a company in Dubai, the Dubai Company Act will require you as a foreign investor to have a local partner who will own the major interest in your company. The only places investors may incorporate fully foreign owned companies are the Dubai free zones.
The company registration requirements may be different from one company to another because of the type of company one chooses to open in Dubai. According to the Company Law, foreign investors may set up the following types of companies in Dubai:
- limited liability companies
- private and public joint stock companies
- branch offices
- free zone limited liability companies
- free zone establishments
Of these, the limited liability company is often the most commonly adopted structure for small business set-ups in the region. Limited liability companies (LLCs) can be formed between as few as two or as many as fifty persons whose liability in the company is limited to their share investment in the company.
A local sponsor with a controlling 51% interest is required and foreign equity in the company is limited to 49%. In Dubai, a minimum capital investment of AED 300,000 (USD 82,000) is required to be shown for the launch of an LLC. These are the steps that need to be followed to set up the company:
- Select a name for your company that relates to the type of business you want to start and have it approved by the Licensing Department of the Economic Development Department.
- Draw up a Memorandum of Association which is a document that governs the external activities of the company. The MoA needs to be notarized by a Notary Public in a Dubai court.
- Apply for entry into the Commercial register at the Economic Development Department.
- Once approval is granted, the Economic Development Department will issue a license and the company’s name will be entered into the Commercial Register. The MoA will be published in the Ministry of Economy and Commerce’s Bulletin.
- The final step is to register the company with the Dubai Chamber of Commerce and Industry.
Visa Requirements for Doing Business in Dubai as a Foreigner
In both the free zones and greater Dubai, you’ll need a residence visa to be able to set up your company in the country. You should know that you will be allotted a certain number of visas by the square footage of office space you buy.
This then means that setting up your company automatically makes you eligible for a visa. In order to maintain your visa, if you’ve set up your business within the DMCC (Dubai Multi Commodities Centre), you’ll pay a fee of AED 3335 every three years, plus put down a refundable deposit of AED 3000.
There is a caveat for businesses that are formed outside of the DMCC: Your local sponsor, or the 51% local shareholder, must apply for your visa for you. Your sponsor then must allow you to apply for visas on behalf of your employees, or apply for visas for new employees directly.
Requirements for Registering your Company in Dubai
To register a company in one of Dubai’s free zones, you have to submit the following items to the Dubai Government authorities:
A detailed business plan. The business plan should encompass;
- Description of the proposed business activity
- Quantity and composition of the employees
- Amount of investment
- Suppliers information and What customers can expect.
- A lease agreement and
- A receipt of the deposit of the share capital.
Before incorporation, a Dubai company’s corporate bank account should be opened to deposit the required paid-up capital.
The Government authorities will review your company registration application. If you application is approved, you will now be required to apply for the necessary licenses and permits. The type of licenses required will vary according to the type of business you intend to start. After you receive the licenses, the company registration is then complete.
Opening a Business Outside of the Free Zone as a Foreigner
While Dubai is a fairly friendly place for expat entrepreneurs even outside of the free zone, there is one requirement for opening a business in the emirate that can be a deterrent. Outside of the DMCC, you must have a local sponsor, and that sponsor must have a controlling share (51%) of the company.
Local sponsors can be either individuals or local businesses, and typically they don’t have any business responsibilities outside of leading government procedures like visa acquisition and obtaining licenses and permits. They must also sign all legal documents and official forms.
Businesses may also require specific licenses, some of which carry capital requirements. It’s also important to note that virtual businesses are not allowed to register in Dubai. Any company undertaking commercial activities is required to have a physical location in the emirate.
Pros to Operating Your Business from the DMCC (free zone)
Free zones are the only places in any emirate in which, as a foreigner, you can own 100% of your business.
There are (essentially) no taxes in the DMCC Free Zone. You won’t be subject to personal income tax, corporate income tax, or withholding tax for at least 10 years; and your business’ exemption is renewable. There are also no currency restrictions, and you’ll enjoy 100% full capital repatriation.
Also, there isn’t a limit on the number of shareholders your business can have in a free zone. Again, free zones are set up with great business infrastructure, and you’ll be surrounded by plenty of amenities.
Cons to Operating your Business from the DMCC (free Zone)
Businesses set up in a free zones are restricted to conducting business inside of that free zone. They may not expand beyond the free zone or other UAE Markets, and business activities can’t be directed at UAE consumers outside of the free zone. Businesses may, however, do business overseas, and should they wish to sell their product or service within the UAE, they may work through an LCC outside of the free zone that has an import/export license.
Again, there are restrictions on what types of businesses that can be opened in each free zone. The DMCC, however, has more than 600 allowed business activities. The DMCC is not located in central Dubai, so it does not have the advantage of being in the city center. However, it is only a 20 minute drive from the city.
Cost Of Setting Up a Business In Dubai
If you are planning to start a business in one of Dubai’s many free zones, keep in mind that each free zone has different start-up procedures and fees. Many free zones also require that the business owner have a minimum amount of capital if they are establishing the company or enterprise in the free zone as opposed to just opening a branch of an existing company. Another cost of running a business in Dubai or in a free zone is sponsoring your employees and providing them with the necessary visas and paperwork to allow them to reside in the country.
Trading companies should also consider the future costs of importing goods to the country. Dubai Customs has clear guidelines to the types of goods that can be brought in, as well as the costs of importing those goods. If the company will only be trading within the GCC, customs fees will be less expensive because of the newly established GCC common market, which promotes trade and employment among GCC nationals.
Companies with only 1 shareholder can register as a free zone establishment (FZE). Companies with 2 to 5 shareholders can register as a Free Zone Company (FZC).
Not all free zones allow FZEs. Most free zones in Dubai need at least 2 shareholders. Please take note of the specific requirements of each free zone before incorporation. All Dubai free zones require a minimum paid-up capital. The paid-up capital amount is set according to the free zone and the company structure. The capital amount ranges from US$14 to US$300,000. A recommended paid-up capital is US$200,000.
Another important point to consider when setting up a free zone company is customers. A free zone company is not allowed to conduct business activities with UAE residents. If you wish to do business within UAE, then you will have to appoint a service agent. The agent will sell and distribute goods and services under his own name