Are you interested in starting a business in United Arab Emirates? If YES, here is a complete guide to starting a business in United Arab Emirates as a foreigner.
Okay, having provided an in-depth analysis of the top 50 best small business ideas in United Arab Emirates and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in Dubai, United Arab Emirates. So put on your entrepreneurial hat and let’s proceed.
Why Start a Business in United Arab Emirates?
Starting a business in the United Arab Emirates can be considered as lucrative especially as the UAE is considered to be a safe haven by investors. The United Arab Emirates is the 12th largest in trade globally. Abu Dhabi which is the largest emirate in the UAE and also the political capital has the largest land mass and 38% of the population, while Dubai is the second largest. Abu Dhabi also has 90% of the UAE’s oil reserves. The population of the UAE is estimated to be around 9.35 million, a figure of which only 10% represent the nationals, while the reminders of the figures are expatriates.
The United Arab Emirate is the second largest Arab economy and 31st largest globally. As at 2015, it had an estimated nominal GDP of $339 billion. It also had the 24th highest GDP per capita globally. Prior to the global recession in 2008, it had a strong progressive economy, but in 2009, its economy shrank by 5%, which was due to a sharp fall in Dubai. However due to strong positives from the tourism, trade, and retail sectors, the country retained its buoyancy in 2015.
The UAE is known as a place where money can be made, and so if you have a business idea and are thinking of what country to start your business in, the UAE more than offers you a lucrative place. However, before starting a business you would need to research on all that would be required of you by the regulating agencies as well as thoroughly research on the business you want to go into.
Starting a Business in United Arab Emirates – A Complete Guide
- General Overview
The significance of the UAE as an oil and gas producer cannot be overemphasized as the country also has 6.6% of the world’s oil reserves that have been proven. The oil reserves which is expected to last for approximately a 100 years, have them ranked amongst the 10 largest oil reserves in the world.
However, despite the country’s heavy reliance on hydrocarbons, its economy is not bound to oil price changes especially due to its huge external reserves which were saved during the oil boom. As at 2014, the GDP for the non-oil growth reached 4.8%. The non-oil sector which is due to the diversification strategy of the UAE contributes approximately 70% of the GDP.
The UAE has a rapid growth that is fuelled by the young population whose demand for leisure, infrastructure, real estate and utilities is huge. The UAE has a high level of investment on social infrastructure so as to service the growing population. The UAE has the 15th largest defense and security budget in the world, which is expected to increase over the next two years. Between 2010 and 2014, the UAE was the largest importer of international arms.
Aviation constitutes about 27% GDP growth for Dubai, as 3 Gulf carriers are the 3 fastest growing airlines. The UAE’s investment in the waste sector is expected to grow astronomically from £95 million in 2013 to £365 million by 2017. Foreign ownership when establishing a company is limited to 49% while the remaining 51% are held by UAE nationals.
Facts and Figures of the United Arab Emirates That Will Interest You as an Investor/Entrepreneur
The UAE has facts and figures that will not only attract but retain investors. This is probably the reason why there are so many foreign people doing business in the UAE. It is also competitive in terms of economic freedom, political stability that is coupled with its natural resources. Here are some facts and figures that you might find handy;
- According to regional ranking, UAE is the 2nd in the Middle East as well as North African Region
- No personal or capital gain tax.
- There is also no VAT or sales tax in the UAE
- Custom duties are not payable on goods imported into a UAE free trade zone
- Revenue in the waste management sector is expected to grow astronomically from £95 million in 2013 to £365 million by 2017.
- Oil production is around 2.79 million barrels per day, with targets of 3.5 million barrels per day.
- The UAE has close proximity to other Gulf markets and is also an entry route to other countries in the Middle East.
Factors or Incentives Encouraging Investors to Venture into Business in the United Arab Emirates
As at 2014, more than 13 million people had visited the UK, if this is not an incentive, then nothing else might be. The UAE’s political and favorable business climate coupled with its natural resource and tourism ensures that it makes the suitable place for investors to do business in. Some of the benefits to be gotten from investing in the United Arab Emirates include;
- Continual growing and diverse economy
- Proximity and entry to other Gulf markets
- No tax on personal income and capital gains
- English language is accepted as language of business
- Ranks 31st in Ease of Doing Business according to World Bank
Starting a Business in United Arab Emirates – Market Feasibility Research
The United Arab Emirate is regarded as a business and a commercial hub especially as it offers investors with easy access to 1.5 billion consumer markets that are situated in West Asia, Africa, Eastern Europe, as well as neighboring Middle East countries. Dubai is one of the topmost destinations of investors in the Middle East, with many free trade zones.
Investment opportunities in Dubai for example, are not just open to indigenous citizens but to foreign investors as well. Most foreign investors go to Dubai because of the presence of many foreign businesses in Dubai. The reason why Dubai is a fertile ground for business is mainly due to the minimal taxation that is mostly non-existent for most businesses with the exception of Oil, Tobacco Processing, and Banking.
The mainstay of UAE’s economy is oil and gas which is responsible for the growth and development witnessed in the economy. The country also has enough oil and gas reserves that will last it for about 100 years making it the 7th largest reserve oil and gas country in the world. This sector has attracted investors and continues to attract more.
However before starting a business in the UAE, you must conduct extensive research – such as the competition, market conditions and forecasts – into the sector you are about to operate within. Also, know what the law states as regards owing a business and which legal entity is likely to suit your business best.
List of 10 Well Known Foreign Brands Doing Business in the UAE
The United Arab Emirates might be a country that is Islamic; however, most of those who stay there are foreigners, this has led to foreign brands taking up roots in the country and thriving there. Also, apart for its teeming population, it is also considered a lucrative place for business. Here is a list of 10 well known foreign brands in the UAE;
- Apple – United States
- Samsung – South Korea
- Starbucks – United States
- Google – United States
- Facebook – United States
- Sony – United States
- Mercedes – Germany
- Lexus – Japan
- Whatsapp – United States
- Dove – United Kingdom
List of 10 Well known indigenous Entrepreneurs in the UAE
These indigenous entrepreneurs have done so well in the UAE that they have become well known and are referred to as role models. It is a mix of both males and females entrepreneurs and shows how open the UAE is to entrepreneurship.
Here is a list of indigenous brands doing business in United Arab Emirates;
- Ronaldo Mouchawar – Souq.com
- Vidya Chabbria – Jumbo Group
- Nadia Zaal – Property Developer
- Tony Jashanmal – Jashanmal Group
- Maha Al Ghunaim – Global Investment House
- Maryam Matar – UAE Genetic Diseases Association
- Yussuffali Ma – LuLu Group International
- LouLou Khazen Baz – Nabbesh.com
- Sunny Varkey – GEMS
- J.C. Butler – Dubizzle.com
List of 10 Most Popular Indigenous Businesses in the UAE
The United Arab Emirates might seem like a suitable place for business, but not all businesses can thrive there due to its stringent rules and procedures regarding new businesses. However, regardless of this, the country isn’t lacking in popular indigenous brands who have worked as hard as their foreign counterparts in establishing a foothold in the country and even beyond its borders. Here are 10 most popular indigenous businesses in United Arab Emirates;
- Emirates Airline
- Abu Dhabi Commercial Bank (ADCB)
- Etihad Airways
- Zonda Rent A Car
- Jumbo Group
- Al Hilal Bank
- Waz International
- Saood Abdul Aziz Trading
Top 5 Best Cities to Do Business in UAE
Every country, no matter how viable it is for business always has cities which would give a faster return on investment than others. These best cities have greater businesses concentrated here than in others. So, if you are intending to start your business in the United Arab Emirates, here are the 5 best cities to look at;
- Abu Dhabi
The UAE’s economy continues to grow with its outlook being positive despite a global economic downturn. Its reserves of natural gas and oil make it among the top ten largest in the world. For Abu Dhabi, hydrocarbons are its largest source of income and while that of Dubai might not be as much, it has successfully diversified its economy to a media and leisure hub. The UAE overall has diversified its income as non-oil sectors make up close to 70% of the country’s GDP, thereby creating a balance for the country’s revenue sources.
The UAE another essential feature is its well established infrastructure that has not only led to a strong banking system but has seen developments in Abu Dhabi and Dubai. The UAE also has a number of free trade zones that not only allow for a 100% foreign ownership but a no taxation regime as well. The UAE is advantageously positioned because it provides an entry to other Gulf markets due to its proximity.
The UAE’s oil reserves are both onshore and offshore and are operated under concessions. Education and environmental sustainability are two of UAE’s top priorities. There are current drives to manage the use of energy. The UAE’s vast power is serviced by gas power stations. It is also considering converting its waste to power.
Possible Threats and Challenges You Will Face When Starting a Business in the UAE
The United Arab Emirate has seven individual states called emirates who to a certain exercise a degree of autonomy in running their business. This can present challenges to businesses who wish to expand to other emirates or start a new business. Some of the likely challenges to be faced are;
- Communication Style
- Poor attitude to time
- Tedious business registration process
- Restrictions on company ownership by Non GCC Nationals
- Documentation is in Arabic
Starting a Business in United Arab Emirates – Legal Aspect
Business Licenses and Permits You Needed to Start a Business in United Arab Emirates
If you wish to incorporate your business in the United Arab Emirates, you would need to be aware of the procedures and cost that will be involved. There are also basic licenses that you would need to start your business not having any of these licenses might lead to a fine or closure of your business. However, you should be aware that licenses might defer depending on the emirate you wish to start your business in. The licenses and permits include the following:
- Trade License – This is usually gotten from the Department for Economic Agency. It is obtained together with the Commercial Registration Certificate. It is only after approval that the company’s name can be entered into the Commercial register.
- Commercial License – Issued to companies whose business activities are general trading, construction, hospitals etc.
- Agricultural License – issued to those with agricultural farms or products
- Professional License – Issued to artisans
- Occupational License – Issued to professionals with mental and intellectual capabilities
- Industrial License – issued to commercial factory owners
- Tourism License – Issued to tourism activities owners
The Best Legal Entity to Use in the UAE
Choosing the right legal entity is necessary because whatever structure you choose will determine the requirements and conditions that would be needed to obtain your business license, how your finances in the business would be handled as well as how your business will be organized. There are seven legal entities in the UAE and they are;
- Establishment or Sole Proprietorship
This is an entity that is usually owned by one individual with the trade license issued in his or the owner’s name. All financial responsibilities including liabilities are assumed by the owner. Most establishments are usually owned by UAE or GCC nationals. However, as a foreigner, you might set up an establishment depending on the kind of business you intend to run which must be professional and not commercial in nature.
General Partnership Company-: This entity consists of two or more partners who are jointly responsible for all financial obligations and liabilities, and are limited to UAE nationals only.
- Limited Partnership Company
This entity consists of one or more general partners who assume financial obligations as well as liabilities; it also consists of one or more limited partners that are liable for obligations only to the extent of their shares in the company. The general partner manages the everyday business transaction, while the limited partner’s role is limited to once in a while participation.
- Joint Participation (Ventures)-: This is an entity where two or more partners share in the profit and loss of one or more commercial businesses that is conducted by one of the partners in his or her name.
- Public Joint Stock Company
In this kind of entity, the company’s capital is divided into equal value and tradable shares. Each of the partners in this entity is liable only to the extent of his or her shares in the company. This entity requires a minimum of 10 founding members.
- Private Joint Stock Company-: This entity requires a minimum of 3 founding members, and the shares of this entity cannot be offered to the public except converted to a public joint stock company.
- Limited Liability Company (LLC)
A limited liability company is formed by a minimum of 2 and a maximum of 50 individuals. A foreign equity in the company mustn’t exceed 49%, which means a UAE national must partner and retain 51% shares. This form of entity is usually preferred by foreign investors.
- Partnerships Limited with Shares
This entity is usually formed by general partners who are jointly liable for the partnership’s financial obligations and liabilities to the extent of their personal assets and shares. The general partners must be UAE nationals and must be responsible for the management of the company.
List of Legal Documents You Need to Run a Business in the UAE
Before a business can be started there are several documents that must be in place so as not to run afoul of the regulations and requirements of the law. Even though the entity you choose will determine what documents you should have, some of the basic documents that you would need to run your business in the UAE include;
- Certificate of Incorporation
- Business Plan
- Trade License
- Establishment Card
- Pension and Social Security
- Employment Contract
List of Government Agencies and Parastatals that are In-charge of Registering businesses and Issuing Licenses and Permits in United Arab Emirates
Every country has various agencies that are in charge of giving out the necessary licenses and permits necessary to start a business. The UAE has several bodies that it has saddled with these tasks of ensuring that businesses have the necessary requirements needed to start.
Here is a list of the agencies;
- Department of Economic Development-: This is the agency in charge of giving preliminary approvals to new businesses. It is also the agency responsible for name availability check, reservation as well as payment. This agency is also responsible for giving out trade licenses.
- Notary-: This agency is in charge of notarizing an applicant’s Memorandum of Association.
- Ministry of Labor-: This agency is in charge of the issuance of establishment cards, which can be applied for after the trade license has been obtained. This ministry also registers native workers.
- General Authority For Pension and Social Security-: This agency requires the registration of native workers for pension as well as social security.