- September 16, 2023
- Posted by: DBS
- Category: Business
This article explores the key aspects of setting up a general business in Dubai. From company formation and business incorporation to free zone company formation and registering a company in Abu Dhabi, this piece provides valuable context on the process and requirements. Additionally, it sheds light on essential services such as pro services in Dubai and Abu Dhabi, as well as obtaining a corporate bank account in Dubai. Whether you are a budding entrepreneur or an existing business looking to expand, this article will provide you with important insights into the general business setup scene in Dubai.
Table of Contents
Types of Business Entities
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is one of the most popular forms of business entities in Dubai. It offers a flexible structure, limited liability for its shareholders, and allows for the separation of personal and business assets. As an LLC, you can have between 2 to 50 shareholders, who can be individuals or corporations. This type of entity is suitable for most types of business activities and provides a great level of flexibility and protection.
Free Zone Company
A Free Zone Company is a company established within one of Dubai’s many free zones. Free zones offer various incentives such as 100% foreign ownership, tax exemptions, and simplified company setup procedures. These zones are designed to attract specific industries and provide a business-friendly environment. Each free zone has its own regulations and requirements, making them ideal for businesses looking to operate in specific industries or sectors.
A Branch Office is an extension of a foreign company, operating in Dubai under the same name and activities as its parent company. However, the branch office is not a separate legal entity, and the parent company holds full liability for its operations. This type of entity is suitable for companies looking to establish a physical presence in Dubai without the need to incorporate a separate entity.
A Representative Office is similar to a branch office but serves mainly as a marketing and liaison office for the parent company. It cannot engage in any commercial activities or generate revenue directly. Representative offices are often used for conducting market research, promoting products or services, and establishing business relationships in Dubai.
A Sole Proprietorship is a business owned and operated by a single individual. This is the simplest form of business entity and does not require any formal registration or capital requirements. However, the individual assumes unlimited personal liability for all aspects of the business. Sole proprietorships are suitable for small-scale businesses and freelancers who prefer simplicity and full control over their operations.
Regardless of the type of business entity you choose, obtaining a trading license is a fundamental requirement for operating a business in Dubai. The trading license specifies the business activities you are allowed to engage in and is issued by the Department of Economic Development (DED) or the relevant free zone authority.
Dubai requires businesses to have a physical office space for their operations, whether it is a dedicated office or a shared workspace. The size and type of office space required may vary depending on the business entity and the nature of the activities.
For certain types of business entities, such as an LLC, a minimum share capital is required. The share capital represents the initial investment made by the shareholders and serves as a safeguard for the company’s creditors.
Certain professional activities require a professional license in Dubai. This includes activities such as legal services, engineering, healthcare, and consulting. The professional license ensures that individuals or companies providing services in these fields possess the necessary qualifications and expertise.
For most types of business entities, except for those established in free zones, local sponsorship is required. Local sponsorship refers to partnering with a UAE national or a UAE-owned company who holds a certain percentage of shares in the business. The local sponsor acts as a local partner and assists with various aspects of business setup and compliance with local regulations.
Company Formation Process
Choose a Business Activity
The first step in setting up a business in Dubai is to determine the nature of your business activity. Dubai offers a wide range of business activities, and it is important to choose one that aligns with your business goals and objectives.
Select a Company Name
Choosing a company name is an important step in the company formation process. The name should be unique, relevant to the business activity, and in compliance with the naming guidelines set by the relevant authority.
Draft and Notarize the Memorandum of Association
The Memorandum of Association (MOA) is a legal document that outlines the company’s structure, shareholders, share capital, and business activities. It is drafted and notarized with the help of a legal professional.
Submit Application to Department of Economic Development (DED)
Once the MOA is drafted, it needs to be submitted along with other required documents to the Department of Economic Development (DED) or the relevant free zone authority. The application is reviewed and processed, and additional documents may be requested if necessary.
Obtain Initial Approval and Trade License
Upon successful review of the application, the DED or the free zone authority will issue an initial approval and trade license. The trade license grants permission to carry out the specified business activities in Dubai.
Register with Dubai Chamber of Commerce and Industry
Registering with the Dubai Chamber of Commerce and Industry is required for all businesses operating in Dubai. This registration provides access to various services and benefits offered by the Chamber.
Register for Value Added Tax (VAT)
If your business meets the threshold for VAT registration, you will need to register for Value Added Tax (VAT) with the Federal Tax Authority (FTA). VAT is a consumption tax levied on the supply of goods and services in the UAE.
Register with Dubai Municipality
Depending on the nature of your business activities, you may need to register with the Dubai Municipality. This registration is required for businesses involved in activities such as food and beverage, healthcare, beauty salons, and construction.
Open a Corporate Bank Account
Once the necessary licenses and registrations are obtained, you can proceed to open a corporate bank account in Dubai. Choosing the right bank is crucial, as it will determine the ease of conducting financial transactions and accessing banking facilities and services.
Free Zones in Dubai
Benefits of Setting up in a Free Zone
Setting up a business in a free zone in Dubai offers several advantages. These include 100% foreign ownership, tax exemptions, complete repatriation of capital and profits, simplified company setup procedures, and access to world-class infrastructure and facilities.
Popular Free Zones in Dubai
Dubai has a wide range of free zones catering to different industries and sectors. Some of the popular free zones include Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), Dubai Internet City (DIC), Dubai Media City (DMC), and Dubai Knowledge Park.
Process of Free Zone Company Formation
The process of setting up a free zone company in Dubai typically involves selecting the appropriate free zone, submitting the required documentation, obtaining initial approval, signing the lease agreement, preparing the company’s formation documents, and receiving the trade license.
Free Zone Business Activities
Free zones in Dubai are designed to attract specific industries and sectors. The business activities permitted in each free zone may vary, ranging from sectors such as trading, manufacturing, logistics, technology, media, and healthcare. It is important to choose a free zone that aligns with your specific industry or sector.
Pro Services in Dubai
What are PRO Services?
PRO Services, or Public Relations Officer Services, refer to the assistance provided by PRO companies to businesses and individuals in handling government-related procedures, document processing, and various administrative tasks. PRO services are essential for businesses operating in the UAE, as they ensure compliance with local regulations and provide efficient support in dealing with government agencies.
Importance of PRO Services
PRO services play a crucial role in business setup and operations in Dubai. They save time and effort by managing all the necessary paperwork, permits, licenses, visa processing, and other administrative tasks required to operate a business. PRO services also ensure compliance with local laws and regulations, reducing the risk of penalties or legal issues.
Services Offered by PRO Companies
PRO companies offer a wide range of services, including company formation and registration, trade license renewal, visa and immigration support, employee sponsorship, document attestation, trademark registration, notary services, and government liaison. These services are tailored to meet the specific needs of businesses and individuals, providing a seamless and hassle-free experience.
Benefits of Outsourcing PRO Services
Outsourcing PRO services to a professional and experienced PRO company offers several benefits. It allows businesses to focus on their core activities, saves time and resources by streamlining administrative processes, ensures compliance with local regulations, provides access to expert knowledge and advice, and enhances operational efficiency.
Corporate Bank Account in Dubai
Choosing the Right Bank
Choosing the right bank for your corporate account is crucial for the smooth operation of your business. Factors to consider when selecting a bank include reputation, reliability, range of services, online banking facilities, fees and charges, and customer support.
To open a corporate bank account in Dubai, you will need to provide several documents, including the company’s trade license, Memorandum of Association (MOA), passport copies and residency visas of the directors and shareholders, proof of address, bank references, and completed account opening forms.
Account Opening Process
The account opening process typically involves submitting the required documents to the bank, verifying the documents, and complying with the bank’s due diligence and Know Your Customer (KYC) requirements. Once the account is approved, you will receive the account details, and you can start using the account for your business transactions.
Banking Facilities and Services
Banks in Dubai offer a wide range of facilities and services to meet the financial needs of businesses. These include current accounts, savings accounts, online banking, mobile banking, foreign currency transactions, trade finance, corporate loans, credit cards, and access to banking advice and support.
Government Agencies and Authorities
Department of Economic Development (DED)
The Department of Economic Development (DED) is the main government authority responsible for regulating and facilitating economic activities in Dubai. DED is responsible for issuing trade licenses, regulating business activities, and ensuring compliance with local laws and regulations.
Dubai Chamber of Commerce and Industry
The Dubai Chamber of Commerce and Industry is a non-profit public organization that supports and protects the interests of the business community in Dubai. It provides various services, including business registration, certificates of origin, arbitration, legal services, networking events, and business support programs.
The Dubai Municipality is responsible for the development and regulation of public services and facilities in Dubai. It oversees various sectors, including planning and construction, environmental protection, public health, waste management, food safety, and licensing of specific business activities.
Federal Authority for Identity and Citizenship
The Federal Authority for Identity and Citizenship is the government authority responsible for issuing residency visas and managing immigration affairs in the UAE. Businesses often need to liaise with this authority for employee visas, sponsorship transfers, and other immigration-related matters.
Dubai Land Department
The Dubai Land Department is the government authority responsible for regulating and overseeing the real estate sector in Dubai. It manages property registration, property transactions, tenancy contracts, and ensures compliance with real estate laws and regulations.
Licensing and Permitting
Types of Licenses
There are several types of licenses in Dubai, including commercial licenses, professional licenses, industrial licenses, and tourism licenses. The type of license required depends on the nature of the business activity.
Obtaining a Trade License
Obtaining a trade license is a crucial step in the company formation process. The trade license is issued by the Department of Economic Development (DED) or the relevant free zone authority and grants permission to carry out the specified business activities.
Additional Permits and Approvals
Depending on the nature of your business activities, you may need to obtain additional permits and approvals from government authorities. This may include environmental permits, health and safety approvals, food handling permits, and permits for specific industries such as banking, education, healthcare, and tourism.
Business licenses in Dubai need to be renewed annually. The renewal process involves submitting the required documents, paying the necessary fees, and ensuring compliance with any updated regulatory requirements.
Taxation and Financial Considerations
Dubai does not levy corporate tax on most business activities. However, certain sectors such as oil, banking, and telecommunications are subject to corporate tax. It is important to seek professional advice to understand the tax implications specific to your business activities.
Personal Income Tax
Dubai does not impose personal income tax on the earnings of individuals. This tax-free environment is one of the main attractions for individuals and businesses looking to relocate or establish a presence in Dubai.
Value Added Tax (VAT)
Value Added Tax (VAT) was introduced in the UAE in 2018. Businesses meeting the threshold for VAT registration are required to charge VAT on their taxable supplies and submit regular VAT returns to the Federal Tax Authority (FTA).
Double Taxation Treaties
Dubai has signed double taxation treaties with several countries to avoid double taxation and promote economic cooperation. These treaties provide relief from paying taxes on the same income in both Dubai and the foreign country.
Accounting and Bookkeeping
Maintaining proper accounting records and bookkeeping is essential for businesses in Dubai. It ensures compliance with local regulations, facilitates accurate financial reporting, and provides a clear overview of the company’s financial health. It is recommended to hire the services of a professional accountant or accounting firm to handle these tasks.
General Maintenance License
What is a General Maintenance License?
A General Maintenance License allows businesses to provide a wide range of maintenance and repair services in Dubai. This includes services such as plumbing, electrical repairs, carpentry, painting, air conditioning maintenance, and general handyman services.
Eligibility and Requirements
To obtain a General Maintenance License, businesses need to meet the specific eligibility requirements set by the relevant authority. This may include possessing the necessary qualifications, certifications, and experience in the maintenance and repair field.
Scope of Activities
A General Maintenance License allows businesses to offer a comprehensive range of maintenance and repair services. The scope of activities can vary based on the specific licenses and certifications held by the company and the expertise of its staff.
Procedure for Obtaining
The procedure for obtaining a General Maintenance License involves submitting the necessary documentation, providing proof of qualifications and certifications, paying the required fees, and complying with any additional requirements specified by the regulatory authority. Once the license is obtained, the business can start providing maintenance and repair services in Dubai.
In conclusion, setting up a business in Dubai offers numerous opportunities for entrepreneurs and investors. By understanding the different types of business entities, legal requirements, company formation process, free zones, PRO services, banking, government agencies, licensing, taxation, and maintenance licenses, you can navigate the business setup process in Dubai with ease. Seeking professional guidance and support from business setup consultants and legal experts can ensure a smooth and successful business establishment in Dubai.