to the Global Entreprenuership Monitor
The country has become a major business hub due to its friendly tax policies and favourable geographical location. Starting a business in the United Arab Emirates may seem straightforward, but there are several important details to consider before you get started.
In this article, you will find a step-by-step guide to starting a business in the UAE and some important details to consider before you get started.
Why do Businesses Choose the UAE?
More than 300k companies from all over the world are registered in Mainland and Free Zones. The UAE attracts businesses in several ways:
- Companies do not pay tax on dividends, capital gains, or intra-group transactions.
- Until 2023, companies were not required to pay taxes on their profits. However, now Сorporate Tax is only paid on an annual profit of more than $102,000 (AED 375,000).
- The VAT rate is only 5%. In Italy, for instance, the VAT rate stands at 22%, and in Scandinavia it is 25%.
- UAE has an extensive network of free economic zones (Free Zones), where businesses enjoy special privileges: some businesses do not pay corporate tax, VAT, or export taxes. This ensures a high standard of living for expatriates in the country.
- UAE boasts a developed digital infrastructure, many processes are digitized which increases the convenience of conducting business. UAE tanks the 3d globally for superior digital government services.
- A simple process for starting a new business and bureaucracy is kept to a minimum.
What types of companies can you establish in the UAE?
In the United Arab Emirates, the companies can be incorporated in:
- Mainland — and operate internationally;
- one of the Free Zones — and operate in the Free Zone and internationally, such companies can also work B2B (business-to-business) with Mainland entities;
- Offshore company — and operates internationally only.
The list of documents required for each type of business can vary, and deciding on the right set for your company may be a challenging process on your own. In such cases, the help of a professional consultant can be invaluable, as they will advise you on how to navigate the obstacles and make the process of establishing a business as smooth and effortless as possible.
Step-by-step Guide for Starting a Business in the UAE
To determine if you are liable for corporate tax in the UAE, overview the table with tax categories:
1 - Selecting business activities
When the business model is clear, it’s time to select the perfect business activities: they will define the nature of business. In the UAE there are thousands of those, and they vary from jurisdiction to jurisdiction and between different license types.
Many business activities can’t be put together under one license. The rule of thumb here is to make sure all the business activities you select are from the same industry (ex. Social Media Management and Marketing Consultancy fit together but Social Media Management and Pets Grooming do not).
Use movingo relocation platform to select the relevant business activities as well as the jurisdictions in real-time online.
You will need to select a jurisdiction (Mainland or Free Zone) based on the size, objectives, and nature of your business. You will also need to get the company's name approved by the registering authority.
The amount of time required to acquire a license will vary depending on jurisdiction. For instance, some businesses can apply for the so-called “instant licenses” and get a license, well, instantly.
More information about the procedure and requirements can be found on the UAE government website, under the "Information & Services" section". As for the documents needed for company formation: only a passport and business plan will be required.
✅ Business license;
✅ Memorandum of Association (MoA);
✅ Office lease agreement (yes, every entity registered in the UAE must have a valid business address in the UAE);
✅ Company stamp, not a document but you need it to issue official corporate documents
Optional/nice to have
✅ Establishment card (company registration at GDRDA (General Directorate of Residency and Foreigners Affairs needed for the entity to have permission to issue residency visas);
✅ Owners’ residency visas (electronic since 2023) and Emirates IDs (not mandatory in Free Zones but requested by the banks later);
✅ E-signature card of the company’s official signatory
Once you receive the documents, you can open a business bank account for your company in the UAE. There is a wide selection of reliable local and international banks available, such as HSBC, Citibank, and Barclays among others.
It usually takes between two weeks up to several months to open an account.
✅ Owners’ residency visa copies;
✅ Owners Emirates IDs;
✅ Owners’ Tenancy Contract/Ejari (optional);
✅ Owners’ 6 months personal bank statements from any country (in English).
✅ Business license;
✅ Memorandum of Association;
✅ Office lease agreement/Ejari;
✅ List of potential clients;
✅ List of potential suppliers;
✅ Business Plan
Few Tips and Tricks to Consider Before Set Up a Business in the UAE
1. Choose business activities wisely
For all types of companies, such as Mainland companies, you need to clearly define the scope of activity, which is necessary for future tax reporting. There are about 2,000 options in total, but you can't choose more than one at a time.
2. Come up with 3 options of company names
When you apply to register, your name must comply with the requirements of the company's incorporation. For example, mainland companies cannot use names that begin with the words "Universal", "Middle East", "Global" or "International".
3. Find out more about the countries’ culture before moving
The UAE is a relatively secular and open country, but it still has its own set of rules regarding etiquette and customs related to religion. Therefore, before relocating to this country, we recommend that you conduct some research about it: its history, culture, and generally accepted norms of behavior. This will help you make your life in this new country easier and avoid any difficulties that many expatriates may face.
UAE is home to over 200 nationalities, and it is important to fit into your partner's cultural expectations. Some people get right to the point, while others prefer to have a small talk first. So the main recommendation here is to do your homework and study your potential partner’s core culture before the meetings.
4. Strict rules of corporate communication are not enough: do more communication
When you move to the UAE, it is important to have a variety of conversations, and they may not always be business-related. The tradition of casual conversation is an essential part of living in the country. For this reason, formal and structured emails may not be sufficient. It is best to get in touch with your colleagues face-to-face and to include casual conversation before moving on to more serious topics.
In many cities in the UAE, there are numerous social events, including informal gatherings, where you can socialize and make new connections or address business issues.
5. Keep a balance
Not all negotiations can proceed according to plan, and often, people get distracted from the topic during a dialogue or suddenly change topics to talk to another person. Be patient, and your goal will be reached.
Life in the UAE favors balance. Here, they don't like those who are in a rush, are very formal, or overly boastful. Work and play always go hand-in-hand, so don't forget that, and your business will succeed.
Before starting a business in the UAE, carefully analyze all the available information. Knowing the legal intricacies and cultural ones will help you establish a successful business and enjoy life as an Arab.
To make sure the company incorporation process is smooth from start to finish, get in touch with movingo experts: we offer free intro calls to talk through the processes of company incorporation and business localization.