Company Formation in UAE [Everything You Should Know]

Company Formation in UAE

Company Formation in UAE

The United Arab Emirates is one of the world's largest business centers, serving as a worldwide and preferred destination for entrepreneurs, investors, and tourists alike. This guide is intended for business professionals who want a comprehensive understanding of the numerous factors to consider when starting a business in the UAE

A Brief Overview of the Emirates

The United Arab Emirates, or the Emirates, situated in the Middle East, assembled with seven emirates consisting of Abu Dhabi, Dubai, Ajman, Sharjah, Fujairah, Umm Al-Quwain and Ras Al Khaimah.

The federation's economy was initially driven by petroleum generated primarily in the emirate of Abu Dhabi. However, the present scenario is different since Dubai, whose economy is based on commerce rather than oil, acts as a regional commercial and nancial hub and leads the country in economic diversication.

So Dubai is a leading worldwide metropolis and a popular tourist destination for entrepreneurs, investors, and visitors.

All of this has been made possible by the UAE government's market-friendly economic policies, encouraging foreign investment, sustainable growth, innovation, and research over the last three decades.

If you want to start a business in the UAE, this treatise will help you get the necessary information before you invest.

An Introduction t conomic Growth of the UAE

Following a pr ease in 2021, activity is expected to go up in Q1 2022.

This year's economic growth is signicantly higher than in 2021. The burgeoning oil industry will fuel the acceleration, while a recovering non-oil economy could provide further momentum thanks to the government's reform effort.

According to reports, GDP is expected to grow 5.2 percent in 2022, up 0.2 percentage points from last month's prediction and 4.4 percent in 2023.

Starting a company in UAE allows business investors to generate signicant investment returns.

Thriving Business Sectors in the Emirates

UAE is making it easier for various businesses to establish themselves and settle.

Among the potential business areas that have contributed to the progressive pattern of economic sector diversication are:

Construction and Infrastructure

E-commerce

Travel and Tourism

Real Estate

Health and Hospitality

Consulting Services

Hotel chains and Restaurants

Marketing and Advertising

Fashion Products and Jewellery

If you want to set up an e-commerce business in Dubai, read about 5 easy steps to launch a successful ecommerce business

Investing Possibilities in the UAE

The UAE is one of the rare countries with a smart economy, minimal crime, a high safety index, no personal taxes, and 100% foreign ownership in important businesses. In addition, it is well-known for its political stability, ease of communication, excellent infrastructure, and affordable luxury But the investor, innovator, or entrepreneur in you has a lot more in store.

Let’s have a look at the advantages of business setup in the UAE:

Economic Stability

Due to its strategic position, robust nancial reserves, signicant sovereign wealth funds, and continued government investment, the UAE has tremendous economic stability and a favorable business climate.

Leading Infrastructure

In 100 global development indices, UAE is among the top countries in the world due to the presence of doing business in the emirates.

Suitable Location

It has direct aircraft ights to over 250 destinations worldwide and is a prominent participant in international commerce networks, having shipping lines to over 400 places.

Strong Governmental Regulations

Over 40 free zones offer competitive advantages and capabilities that attract long-term investments. In addition, the country enables foreign ownership to be 100 percent.

With the exception of oil rms and international bank branches, it does not levy income tax on people, investors, or corporations.

Open Economy

The UAE promotes private sector growth and competition while also enforcing anti-monopoly laws. It has strong relations with signicant regional and international trade groups.

Incentives for investment

In the UAE, customs charges range from 0% to 5%. In addition, the United Arab Emirates has a 10-year Golden Visa program. The long-term residence program is for investors, company owners, and critical industry experts. Now, you set up a business in Dubai, and now you need a visa. Learn more about visa services in Dubai.

Leading Industries in the UAE

In the GCC, the UAE has the most diverse economy For generations, the country has been dependent on oil and gas; nevertheless, the government has recently begun to provide equal weight to all industries.

The move has assisted the government in boosting income and has resulted in signicant growth in areas such as tourism, retail, and manufacturing. Some of the top sectors in the UAE that have made signicant contributions to the country's economy include:

Retail Industry

The UAE's medium-term retail sales are expected to climb by 5.7 percent yearly, reaching $7.5 billion by 2025; however, internet shopping is expected to grow by 14.8% annually

Travel and Tourism

Before the pandemic, the World Travel and Tourism Council anticipated that travel and tourism would contribute $133.6 billion to the Middle East's GDP by 2028.

Manufacturing Industry

According to the Ministry of Industry and Advanced Technology, industrial exports from the UAE reached a 'historic high' of Dh120 billion ($32.6 billion) in 2021, as 220 plants opened nationwide.

The Operation 300bn plan aims to increase the industrial sector's contribution to the GDP from Dh133 billion in 2021 to Dh300 billion by 2031. It aims to help 13,500 small and medium businesses over the next ten years.

Additionally, digital transformation is evident in the UAE, impacting the manufacturing business. Learn more about how digital transformation is affecting manufacturing industries

Healthcare Industry

Medical tourism sales reached AED 8.4 billion ($10.3 billion) in 2021. From 2019 to 2023, the UAE's healthcare market is expected to grow at a CAGR of over 10%.

Different Legal Business Entities in UAE

In that case, the emirates offer everyone a legal business structure suitable for their situations. Therefore, UAE is appropriate for every business investor or entrepreneur Based on different types of business structures, here are the following main divisions:

Sole Proprietorship

Limited Liability Company

Public Shareholding Company

Private Shareholding Company

Civil Company

Partnership Company

Branch of a Foreign Company

Representative Company

Learn in detail about the types of business entities in the UAE.

Framework for Laws and Regulations

The nation has got specic laws based on the different business zones, which are discussed below:

The Economic Substance Regulations

The UAE's commitment to international tax cooperation and openness is shown in the Economic Substance Regulations (ESR) The laws compel UAE onshore and free zone rms and other company forms to have an acceptable 'economic presence in the UAE concerning the activities they engage in, as dened in the framework of the regulations. Learn more about  economic substance regulations on the ocial sites of the ministry of nance.

Business Laws for Mainland Businesses

Except for the following, the UAE Federal Law No. 2 of 2015 on Commercial Companies, as amended, applies to any economic entity that engages in any commercial, nancial, industrial, agricultural, real estate, or other types of economic activity on the mainland:

Accordingly, the UAE Cabinet has decided to exclude some corporations.

Firms entirely owned by federal or municipal governments and corporations held in whole by such companies, providing the company's memorandum has a unique clause.

If a stipulation to that effect is included in their Memorandum of Agreement, companies functioning in various oil, gas, and power sectors in which the federal or municipal government owns 25% or more.

Business Regulations for Free Zone Businesses

In some situations, the free zone authority will control your rm if it is established and another government organization.

Your business will be governed by specic regulations relevant to your commercial activity

Tax Scenario in the UAE

The emirate government has set the tax structure to benet the business in several ways.

There is no income tax in the UAE.

For taxable income surpassing 375,000 UAE dirham ($102,000), the country's statutory tax rate will be 9%.

To "help small rms and startups," taxable income up to that level is nil.

The federal corporate tax is a prot tax distinct from the cost of the business in the UAE, including licenses, visas, health insurance, and other running expenses. As a result, companies in the UAE will face corporation tax rates ranging from 0% to 15%, computed depending on their net taxable revenue.

The UAE has 123 double tax treaties in place or in the works that benet expatriates and businesses.

Different Kinds of Business Jurisdiction

The UAE government has made it easier for business investors by establishing three different jurisdictions. These three jurisdictions are characterized by additional features and offer various business activities for the business investors suitable for other business activities. The three jurisdictions are as follows:

Mainland Companies

The Commercial Companies Law, Federal Law No. 2 of 2015, governs the legal forms on the UAE mainland (CCL). As a result, the Limited Liability Firm (LLC) or a branch/representative of a foreign company is the most frequent business structure in the UAE mainland.

If you wish to set up a mainland company in the UAE, then learn about mainland company formation

Free Zone Companies

Another alternative for foreign investors is to start a rm in a Free Zone. A Free Zone is a dened region inside the UAE where foreign investors can own up to 100% of their business and benet from tax and tariff exemptions. To entice international investment into the UAE, free zones have been developed. In the UAE, there are over 40 Free Zones, each with its own set of laws and regulations and agencies in charge of licensing and registration for international companies wishing to set up shop in that particular Free Zone. In addition, in the UAE, free zones are often formed to support certain businesses.

In Dubai, for example, specic Free Zones cater to enterprises in the technology, media, nance, and import/export industries. The following are some of the most popular UAE Free Zones:

Dubai Airport Free Zone Authority (DAFZA) - Appropriate for the aviation and logistics industry

Dubai Multi Commodities Center (DMCC) - Appropriate for businesses engaged in the commodity trade and services sector

Dubai International Financial Center (DIFC) - Appropriate for the nancial services industry

Dubai Media City (DMC) - Appropriate for the technology, media, and telecommunication industry

Jebel Ali Free Zone Authority (JAFZA)- Appropriate for trade, import, and export.

Abu Dhabi Global Market (ADGM) – Appropriate for the nancial services industry.

Khalifa Industrial Zone Abu Dhabi (KIZAD) – Appropriate for industrial services.

Ras Al Khaimah Free Trade Zone (RAKFTZ)

Fujairah Free Zone (FFZ)

Ajman Free Zone (AFZ)

Offshore Companies

A few Free Zones, such as JAFZA and RAKFTZ, allow foreign investors to set up offshore rms that can operate as holding companies within their group structure and cannot conduct business in the UAE (Free Zone or mainland). Offshore rms in the UAE are controlled by the appropriate Free Zone's offshore regulatory rules and regulations.

If you want to learn more about new tax laws and regulations in the offshore company formation service industry

Business Licenses in the UAE

The nature of the economic activity determines the legal structure of the rm and the type of license necessary

There are six types of business licenses available for different activities, which are as follows:

Industrial license

Commercial license

Crafts license

Tourism license

Agricultural license

Professional license.

For example, if you need to obtain a commercial license in Dubai, then go on and learn more about commercial licenses in Dubai

Stages of UAE Company Formation

The stages for the company formation in the UAE are as follows:

1. Finalize the Business Activities

There are hundreds of possible actions to select from, and you must include all of them on your license application.

Failure to identify each of your anticipated actions might lead to later problems. You can consult with some business professionals. Such professionals know allowed activities and may recommend those most appropriate for your company

2. Choose a Trade Name

Now that you've detailed your business operations, it's time to pick a company name. When naming a company in the UAE, a few factors to consider First, you must follow a set of naming rules that are both stringent and simple to follow This is another phase where a company setup specialist may assist you.

3. Finalize the Jurisdiction

As mentioned above, there are three types of business jurisdictions in the UAE, mainland, offshore and free zone. Select the appropriate one based on your business requirements.

Learn more about business setup in UAE free zone

Register Your Company

Get the required approvals from the respective government authority and submit all the relevant documents.

5. Apply for the Business License

You can apply for the mainland trade license, which varies from the UAE free zone business license. It depends on the business activities you carry out.

6. Find a Local Sponsor (If required)

If you open your companies in the UAE mainland, get yourself a local agent, as he or she will be holding 51% of the share of your business.

7. Apply for the Visa

A UAE visa is another essential need for starting a small business. The application process for your visa and that of your staff are unique yet simple.

If you have a UAE company license, you can also sponsor others. For example, a domestic worker, such as a housekeeper, might be a spouse, parent, or kid.

If you want to know more about visas, learn about visa services in Dubai, for example.

8. Open a Bank Account

Lastly, open a bank account for your future transactions.

Things to Do after the Company Incorporation in the UAE

Establish a Digital Presence

Businesses are now conducted at the press of a button. The COVID-19 scenario has increased the number of remote business prospects available to entrepreneurs.

A web presence is a beautiful way to enter the foreign market quickly However, make sure to choose a good domain name before moving on with hosting your website.

Begin your accounting and bookkeeping

Before the rst closure, keeping a proper record of the business's income and spending begins. Keeping track of every dime is necessary for monitoring your rm's progress.

Recruit the Required Personnel

The next step is to recruit the necessary personnel to maintain your organization’s essential activities and ensure that it runs properly

The UAE also allows company owners to employ exceptional people from around the world.

Documents Required for Company Formation in the UAE

You must submit some documents before your trade license application for company formation in the UAE Check below for those:

The Business Plan Application Form

The authority has ocially notarized the MOA and AOA. Passports of the Company's Executives Sponsor's passport, proving that he or she is a UAE national Sponsor's approval

Each shareholder will receive a bank reference letter

Aside from the above documents, the following documents must be given for an industrial license:

Feasibility Report Copies

Existing Business Prole Information concerning the Investor Establishing Branch Oces

Copy of the Certicate of Incorporation, MOA, and AOA that has been attested

Resolution of the Company's Board of Directors

Three months' worth of bank statements for the parent rm

Original Power of Attorney and a copy of your passport

UAE Company Formation Cost

UAE Mainland Company Formation Cost: USD 18,000- 20,000

UAE Offshore Company Formation Cost: USD 3500 (Registered Oce Fee is included)

UE Free Zones Company Formation Cost: USD 20,500 (Registered Oce Fee is included)

*All the price mentioned above is average pricing. Cost can vary depending on the place.

UAE Business Scenario Post Covid-19

The UAE Government strives to balance pandemic control and economic activity following the open economy

The markets have recovered after a temporary disruption caused by the pandemic in 2020, demonstrating the resilience of the UAE economy and global investors' faith in the UAE.

For example, Dubai Financial Market (DFM) reported net earnings of AED38.8 million in the rst half of 2021 on the stock exchange.

Furthermore, according to a report from the UAE Central Bank, Abu Dhabi's quarterly average Financial Market Index increased by 17% in the rst quarter of 2021, and the average market capitalization of companies listed on the Abu Dhabi Securities Exchange increased by AED101 billion to AED826.7 billion in the same quarter.

Our Business Setup Services in UAE

Business Setup Worldwide offers a wide range of services regarding your business setup process in the UAE Have a look at some of the services provided by our consultancy:

Company Formation Services

Accounting Bookkeeping

Visa Processing

Assisting in bank accounting

Virtual Oce Space Setup

Intellectual Property Services

Learn more about company formation services offered by Business Setup Worldwide

Why Business Setup Worldwide?

While the processes to create a business in the UAE are not particularly dicult, they need some prior understanding of the process. Furthermore, it is critical to remember that the application procedure is only simple if your business application is complete and error-free at the time of submission.

When forming a new business in the UAE, engaging with a company formation professional is good to guarantee this is the case.

A business formation specialist may help you create corporate bank accounts, choose the best nancial institution for your unique needs, and manage your licensing application.

We at Business Setup Worldwide can assist you with the required services regarding your company setup in the UAE

Contact us for further queries; we’d be glad to help you.

Thriving Business Sectors in the Emirates

Leading Industries in the UAE

Different Legal Business Entities in UAE

Framework for Laws and Regulations

Tax Scenario in the UAE

Different Kinds of Business

Stages of UAE Company Fo

Documents Required for Co p y on in the UAE

UAE Company Formation Cost Free Zones

in the

Types of Company Formation in Company Formation in UAE

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Frequently Asked Questions

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