Setting Up a Business in the UAE: A Step-by-Step Guide

The UAE has become a global business hub, attracting entrepreneurs from around the world due to its strategic location, modern infrastructure, and business-friendly environment. Whether you're a startup or a multinational corporation, setting up a business in the UAE can offer significant advantages. This guide provides a step-by-step approach to establishing a business in the UAE, covering both mainland and free zone options.

1. Choosing the Right Business Structure

The first step in setting up a business in the UAE is determining the most suitable legal structure for your venture. There are several options available:

• Mainland Company: Allows you to operate anywhere in the UAE, including the local market, but typically requires a local sponsor or service agent.

• Free Zone Company: Offers 100% foreign ownership, tax benefits, and simpler administrative processes, but restricts business activities to within the free zone and international markets unless you partner with a mainland distributor.

• Offshore Company: Best for international business without any physical presence in the UAE, commonly used for holding assets or conducting business outside the UAE.

The choice of structure depends on your business activities, ownership preferences, and target market.

2. Selecting a Business Activity

It’s essential to identify the specific business activity you intend to conduct, as the UAE has a well-regulated system requiring businesses to select their activity from an approved list. Whether it's trading, consultancy, real estate, or manufacturing, the chosen activity determines the licensing requirements and the type of legal structure suitable for your business.

3. Choosing the Jurisdiction: Mainland vs. Free Zones

The UAE offers two main business jurisdictions: mainland and free zones. Here's a comparison:

• Mainland: Ideal for businesses wanting to trade within the UAE, offering the ability to open branches and expand easily. Mainland businesses are subject to UAE corporate taxes, including the newly introduced corporate tax (2023) for eligible companies.

• Free Zones: There are over 40 free zones in the UAE, each catering to different sectors (e.g., Dubai International Financial Centre for finance, Jebel Ali Free Zone for logistics). Free zones offer significant benefits like 100% foreign ownership and ease of repatriation of profits.

4. Registering Your Trade Name

Once you’ve determined the business structure and jurisdiction, the next step is to register your trade name with the relevant authority. The trade name must be unique and aligned with the UAE's naming conventions. After approval, a trade name certificate will be issued, valid for six months.

5. Obtaining Initial Approvals

Certain business activities, especially those in sectors like healthcare, education, or financial services, require additional regulatory approvals. These approvals must be obtained from respective government bodies such as:

• The Ministry of Health (for medical businesses)

• The Securities and Commodities Authority (for financial services)

• The Telecommunications and Digital Government Regulatory Authority (for telecom-related businesses)

6. Drafting the Memorandum of Association (MOA)

A key legal requirement for setting up your company is the drafting and notarization of the Memorandum of Association (MOA). This document outlines the company’s shareholding structure, capital, and operations. Depending on the jurisdiction (mainland or free zone), the MOA may need to be submitted to a notary public or the free zone authority.

7. Renting Office Space

Physical office space is a mandatory requirement in most UAE jurisdictions. You can either lease office space in the mainland or opt for free zone flexi-desk services, which offer cost-effective and flexible office solutions. The lease agreement, known as a tenancy contract or Ejari (in Dubai), is needed to proceed with the business license application.

8. Obtaining Business Licenses

After securing your office and getting approvals, you will need to apply for your business license. There are three main types of licenses:

• Commercial License: For trading activities

• Professional License: For service-based businesses (e.g., legal consultancy, IT services)

• Industrial License: For manufacturing businesses

In free zones, the process is typically faster, and licenses can be issued within days, while mainland companies may need more extensive documentation and time.

9. Registering for UAE Corporate Tax and VAT

With the introduction of the UAE Corporate Tax (9% on profits exceeding AED 375,000) in 2023, all businesses must register with the Federal Tax Authority (FTA). Furthermore, businesses engaged in taxable activities must also register for Value-Added Tax (VAT) if their annual turnover exceeds AED 375,000. VAT is currently set at 5%.

10. Opening a Corporate Bank Account

Opening a corporate bank account is crucial for operational success. Banks in the UAE require specific documents, including the trade license, MOA, passport copies, and proof of business activity. Banks often assess the risk level associated with the business, and requirements may vary depending on the business structure (e.g., offshore vs. mainland).

11. Obtaining Visas and Residency Permits

The UAE offers visas for company owners, employees, and their dependents. The number of visas granted depends on the size of the office space and the type of company. Companies must register with the General Directorate of Residency and Foreigners Affairs (GDRFA) to issue employment visas and sponsor residency for employees and their families.

12. Complying with Emiratization Requirements (for Mainland Companies)

For mainland companies with 50 or more employees, it is mandatory to comply with the Emiratization policy, which requires companies to employ a certain percentage of UAE nationals. Failure to meet the quotas can lead to fines.

13. Staying Compliant with Legal and Regulatory Requirements

After setting up, businesses must comply with local regulations, including maintaining proper accounting records, conducting annual audits, renewing business licenses, and staying up to date with any regulatory changes. Free zones often provide streamlined renewal processes.

Conclusion

Setting up a business in the UAE can be a rewarding venture with the right planning and adherence to legal procedures. From selecting the appropriate business structure and jurisdiction to obtaining licenses and complying with tax regulations, each step is crucial to the success of your business in the UAE.

To navigate the process smoothly, legal expertise is invaluable. Smart Counsel for Legal Services offers specialized guidance on business setup, ensuring compliance with UAE regulations and helping you every step of the way—from choosing the right structure to managing ongoing legal obligations.