Dubai is a global city and the business hub of the Middle East.
Dubai is one of the world’s fastest-growing economies, with the following businesses being the most significant contributors to its GDP being real estate, trade, tourism, and financial services industries. This has attracted a lot of foreign investors and job seekers to flock to Dubai.
Despite the Emirate’s infrastructure having built on the oil exports over three decades ago, oil and natural gas contribute to less than 5% of its GDP now.
Dubai has gained the reputation of a leading trading hub in UAE, owing to premier business locations and an environment that is not unduly restrictive. It offers business people the most liberal operating conditions, tax exemptions, asset protection, complete privacy, and limited liability, in establishing a business in Dubai. The tax haven also offers tremendous promise to overseas companies, as it has:
- Excellent growth trajectory (imports have doubled since 1990) and unique policies of liberalization
- Prosperous market located in one of the world’s wealthiest regions that are diversified and offers ample opportunities to traders
- No trade barriers, quotas, exchange controls (open market)
- High accessibility through air or water (around 90 airlines and 170 shipping lines)
Setkorp can help you set up your business here by availing the licenses like Industrial/Service License, Trading/Commercial License, and Professional/General Trading License). You can choose from among a free zone, mainland, or offshore company in Dubai. Onshore and offshore sectors dominate the UAE economy. The difference between these two is that offshore industries contain free zones that bring foreign investment. And onshore sectors put restrictions on foreign ownership and take care of local business interests. Here’s a little summary on the three types of company formation in Dubai:
1. Free Zone Company
Free zones in Dubai are the most sought-after locations for international business operations. They attract foreign direct investment due to their policies that generate employment while supporting economic reforms. Free zone company registration Dubai is a highly profitable investment option for organizations because of incentives like:
- 100% foreign ownership
- Exemption of taxes
- Customs privileges
- More significant growth potential due to the strategic location
- Well established transport network and road connectivity
- Proximity to a large customer base
- Affordable cost for high-quality labor
There are many such positive aspects of setting up a company in Dubai free zone.
2. Offshore Company
Many businesses prefer to set up an offshore company, also known as the non-resident company, in Dubai, as the income obtained from a holding company (offshore company) is not taxable.
Other than tax savings, people prefer having an offshore company as a holding company so that they can hold:
- The interest of other companies in a separate jurisdiction
- Licensing of franchises
- Intellectual property rights like patent, trademark, copyright, etc.
There are many features of offshore company formation Dubai like,
- Complete tax exemption
- Virtual office facilities
- No exchange control
- Provision to open a multi-currency bank account
- Stringent privacy laws and reliable confidentiality
Offshore business setup in Dubai has several benefits associated with it, due to which many established businesses outside Dubai go for this option
3. Mainland Company
A business entity falling under commercialized geographical areas and directly registered under the Emirates government and its authorities are known as a mainland company. A mainland company in Dubai can carry out business across the UAE but permits maximum foreign shareholder equity capped at 49%. Mainland represents the most developed economy as it is set up directly following the legal structures of the Government policies.
Difference between Mainland, Free Zone, and Offshore in Dubai
For a foreigner, it might get difficult to understand the concept of ‘free zone,’ ‘offshore,’ and ‘mainland’ in Dubai. One must have complete knowledge of what each jurisdiction provides to its businesses. Hence, to clear away the confusion, a differentiation table has been prepared.
|Ownership||An expat can own 49% of shares in their company for business setup in mainland Dubai. A local sponsor must be appointed who will own the majority of shares||A foreigner can have complete ownership of their business in any of the Dubai free zones. There is no need for appointment of local sponsor or a service agent||A full ownership is granted to an expat in offshore Dubai only if they have a business outside the UAE|
|Visa||A residence visa can be obtained depending on the size of the work premises||A residence visa can be obtained depending on the size of the work premises||There is no need for an office space for an offshore company, hence residence visa is not granted|
|Cost of Business Setup||High||Medium||Low|
|Audit Requirement||It is mandatory for mainland companies to prepare audit by the end of financial year||Only a free zone company and a free zone establishment have to prepare audit in free zone||It is not mandatory for an offshore company to prepare audit for the company|
There are many such differences when it comes to these three jurisdictions
Benefits of Company Incorporation in Dubai
Apart from the advantages mentioned above, there is more to Dubai and its business culture. Dubai’s strategic location is just the first in a long list of causes to invest in the city. It provides a gateway towards Eastern businesses and is an excellent hub for imports and exports. Not just this, its growing and diverse economy makes it possible for the foreign investors to concentrate their attention on areas different from the one that made the city famous. Oil, logistics, trade, transportation, tourism, and real estate are some of the business areas that have become essential over the last few years. Regardless of the business field one chooses to enter; the Emirate has a qualified workforce.
The city also attracts expats from around the world, and the labor policies make it very easy for employers to hire personnel from different parts of the globe. Dubai is considered as one of the safest cities in the world and one that has a high quality of life. Here are a few benefits if you want to open a company in Dubai-
- No limitation on visas
- Flexibility to rent office anywhere
- No restrictions in office space requirement
- Great opportunity to expand by forming branches
- New permit to grow the business in the mainland without establishing a branch office
- No minimum capital investment required
- Permission to undertake government projects
- Easy accessibility of office space
To know more about such advantages of starting a company in Dubai, read our blog.
Types of Business Entities in Dubai
As per the Federal Law, a commercial company in Dubai must have not less than 51% local equity (participation of UAE nationals). The law also defines seven categories of business organizations that are permitted to register a business in Dubai. These are:
Sole Proprietor Company in Dubai is a separate legal entity and is operated by one individual. A sole proprietor is in complete control of the company’s operations, and he/her completely bare the profits and losses. A sole proprietor is fully liable for the company’s debts or obligation.
General Partnership Company
A General Partnership Company in Dubai is owned by two or partners who bear unlimited liability, and are responsible for the debts and obligations of the company in a personal capacity. A general partnership may dissolve in the event of bankruptcy, withdrawal, insanity, or death of a partner.
A Partnership-en-Commendam in Dubai consists of one or more general partners who bear the unlimited liability and are responsible for the company’s profits, losses, debts, obligations. The joint partners in Dubai need nationals of the UAE due to partners involved in the financial commitments in a limited partnership
Limited Liability Company
A Limited Liability Company (LLC) is the one whose liability is limited to the extent of their shareholding in the company. An LLC may conduct any type of business activity except insurance, banking, and or money investment. Trading LLCs are permitted to carry out business in their local Emirate as well as to export and import easily.
Joint Venture Company
A Joint Venture Company in Dubai is a contractual agreement between an international party and a regional party licensed to conduct the coveted business activity. An exclusive license is not issuable in the name of the company. The license belonging to the original partner is enough for the implementation of the project with the collaboration of the other partner who engages in running of the company.
Public Shareholding Company
A Public Shareholding Company in Dubai is also called as a Public Joint Stock Company. It is the one where the business capital is split into equal shares, with each shareholder’s liability limited to the number of shares in the company
Private Shareholding Company
A Private Shareholding Company in Dubai is also called as a Private Joint Stock Company and is owned by a non-governmental organization. The minimum capital required to register a private shareholding company in Dubai is AED 2 million.
A Professional Company in Dubai is an organization which operates out of the intellectual efforts of its partners. The UAE has explicit norms that guide the conduct of professional companies. One needs to have a professional license to start a Professional Company.
Out of these seven company types, Limited Liability Company (LLC) is the most commonly chosen one by foreign investors.
Moreover, 51% participation of UAE nationals is the general norm in the seven company mentioned above types, except for the following scenarios:
- Where 100% of local ownership is required
- Free Trade Zones, where 100% foreign ownership is allowed
- In activities with 100% Arabian Gulf Cooperation Council (AGCC) ownership, where wholly owned AGCC companies partner with UAE nationals
- Where foreign companies register a representative office or branch in Dubai
- In artisan or professional companies, where 100% foreign ownership is allowed
What are the Types of Business Licenses Available in Dubai?
The Department of Economic Development (DED), Dubai is the licensing authority that issues a license for significant activities. A fundamental prerequisite for all business activity in Dubai is to apply for and procure one of the following three categories of licenses:
If an investor wants to involve in trading activities or buying and selling of goods, they have to obtain a commercial license in Dubai. The DED issues this license for the businesses.
The industrial license in Dubai is issued for those businesses which transform natural material or natural resources into their final products.
A professional license in Dubai is issued to an individual or a company to practice any profession which he/she relies on talent and intellectual abilities. It is meant for artisans, craftsmen, and other professional service providers.
Apart from this, one can apply for other licenses such as-
- Import/Export License
- Manufacturing License
- Spa License
- Freelance License
- E-commerce License
- E-Trader License
- Instant License
To get a comprehensive overview of different licenses, read our business licenses in Dubai section.