Starting a Business in the UAE: What You Need to Know

The United Arab Emirates is a progressive country in the Arabian Peninsula. It lies at the crossroads of three continents: Asia, Europe, and Africa. The emirate of Dubai, a cosmopolitan city with advanced logistics and transportation network and one of the best airports in the world, is a mere four hours away by air from a third of the people on the planet and eight hours from two-thirds of the global population. If you want to establish a business in the UAE, read on. This guide will tell you the essential things you must know and remember when Starting a Business in the UAE.

Indeed, corporate incorporation in the UAE more than makes economic and practical sense for anyone who wants to start a business with global operations.

Is it easy to set up a business in the UAE?

It is. According to the UAE Ministry of Economy (MoEc), you can set up a company in the UAE in as little as 15 minutes via the UAE government’s integrated online services platform, Basher eService.

You may also apply for your business license through the Department of Economic Development of the emirate where you wish to do business. MoEc notes this takes around four days, less than half the time (i.e., 10 days) the World Bank says is required when setting up a company in other high-income countries.

The best (and easiest) way is to set up your business with the help of a UAE business consulting company. They can initiate and do all the legwork involved in establishing your business in the UAE.

Business setup through a business incorporation service provider can make you more efficient. They will know exactly which regulations and requirements apply in your case and, thus, help you prepare exactly what you need – no more, no less. They’ll also help you avoid potential pitfalls and missteps.

Where should you set up your business?

Decide whether to incorporate your company in the UAE mainland or a free zone. It all depends on what your needs are.

Free Zone

Are you setting up a company in the UAE for international trading? Your clients and customers are outside the UAE. You just want to take advantage of the UAE’s advanced infrastructure to minimize your freight times and costs and maximize your logistics efficiency and reach.

In this case, you will find the free zone more suitable than the UAE mainland. Your company may still do business locally but only within the free zones.

Mainland

Do you wish to do business in the UAE? Suppose you manufacture PVC pipes and duct fittings for HVAC systems. While you export your products to Europe, Asia, and Africa, you also sell to local UAE contractors and consumers.

In this case, you’ll need to set up a company in the UAE mainland. Yours must be a mainland company to sell to and serve the local market.

Why should you incorporate your business?

If you’re applying to start a business in the UAE mainland, you can choose from several legal structures. Which should you choose if you were asked to decide between a corporation (e.g., public joint stock company) and a sole establishment? It depends.

Sole Establishment

If you want absolute control over your business operations and finances, the sole establishment structure is for you.

It’s important to note, however, that while the owners of sole establishments have 100% agency over their business operations and earn 100% of business profits, they are also solely responsible for all of their liabilities.

So, if a sole establishment has debts, the owner is deemed to have incurred them and is thus 100% responsible for repaying them.

Corporation

In contrast, corporations have capital or shares owned by multiple individuals or other entities. Public and private joint stock companies’ shareholders own shares of the company. They have directors to set the company policy and direction and executive officers (e.g., chief executive officer) to run the company’s day-to-day operations. Meanwhile, a limited liability company (LLC) is like a partnership corporation, where partners have a set share of the capital.

Incorporating a business in the UAE is the best way to limit your business liabilities. Corporations exist as independent entities. They are considered independent and separate from their owners. As such, corporation shareholders can only be liable to the extent of their shares or share of the capital.

Is there corporate tax in the UAE?

Yes, the UAE government levies corporate income tax – i.e., corporate tax. As the name suggests, it is a business tax computed against a company’s net income or profit.

In the past, the UAE did not charge corporate tax. However, in its desire to align with global taxation standards and affirm its commitment to tax transparency, the UAE government instituted the corporate tax in a decree.

Who is liable to pay corporate tax?

The corporate tax is levied on the business income of all UAE entities with a commercial license. Thus, an employed individual with a side business for which they have a permit is liable to pay corporate tax on their business income. However, their income from their employment remains tax-free.

Technically, the corporate tax regime also encompasses free zone companies. However, free zone companies with zero corporate tax incentives may continue enjoying this privilege as long as they comply with their reporting and other requirements and their non-qualifying income (i.e., what would otherwise be taxable income for free zone companies) does not exceed the mandated de minimis threshold.

Even foreign entities not based in the UAE may be liable for corporate tax if they regularly conduct business or trade in the UAE.

What is the corporate tax rate?

It’s 0% for an income of AED 375,000 or below. The rate is 9% for income beyond AED 375,000. A special rate applies to certain types of multinational companies.

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Start a Business in the UAE

You can start a business in the UAE in as little as 15 minutes on the Basher online platform or as short as four days through the Department of Economic Development. For efficiency and to avoid common pitfalls and potentially costly mistakes, set up your UAE business with the help of a business incorporation consultant.