There is an abundance of business opportunities found in the city of Dubai.  The attractiveness of the emirates for entrepreneurs is primarily propelled by the tax and operating incentives in the government designated free zones.  Adding to Dubai’s attractiveness for fertile business ventures is the fact that the emirate has a strong economy that is growing at a steady rate, the fact that the government is committed in creating new business opportunities in order to maintain the diversification of the economy, and the fact that the emirate of Dubai has the most liberal operating conditions for businesses in the entire federation of emirates.

In addition to these economic factors, there are other supporting details that make Dubai a haven for business ventures.  These include the emirate’s strategic and accessible location, excellent infrastructure, competitive labor costs, no corporate and personal taxes levied, government reforms to make the process of putting up businesses in Dubai much easier, and an exceptionally safe and pleasant working environment.

The most ideal location for foreign investors seeking to put up their businesses in Dubai is at the emirate’s free trade zones.  They were created by the government to attract more foreign investments and trade in a bid to diversify the economy and move its economic dependence on the oil and petroleum sector. Free trade zones are designated areas, wherein regulations with regards to business ownership, taxation, recruitment of workers, value addition, and income repatriation are especially augmented to provide additional incentive to foreign businesses.

Dubai’s free trade zones are well-resourced in terms of facilities, amenities, and communication infrastructure necessary to put up a business.  Aside from providing a wider range of options to potential foreign investors, and provides a list of benefits which are otherwise not possible outside the free trade zones.  The list of major advantages in setting up businesses in these areas include: 100% foreign ownership of the business, 100% repatriation of capital and profits, 100% import and export tax exemptions, no currency restrictions, no corporate tax for 15 years and may be renewed for an additional 15 years, no personal taxes, and assistance with recruitment of workers with additional support services, such as housing and sponsorship.

These incentives are all applicable to all free trade zones found in the emirate.  Dubai has the following free trade zones: Dubai Investment Park, Dubai Internet City, Dubai International Financial Center, Dubai AutoDrome & Business Park, Maritime City, Airport Free Zone, and the Jebel Ali Free Zone.

The government agencies involved and the entire process of putting up a business in the free trade zones are quite different than that of the process involved in putting up a business outside these areas.  The government agency directly concerned with the rules and regulations regarding businesses in the emirate’s free trade zones are the Dubai Free Zone Authority.  Any foreign company who wishes to set up their enterprise within these areas are subject to the authority’s own regulations on immigration and labor laws, as well as the regulations for setting up businesses.

The Dubai Free Zone Authority firstly assesses any prospective company’s requirement and its ability to meet these requirements through the accomplishment of a questionnaire.  Should the company is deemed capable to operate within the free trade zone; an impermanent approval is given together with a lease agreement.  Personnel documents for the license requirement are also submitted.  Processing of the actual documents is done only after the company representative and the Free Zone Authority have met and settled the details of the project.

Licenses are given by the Free Zone Authority after a company is approved for the free trade zone.  The licenses issued by the Free zone Authority can be renewed annually as long as the lease agreement is still enforced.  The licenses given depend on the nature of the company’s business activity.

Trade License

Trade licenses are given to companies engaged in trading, such as import and export. This license is also granted to companies engaged in import and export who are legally incorporated outside the UAE.  Ownership remains 100% foreign and license from the Dubai Economic Department is no longer required.

Industrial License

This license is granted to companies engaged in manufacturing and industrial activities.  Companies legally incorporated in manufacturing and industrial production outside the UAE can be granted this license, provided that they operate within the free trade zones.  Ownership can remain 100% foreign, and license from the emirate’s economic department is not necessary.

Service License

The Dubai International Financial Center is the only free trade zone dedicated to providing services, particularly financial services.  Companies engaged in banking services, capital market activities, asset management and fund registration, reinsurance, and Islamic finance and back office operations may apply for a license.  Companies operating in the DIFC can benefit from 100% foreign ownership, zero tax rates on profits, no restrictions on foreign trade and capital repatriation, operational support, and business continuity facilities.  License from the Dubai Economic Department is not required.

Conversely, setting up a business in Dubai outside of these free trade zones requires companies to deal with more than government agencies.  The primary government agencies concerned with setting up a business in the emirate are the Dubai Department of Economic Development (DED), the Dubai Chamber of Commerce and Industry (DCCI), and the Ministry of Economy.  All industrial, professional, and commercial companies must register with the Dubai Chamber of Commerce and Industry, while the Department of Economic Development is responsible for the issuance of licenses.  The Ministry of Economy, on the other hand, oversees the entire economic activity of the UAE.   It supervises and regulates the commercial activities in the entire country, as well as gives the approval for foreign companies who wish to set up a business in Dubai.

In general, there are two types of companies an expatriate can put-up in Dubai: one is a branch of a foreign company, and a limited liability company (LLC), which is incorporated under the UAE company law.  LLC requires 51% ownership of property shares by a UAE citizen.  Control of the company between the shareholders and the management varies upon the agreement of the two parties.  On the other hand, branches of foreign companies are 100% foreign owned, although the company must appoint a UAE national as a service agent, or a sponsor, who will assist the company in dealing with the Immigration or Ministry of labor.  A service agent’s degree of power in the company depends on the agreement between the two parties.

The first step a foreign company must take if they wish to set up a business in Dubai outside the free trade zones is to acquire a license, which is issued by the DED.  The DED issues three types of licenses depending on the nature of the company’s business activity.  Companies engaged in trading would require a commercial license, a professional license would be needed for companies offering professional services, while companies engaged in manufacturing or industrial activities would be obliged to acquire an industrial license. 

In order to apply for a license, a foreign company must obtain a lease for commercial property in the emirate.  In addition, depending on the legal form a company takes and the kind of activities they engage in, some business may need approval from other ministries before obtaining a license from the DED.  It would be advantageous to pre-determine which type of businesses would require additional approval from other ministries by reading the Standard Classification of Economic Activities published by the DED and the DCCI.

It usually takes 30 working days to process a license, but may vary depending on the structure of the company.  The process is particularly complex for branches of foreign companies.  This compounded by the fact that branches of foreign companies must be registered at federal UAE level together with the Ministry of Economy.

Likewise A foreign company must register with the Ministry of the Interior and the Ministry of Labor and Social Affairs Department in order for the company to recruit staff and apply for visas.  Licenses must be renewed annually.  However, if the DED deems that a company has not fulfilled the terms of its license, a DED may not renew that company’s license.

The process of putting up a business in Dubai, particularly outside the free trade zone, may prove to be a daunting task.  It has been recommended that enlisting the aid of a well-established law firm would be a great assistance with the whole process.  This law first could take on the task of registering and applying for a license for your company.

Alternatively, companies specializing in company formation can provide support and guidance, a network of contacts for putting up businesses.