When starting a business in the UAE there are many factors to explore. Creation Business Consultants sat down with Arabian Business to unpack the key points to consider ensuring your company setup is a seamless and successful process.
1. Engage with qualified experts
Question: If you require medical eye treatment, would you only trust a qualified expert eye doctor? After all, your eyes are too valuable, right? The same logic should apply when starting a business in the UAE. Your business is too valuable, and you should only trust a qualified expert company formation consultant. Engage with a registered and licensed corporate service provider. Ensure your consultant can assist with finance, tax and compliance after the company setup. Also ensure you have access to support services such as customs and VAT registration and wage protection assistance.
2. Free zone setup
With over 50 free zones in the UAE, each has its own rules and regulations. Some free zones are more industry-focused, i.e., finance, media, healthcare, logistics and aviation etc. There are free zones that are more generic offering a wide range of business activities such as services, consulting, and trading. Which free zone best fits your business needs and is the right option depends on a lot of factors. Below are a few things to consider:
a) Location
Having a company setup in the north Emirates over 90 minutes from Dubai is not ideal if you need to operate with clients and suppliers in Dubai on a regular basis. Setting up a company in a free zone where there is no accessibility to ports to import and export or warehouse storage can also be an issue. Ensure you select the right location with the facilities you will require for the operation of your business. If you need clients to visit your office, a central location is important. Also, if you are employing staff, make sure they can (and want) to travel to your office location. Check local amenities to make sure it is suitable.
b) Business activities
Each free zone will have its own list of business activities. It is important that you have the right activity listed for your company – banks have rejected applicants for not have the right details on their license.
Jebel Ali is the oldest – and biggest – free zone in Dubai.
c) Budget
License types and fees will vary depending on the free zone, type of license, business activity, external approvals, and number of shareholders. Some free zones require paid up capital requirements and lodgement of financial audit reports. It is important to know how much and have a budget in place. Note: the cheapest license option could cost you more in the long run.
d) Staffing requirements and office requirements
With every company setup an office lease is required to complete the company registration. Free zones are great for new market entrants and offer the minimum office requirement known as a flexi, smart or hot desk within a co-working space environment. This will provide a lease for company setup completion and an address to provide to the bank when applying for your company bank account. However, flexi desks typically offer around one to two visa eligibility. As your business grows and if it require more staff, you will need to upgrade to a larger office and apply for more visa quota. The cost of office space in the free zone is usually much higher than mainland office space.
As per the laws and regulations of the free zones and Civil laws of the UAE, a company registered with any free zone cannot conduct their business or activities outside the specific free zone, at a different free zone or inside UAE mainland.
If any company is found conducting activities inside UAE mainland without an appropriate license, the general manager, or any other person responsible is liable to pay fines or imprisonment as imposed by the authorities of up to AED100,000.
There are exceptions for a free zone company to trade or operate outside of their free zone and to use a mainland distributor or mainland third-party provider.
3. Mainland setup
UAE mainland company is registered under the government authority of the related Emirate. The company trade license is issued by the Department of Economic Development (DED) of the Emirate. A mainland company is mainly characterized by being able to perform its business activities with no restrictions and the company can operate its businesses within the mainland UAE local market as well as outside of the UAE.
Mainland company setup is governed by UAE Commercial Companies Law (CCL). Currently there are several amendments occurring with UAE CCL such as 100 precent ownership eligibility for foreigners for selected business activities.
Department of Economic Development (DED).
There are still some business activities that require an Emirati to be involved in the company registration such as engineering, manpower and real estate business activities. Where a nominee is required, it is recommended to opt for a Corporate Nominee to satisfy this requirement as this is safer than using an individual sponsor. A Corporate Nominee is an exclusively UAE owned Limited Liability Company that is fully managed and controlled by your corporate service provider. You will have access to a team of consultants that can support you and your business.
For a company to be eligible to contract with a UAE government entity, ordinarily they must be registered as a DED mainland entity. Many companies opt to obtain a mainland license to seek the many opportunities and incentives the UAE has on offer such as contracts supporting Dubai 2040.
4. Work to your timeframe and business needs
The time it takes to setup a company may play a key role. If you are looking to bid on a contract or open a bank account asap to receive payments from the UAE time is of the essence to have your company license completed.
A mainland company incorporation can vary from one business day to four weeks to be fully completed with the license issued. However, certain business activities can be completed and setup as an instant license, if you are in the UAE or have all your paperwork in place, we can have your company registered in as little as one business day. Some business activities may require additional approvals from government departments and authorities, and this will result in a longer timeframe for license issuance.
Getting your business up and running can take a matter of weeks.
Depending on the free zone, a company can be setup and its license issued within a few hours, or it could take up to several weeks for completion. Northern Emirates free zones average company setups within three working days. Dubai and Abu Dhabi free zones the average company setup time frame is two-to-six weeks.
5. Consider travel plans for company owner
Another point to consider currently is Covid-19 and the ability for company owners and/or shareholders to travel to the UAE for company setup requirements. Most of the free zones have implemented processes for remote company setup by the shareholder(s) such as digital signing of documents or providing an authorisation to a consultant to complete the company setup on your behalf.
Mainland companies require the shareholders to be present in the UAE for the company setup process and signing of documents. For those clients that have travel restrictions in place, certain suppliers can provide a bespoke Power of Attorney to act on the clients’ behalf to complete the company setup from start to finish saving time, money, and travel concerns.
6. Compliance and banking
In terms of compliance, the UAE was removed from the European Union’s “blacklist” following its implementation of economic substance legislation. Each UAE entity, regardless of if the company is mainland UAE or a free zone, is required to complete the Economic Substance Notification and/or report each year.
Furthermore, companies are required maintain a register of partners, shareholders, directors, managers, nominee directors, and a register of ultimate beneficial owners (UBO). Failure to complete economic substance and UBO notifications following the correct format, with accurate details and on-time will result in fines and license suspension.
For many start-ups or entites new to the UAE, the biggest challenge post setup is banking. Certain banks may not issue corporate bank accounts to companies established in certain jurisdictions. This could make a newly established company redundant if it cannot open a corporate bank account. Check thoroughly before committing to ensure you will have appropriate corporate banking options to suit your business.
Again, the cheapest free zone option is not always the correct option. The best value you can find is a compliant company structure that minimises your risk and maximises your profit potential, both now and in the future.
Setting up a company in the UAE is not inherently difficult. Setting up the correct company for your circumstances requires a little more attention to detail to ensure your business’s success.
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