UAE is consistently ranked high in terms of ease of doing business, global competitiveness and growth indicators, according to the global competitiveness report, ease of doing business index, and other reliable indicators of economic resilience. In fact, the trust on the UAE Government is one of the highest in the region, as per recent studies. So what is it that drives business owners from around the world into UAE? The location, coupled with a diverse and cosmopolitan mix of residents, with a vibrant focus on tourism and hospitality, in addition to its business-friendly regulations, put UAE right on the map for businesses to expand their operations.
Business setup in Dubai is the perfect choice once you decide to expand or relocate your business to the UAE. As one of the seven Emirates in the safest and fastest-growing country in the region, Dubai is a vibrant, modern and welcoming city, with a high proportion of Expats among its populace. Its geographical location and business-friendly environment render it the most preferred Emirate for new company establishment, multinational companies, and SMEs to expand and set up businesses. As a strategically located connecting point between Eastern and Western parts of the world, Dubai is the trading hub in the MENA region. Register a company in Dubai, UAE to reap the benefits offered by the Emirate.
By establishing a Mainland company, also called as an onshore company, you will be able to freely operate throughout the Emirate with no territorial restrictions, however having an Emirati partner or service agent, individual or corporate, holding at least 51% of the total equity is mandatory to operate inside Dubai and other Emirates in UAE.
Exceptions to this rule include:
A mainland company is a legal entity registered under the Dubai Economic Department (DED) and governed by the UAE commercial company – Federal Law No.2 of 2015 – the New Commercial Company Law, (NCCL). Depending on the nature of the business activity, you may need to obtain external approvals from other local or federal authorities.
The Department of Economic Development (DED), is the issuing authority for all operating trade licenses in the mainland of Dubai, outside the free zones. These companies are often known as a “local company”.
Local companies must have a trade license under any one of the categories below:
Professional license – Issued for service provider companies such as training, management consultancy, etc. Full or partially ownership approval is dependent on the activity requirements. Certain business activities are allowed 49% of foreign ownership, while others have full ownership. In this case, the role of the Local Service Agent (individual or corporate) is limited to the scope of administrative purposes only.
Industrial license – specific for manufacturing enterprises and industrial companies. Valid for a definite period, the industrial trade license obligates the company to have a leased or owned physical warehouse inside the country and related manufacturing facilities.
Commercial license – Adequate for businesses involving trading or retail activities ( buying and selling of goods, import and export activities, real estate services, logistics, travel & tourism, auto vehicle rental business, etc). A maximum of 10 business activities per license is allowed.
Following are the types of Mainland Companies formed and recognized in
Prior to taking a decision, here is the pertinent question for any business owner: What is the difference between mainland and free zone companies? What are the pros and cons while deciding on a suitable business structure in the UAE?
The bellow table seeks to shed light on the appropriate legal form of business you would be looking for:
|Mainland Company Formation||Free Zone Company Formation|
The geographical area of doing business on mainland license is unlimited. You will be free to do business in local, neighboring countries of the Arabian Gulf (GCC) and international markets, including free zones, with commercial or professional licenses, and applicable for most business activities, except those that require external approvals from local or federal government bodies.
|Free zone Business Setup activities are limited to the ones permissible and registered within the same free zone. A local agent, individual or company, is mandatory to engage in any business out of the Free Zone, inside or outside the UAE.|
When engaging with government classified clients, you should refer to the mainland’s jurisdiction
|Within the UAE, you will be able to deal directly with clients registered in the same free zone.|
You will be eligible for an E-quota (electronic quota), issued by the Ministry of Human Resources and Emiratization, showing your visa entitlement. This can be increased if needed and is subject to the discretion of the deciding authority.
|The number of visas depends on the office space, owned or leased in the free zone. Smart office packages offer up to 6 visas, depending on the license and the free zone. A physical office or warehouse has to be leased out of the free zone to avail of more visas.|
You will require an office space of a minimum 200 sq ft, to be owned or leased on annual basis, through “Ejari”- a Certificate issued from the land department that makes your annual tenancy contract, legal and presentable to Department of Economic Development (DED) for the issuance of your mainland license. This would increase your business cost commensurately.
|You will be saving on initial costs of registration as license fees are lower, besides no physical office is required. Free zone authorities allow the licensees to use Flexi desks/smart offices, or common business center desks for limited hours per week.|
According to your business activity, you may require a UAE national agent (individual or company) called Local sponsor who acquires 51% of the company shares. The remaining 49% would be the equity that you would be allowed to hold.
|Full ownership of your company.|
Neither free zone nor mainland setups are ‘better’ than one another; it simply comes down to what fits best for your business.
Business setup involves the steps and processes associated with before, during and after establishing a company in the UAE. The main step is to obtain a trade license which legally allows a company to operate and run its business. To read more about the steps in business setup, read here
The process for company formation usually depends on multiple factors. The “instant license” track under the Dubai Economic Department allows a trade license to be issued on the same day, provided it meets a list of criteria. Some other licenses that do not fall under the criteria may take a few weeks. The key is to obtain the right business consultancy advisor to help you track your milestones.
In our earlier blog columns, we focused on the ways to make a business setup easy for entrepreneurs. Read the blog here. For more business value, smartly engage the services of a business setup advisor like Corporate Business Services.
We have provided a detailed write-up on the advantages of a free zone business setup. Do read our earlier blog column here
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