Nuances of Business in Dubai

Economic, political, and social factors make Dubai a magnet for both aspiring and experienced businessmen. However, for an effective business start in Dubai, it is necessary to study all the advantages and disadvantages, as well as the nuances of commercial activity in the United Arab Emirates. These are related not only to organizational and legal aspects but also to national and geographical features.

Choosing the Type of Company

Entrepreneurs consider opening a company or relocating an existing business at different stages of its development. In this process, whether starting a business from scratch or launching a company's division in the UAE, the founder faces the problem of choosing the type of organization. This decision determines the further development model on the regional and international market, tax regime, and interaction with regulatory authorities. Thus, starting a business in the UAE is available in several main formats:

• Offshore company – one of the most popular options for registering a business in the UAE for entrepreneurs using Dubai as a platform for interacting with foreign investors and entering the global market. This form of ownership does not involve actual activity within the United Arab Emirates, therefore requires less time for document processing. In this case, the founder does not need to rent an office in Dubai, hire employees, or obtain a business license for the emirate. The essence of this form lies in using the financial and political advantages of the jurisdiction favorable for international activity.
• Onshore company – a way to do business within a free economic zone, granting the right to operate within the United Arab Emirates. However, this format implies several restrictions, such as on mainland activities. Some free zones also set minimum capital requirements.
• Local (mainland) company – maintains several preferential conditions for foreign founders but implies actual business operations on the mainland. In this case, Dubai and other emirates impose additional licensing requirements. Also, local residents must be employed in the mainland company, and they should be part of the founders and participate in managing the enterprise. For certain types of business, for example, services for the country's residents, only a local company may be registered.

When choosing the type of company, it is important to focus on the specifics of the activity and business scaling plans, which is especially relevant for large international companies opening branches in the UAE as part of strategic scaling.

Choosing Jurisdiction

The conditions for doing business in the UAE vary depending on the chosen jurisdiction. Broadly, an entrepreneur can register a company in the Mainland or in a free trade zone. However, due to the active development of free zones, it is necessary to study the features of each and compare them with the specifics of one’s own business. The state stimulates the attraction of foreign capital and launches sectoral free trade zones. Currently, there are over 50 free zones in the United Arab Emirates, each tied to specific business activities. For example, in the UAE, the most popular types of business include:

• Consulting – due to the development of various business sectors, services for legal and natural persons are especially relevant. For effective market development, it’s better to choose a form of ownership that allows employing local residents and providing quality consulting services related to legal aspects.
• IT developments and innovations – since the authorities position Dubai as a "city of the future," the direction of scientific and technological and IT developments is one of the priorities for government support. In some free zones, there are special platforms for finding foreign investors for launching IT startups and venture funds adapted to a specific industry.
• Information and educational business – develop in the free economic zones of Dubai in both online and offline formats. The popularity of this direction is associated with the multinationality of the population, high quality of education requirements, and constantly growing demand for qualified specialists.
• Construction business – due to the continuous expansion of Dubai, reliable construction companies offering modern architectural, design, and technological solutions are required.
• Manufacturing and sales – relevant both online and offline. In this case, organizational and legal aspects depend on the specifics of the production or trade. For example, when registering a business, it is important to provide information not only about the legal address of the company but also about the production location and potential sales channels.
• Logistics – thanks to the advantageous geographical position and the development of commerce, the logistics business in the UAE is considered one of the most promising in the country. In recent years, it has developed significantly due to the introduction of foreign political and economic sanctions in some countries. For instance, Dubai authorities stimulate the logistics sector and develop a special transport hub within the free economic zone, simplifying multimodal transportation. Within the free zone, a separate Logistics City has been created, combining all types of logistics, warehouses for transit storage, and customs clearance services.

When choosing a free economic zone in Dubai, it is important to consider conditions for foreign founders. For example, in some free zones, companies cannot operate on the mainland but can collaborate with local companies on favorable terms.

Legal Aspects

To organize a business in Dubai, an entrepreneur needs to follow a step-by-step algorithm. After choosing the type of company and the relevant jurisdiction, legal issues should be addressed. Depending on the chosen business sector, it is necessary to select the right activity and obtain the corresponding license from Dubai's controlling authorities, as well as open an account in a local bank.

For some types of companies, it is also necessary to rent an office or another premise for business placement. Business licenses in Dubai are issued based on the type of activity: for example, commercial, investment, professional, educational, etc. Most licenses are issued for 1 year, but this term can change depending on the conditions of the specific free zone's controlling body.

The cost of licensing a business in the UAE starts from 10,000 dirhams. After obtaining a license, the founder can register a trademark in the patent office if it has not previously been registered in a country that is part of the international agreement.

Advantages and Disadvantages of Business in Dubai

Despite stereotypes about the ease of starting and running a business in the Emirates, it is better to study all available information about the specifics of activities in a particular industry and the process of doing business within a specific free zone before registering a company. It is especially important to understand the mechanics of interaction with local companies, scalability potential, and other significant aspects for international companies. Advantages of business in Dubai include:

• Preferential conditions for foreign entrepreneurs – when registering a company in a free economic zone, founders receive several benefits. For example, exemption from VAT, simplified customs procedures, low requirements for minimum charter capital, etc.
• Access to the global market – regardless of the chosen legal entity form, the company gets the opportunity to enter not only the regional but also the international market, leading to significant growth in financial and marketing indicators.
• Quick business launch – thanks to the possibility of online business registration using a special form, it is possible to open a company in Dubai within a few days if it is about opening a company in a FEZ. For a mainland company, the registration period usually ranges from 7 to 30 days depending on the conditions of the specific industry
• Advantageous geographical location - allows working with partners and clients worldwide, which is particularly relevant for organizations in the field of manufacturing, sales of goods, and logistics.
• Collaboration opportunities - due to the emirate government's organized sectoral forums, exhibitions, and venture funds, founders can find an investor, attract qualified specialists, or find a partner for joint development.
• Financial and political stability - UAE banks guarantee the confidentiality of business account operations regardless of the transaction's territorial occurrence and its volume, and they offer fixed tariffs depending on the number of operations.

Simultaneously with the advantages of doing business in Dubai, it is necessary to consider the negative aspects that could overshadow the activity in the UAE:

• Legalization pitfalls - arise during document processing, such as licenses, trademarks, etc. In this case, the procedure can extend over a longer period than the founder expects. However, even when requesting additional papers, it rarely takes more than 1-1.5 months, while trademark registration can take up to 6 months.
• High industry competition - due to the popularity of the local market and the growth of the UAE's economy, many business owners strive to enter Dubai, making it essential to offer quality products and fast service for effective positioning in the niche.
• National and cultural peculiarities - can inhibit some business segments. For example, in Dubai, the sale of alcohol and pork is controlled and prohibited, which affects not only the operations of productions and trade points but also public dining establishments.
• Participation of local partners in business management - some types of business cannot be opened in the UAE without involving co-owners - local citizens.
• Additionally, it is essential to consider different reporting regulations to local regulatory bodies, which must be provided at least once a year. But for some types of commercial activities, additional reporting is introduced to enhance control. It is also important to keep in mind that in case of disputes between foreign and local companies, the local court tends to side with the latter.

Opening and running a business in Dubai is associated with high financial and marketing prospects for both the brand and the entrepreneur. However, to prevent possible difficulties at all stages of business activity, it is important to study all the nuances of the local economic system in advance or consult a consulting company. The Level Consulting offers comprehensive solutions for businessmen planning to open an organization in Dubai or another emirate. You can count on the support of professionals from the analysis of the most suitable niche for the startup to the issuance of founding documentation and the conclusion of the first deal.