How to Organize a Business in the Service Sector in the UAE

The service sector is one of the key sectors of the economy in developed countries, and the UAE is no exception. The service market in the UAE offers excellent prospects for Russian entrepreneurs who are ready to conduct transparent business, adapt to changes, and listen to customer needs.

In-Demand Services in the UAE

In 2023, the GDP of the UAE showed record growth over the last decade. The largest income was brought by operations with real estate, the construction sector, trade, and logistical services, tourism, IT, and crypto business, services, and service industries. This indicates that the service sector is in demand and rapidly developing in the UAE.

The most in-demand services in the UAE:

• Social and domestic services: laundry, beauty salon, massage parlor, professional cleaning of residential and office premises, auto repair shop, minor repairs, etc.
• Medicine and healthcare: private offices, medical centers and laboratories, pharmaceutical consultations.
• Education at all levels, conducting training and courses, private universities, and other educational institutions.
• Recreation and entertainment: organizing mass events and private parties, galleries, circuses, etc.
• Transport and logistical activities: courier delivery, luxury car and yacht rentals, packing and warehousing services.
• Catering and food production: farming, beverage and food production, providing services at remote locations, restaurant business, etc.
• Business management and support: consulting, tax optimization, services in accounting and auditing, IT support, data and call centers, translation bureaus.
• IT technologies: IT startups, software development and customization, cybersecurity, technical support.
• Sports: sports clubs, fitness centers, yoga studios, spas.

Advantages of Conducting Business in the Jurisdiction

Russian investors invest in development and real estate, restaurant business and services, tourism, and advertising agencies in the UAE. Despite high competition – after the change in the geopolitical situation in the world, many entrepreneurs have turned to the MENA market – Russian business can still take its place in the service sector of the UAE.

Main advantages of organizing a business on services in the UAE:

• Relaxed taxation regime. When providing services and selling goods, you need to pay 5% VAT. Corporate tax (9%) is mandatory only for companies with an annual profit of more than 375,000 dirhams that operate in the UAE (i.e., there is no corporate tax in the Free Zones).
• Easy access to global markets. The UAE is a global transit point. Such promising and relatively free markets as Africa, India, and China are within easy reach from Abu Dhabi and Dubai, the main world capitals are 2–4 hours away by plane. This allows freely conducting business with partners and clients from all over the world.
• Business support and development system. Many Free Zones operate incubators and accelerators for business. Such support helps to accelerate the development of the company with material and non-material incentives. For example, a business can win a grant from a venture fund or receive advisory support on various issues.
• Available infrastructure. In the UAE, there is all the necessary infrastructure for business. In any Free Zone, you can rent a full-fledged office, a work desk, or a virtual office. Depending on the type of business, you can choose a location near the airport, port, business center, warehouse premises, production facilities, and other infrastructure objects.
• High income levels of the population. The majority of citizens have their daily needs met, so they willingly spend money on services that make life easier (car sharing instead of owning a car that needs to be serviced, cleaning, food delivery, etc.), entertainment, and other activities. This creates favorable conditions for the development of the service business in the UAE.

Features and Potential Difficulties

Although the UAE is a favorable jurisdiction for business development, like any country, there are certain risks for foreign companies in the Emirates. Here are some important business features:

• The sales cycle of a new business is twice as long as in Russia. Allocate additional time to set up business processes.
• Marketing differs from Russian. Some channels of interaction with clients do not work or work differently than in Russia. Marketing services in the UAE are more expensive than in Russia.
• Direct sanctions against Russian citizens. For some restrictions, it doesn't matter where the company is registered – in the UAE, Saudi Arabia, Argentina, Venezuela, etc. – it can generally fall under sanctions if the founders are Russian citizens.
• Lack of access to some financial instruments. Local banks do not lend to companies younger than 3 years. But even experienced entrepreneurs find it difficult to obtain a loan from a UAE bank.

How to Start a Business in the Service Sector in the UAE

The first step on the way to opening a business in the service sector in the UAE is choosing a business concept. You need to analyze the competitive environment and develop a business development strategy. Business models that work successfully in other countries may prove ineffective in the UAE.

Choice of Jurisdiction

Local companies and businesses registered in free economic zones (FEZs) can provide services in the UAE. The choice of zone for registration depends on the business model: if you plan to provide services to local residents, you should choose a local company; if you want to work with foreign business within the FEZ, registration in the free zone is sufficient.

You can also set up an offshore company – such a business has the right to operate only outside the UAE. This option is suitable if, for example, you plan to provide services in Russia but want to ease the tax burden.

Obtaining a License

It is necessary to analyze the legislation of the UAE in the chosen industry and find out additional requirements for obtaining a license. Registration rules in different FEZs and on the mainland may differ.

To provide services in the UAE, you need a service (professional) license. How to apply for it and start working:

• Gather all documents. Required are copies of the founders' IDs, a business plan with a financial part, a lease agreement for office space (mandatory for mainland companies), other industry documents, for example, for catering, permissions from the Food Control Department (DM) for food products, halal product and organic product certificates issued by MoIAT, etc.
• Submission of the application. In Dubai, the Department of Economic Development (DED) handles the licensing of mainland companies. In FEZs, there are usually their own registering and licensing authorities.
• Application for visas for employees. To legally work in the UAE, the founder of the company and employees must have resident visas. The number of visas a business can apply for depends on the scale of activity, chosen structure, income size.
• Opening a bank account. To provide services in the UAE, a bank account is required. Non-residents of the Gulf countries face stricter requirements from banks, so professional support is also worth seeking in this matter.

Consult with specialists to correctly fill out the application. Success largely depends on the correct completion of documents, choice of appropriate jurisdiction for registration. To speed up the process and be confident that the application will be accepted, it's wise to turn to professionals.

The license can cost from 8,000 to 15,000 dirhams. It usually lasts for a year, then it needs to be renewed. For this, certain conditions must be met, for example, timely upgrading employees' qualifications, maintaining membership in professional communities, submitting documents on time.

Office and Bank Account

The rented space must match the company's activity type (according to the license). The office must be located only within the territory of the Free Zone where the company is located. The norm of space per employee is 9 m², and the minimum office area is 30 m². If you don't need a full-fledged office, you can rent a flexi desk - a virtual office with a subscriber mailbox and access to the infrastructure of the business center.

Besides the office, any business needs a bank account for transactions with clients and partners. Banks impose stricter requirements on physical persons and non-resident companies than on citizens of the Gulf countries. For example, to open a business account, you will need founding documents, documents about the corporate structure, a recommendation letter from the founder's bank, information about the source of funds from investors.

Opening an account takes 2-3 weeks, but the process can be extended. Therefore, before submitting documents, organizations conduct a preliminary check – this allows assessing the chances of success, and not spend time waiting for a negative decision, but on improving their position. In some banks, there may be minimum balance requirements and other restrictions for foreign companies.

If you are considering starting a business in the service sector in the UAE, seek advice from The Level Consulting company. Over 12 years of work, we have helped thousands of entrepreneurs start their business. Experts of The Level Consulting will assist with obtaining licenses, company registration, opening a business account. Leave your contacts – we will get in touch with you shortly and provide the necessary information.