More and more people want to set up a company in Dubai. On the one hand, to obtain a residence visa for the Emigration to Dubai but also to benefit from the tax advantages of the metropolis on the Arabian Gulf.
Everything you need to know about setting up a company in Dubai, from requirements and procedures to costs and ongoing compliance in this comprehensive guide.
Advantages
Dubai is not only a place of extremes, but also a serious global economic player. The city combines modern infrastructure, economic stability and an advantageous geographical location. Here are some reasons why Dubai is particularly attractive for entrepreneurs and start-ups.
1st position
Dubai acts as a bridge between the emerging markets of the East and the established markets of the West. This strategic location makes it an important logistics and trade center. In the meantime, Dubai has also become a technology hub and numerous large corporations from the IT sector have settled in the city on the Gulf.
The government is also promoting this development and is even awarding Golden VISA for people in software and AI to attract more top performers and experts in this field.
Numerous major international events such as GITEX (the largest tech, AI & start-up trade fair) confirm this development.
2. economic stability
Dubai has proven to be resilient to global economic fluctuations thanks to its impressive economic stability and the diversification of its economic sectors. Quick political decisions promise innovation and legal certainty for long-term business decisions.
The figures confirm this and Dubai has always been able to achieve stable economic growth in recent decades. Other economic data such as low unemployment, low inflation and bank valuations confirm this. More on this in a moment.
In general, the UAE is not only economically but also politically very stable. Dubai, Abu Dhabi and Fujairah are among the safest cities in the world and everyday crime is virtually non-existent.
3. tax advantages
The UAE and Dubai offer extremely attractive opportunities for companies and entrepreneurs. Tax benefits.
In principle, no taxes are payable on salaries, dividends, capital gains (including crypto gains) and rental income at a private level. As a private individual, you are therefore largely tax-exempt.
The company itself in Dubai generally pays no tax up to AED 3,000,000 turnover (€750,000), as there is still the Small Business Relief. Companies above this amount pay 9% corporation tax on company profits. However, there is still an allowance of around 3750,000 (just under €100,000), which does not have to be taxed. Combined with a salary, several hundred thousand euros can be paid out tax-free.
In some free zones, there are still certain activities that are completely tax-exempt. These are known as Qualified Activities. These include shipping, logistics, manufacturing / production and commodity trading.
4. banks
Dubai and the UAE offer a great banking environment, which is not the case in every tax-free country. The major banks are partly state-backed and offer stable, secure and convenient banking, both privately and for companies. Banks in Dubai such as FAB, Mashreq or ADCB are highly recommended. Numerous major international banks have also established themselves in the UAE. These include HSBC, Citibank and other big players.
This is a decisive factor for entrepreneurs, because without a bank, every company is at a standstill. In Dubai in particular, there are numerous banks that can support companies in any situation. From start-ups and SMEs to international corporations.
Due to the tax advantages, fast incorporation and good infrastructure, companies in Dubai are definitely one of the most sought-after setups in the offshore company sector.
5. residence visa
One of the most important factors in favor of setting up a company in Dubai is the possibility of Residence visa for the UAE to get. You can only emigrate to Dubai if you have a valid residence visa. This is usually obtained through employment. The VISA is obtained through employment in your own company. Many investors, traders or other HNWIs actually only use the company for this purpose and do not run an actual business. This is also not necessary.
In addition, no salary has to be paid. As long as the company is established and the fees for the licenses are paid annually and you submit an annual financial statement (even with AED 0 turnover), the company and the visa remain valid. More on this later.
Prerequisites
In principle, there are no legal requirements for setting up a company in Dubai. Most licenses are free, i.e. unregulated. Only some licenses for specialized activities (doctors, lawyers, pilots, etc...) require a license release from the authorities. More on this later.
Otherwise, anyone who does not have at least a serious legal history in the UAE can set up a company in Dubai.
Fundamentals
In general, there are a few things you need to understand before starting a business in Dubai. Here are the most important aspects of setting up a company in Dubai that you need to consider.
Legal form
Before setting up a company, you have to decide whether you want to operate in a free trade zone, mainland or offshore. Depending on the requirements, the different options have individual advantages and disadvantages. For certain business activities, it is also mandatory to choose a certain legal form.
Freezone (FZCO)
If a company is to be 100% owned, the Establishing a company in a Dubai Freezone makes the most sense. The concept of free zones was introduced by the Dubai government to attract foreign interest in setting up businesses in the city. Essentially, it is a special economic zone where entrepreneurs can enjoy full ownership rights, a corporate tax of 0-9 % (9% only for UAE companies with a turnover of AED 3,000,000 or more) and a personal income tax of 0 %.
However, one of the main restrictions on operating a business in a free zone is that you are not allowed to trade directly with the local UAE market. However, there are exceptions for certain services.
There are currently over 20 free zones in Dubai. Generally, each free zone focuses on a specific industry and offers licenses to companies within these categories. Here are some examples:
- RAKEZ
- Meydan
- DIEZ (Dubai Integrated Economic Zone) - including Dubai Silico Oasis (known from Company foundation by IFZA)
- JAFZA (Jebel Alo Freezone)
- Dubai International Finance Center (DIFC)
- Dubai Internet City (DIC)
Mainland (LLC)
The LLC is one of the most common legal forms and offers a balanced mix of flexibility and limited liability. This option is particularly suitable for small and medium-sized companies that do business in Dubai (mainly selling products) and also have customers here.
Mainland companies generally enjoy a higher reputation, get bank accounts more easily and are allowed to do business anywhere (geographically). There are also more licenses than for Freezone companies.
However, this option is significantly more expensive, as you have to rent an office. The cheapest "compliance offices" start at €2,000 per year.
Offshore
Offshore companies can also be registered in a free zone and enjoy many of the same benefits. However, it is not a substitute for a company in a free zone. The main difference between a company in a free zone and an offshore company is business operations. Offshore companies are allowed to do business outside the UAE and not inside. They are also not required to deposit a minimum amount of capital before incorporation.
However, unlike a company in a free zone, a sponsor is required to limit your foreign holding to 49 %.
Licenses and activities
In addition to deciding on an area, you must also determine the type of license required. The Department of Economic Development (DED) is responsible for issuing licenses and there are 3 main types that you can apply for.
Commercial License
To start a business in Dubai that involves trading activities or the buying and selling of goods, you need a trading license. This license can apply to businesses in the areas of import and export, sales, logistics, travel and tourism, general business and real estate.
Industrial License
This type of license is issued to companies that convert natural materials and resources into end products - manually or mechanically. This license applies to companies such as textile, metal and paper manufacturers.
Professional License
The trade license is issued to companies that operate as service providers, craftsmen or artisans. Examples of businesses that apply for this type of license are medical services, beauty salons and repair services.
Setting up a company in Dubai - procedure
The process of setting up a company in Dubai is clearly different from setting up a company in a free zone (free zone company) or setting up a company on the mainland. As mentioned at the beginning, the former is faster, simpler and cheaper. But it is not always suitable for your own project.
Below is a brief overview of both types of incorporation.
Freezone company formation
The Foundation of a free zone company in Dubai comprises eight essential steps.
1. determine business activity
The decision in advance is to determine the purpose of the company or the business activity. This also determines the choice or selection of the free zone and, accordingly, the licenses. Both are crucial aspects when it comes to the legally compliant exercise of the activity. More on this in a moment.
2. selection of the free zone
As already mentioned, there are over 20 free zones to choose from in Dubai. The type of company can have an influence on which free zone you want or need to settle in. As a rule, it makes sense to set up near companies in the same sector.
Alongside the choice of license, the choice of free zone is one of the most important factors, as this can have a significant impact on various aspects that are relevant to the company. These include points such as
- Selection of licenses
- License costs
- Infrastructure (offices, storage rooms etc...)
- Location and connection
If you choose the wrong free zone, you cannot simply switch later. It would be necessary to close down and set up a new one, which is very cost-intensive. Accordingly, you should obtain comprehensive information in advance or seek professional advice.
3. foundation
The company is then founded. All the necessary information must be submitted to the relevant free trade zone. Below is an overview of the most important ones:
- Company name When choosing your company name, it is important that it complies with the UAE's strict naming conventions. Names that contain offensive language, could be perceived as religiously offensive or refer to political groups or the mafia are prohibited. When naming a company after a person, you must prove that this person is a partner or owner of the company (initials or abbreviations are not permitted).
Naming your business can be a complicated process. You can save time and effort by consulting an expert to help you comply with conventions and get your name approved.
- Licenses As mentioned at the beginning, it is essential to choose the right freezone and licenses for the desired activity. If there are problems with this, it can lead to penalties being imposed or, even worse, the company having to close down and start up again. When choosing licenses, it is important to select the right ones and specify a primary activity. If the license is regulated, it is necessary to obtain approval from the authorities.
- Visa selection It is important to specify not only the number of visas, but also the type of visa. Each visa costs a fee, so you should be clear in advance how many VISAs you need. It is also crucial which VISA you need (employment, investor...). This also determines the costs, as well as other factors such as entry requirements. (An investor only has to enter the country once a year. Normal employees at least twice a year).
- Corporate structure As with any other company, the corporate structure must be defined. This includes owners (private vs. corporate), as well as general manager, director and secretary.
- Passport A valid passport is of course also required when founding a company. This must be submitted as a photocopy at the time of incorporation.
Once these data and documents have been submitted, confirmation from the authorities and official registration usually takes a week.
4. entry visa
Once you have founded the company, you are (usually) employed as a managing director, here called general manager. This employment entitles you to an entry visa via Employment. This is absolutely necessary if you want to enter the UAE; a tourist visa is not sufficient for the following step. The visa via Employment is usually issued within one week of application.
5. emirates ID
The next decisive step is to apply for the Emirates ID, The EID is the key document for doing business in the UAE. The EID is an identification document that enables all economic activities in the UAE. This includes first and foremost:
- Opening an account (private and business)
- Renting / buying real estate
- Telephone and Internet contract
- and much more.
With the Emirates ID you also receive a document which is also the visa for your stay in Dubai. There are different types, but with normal employment the visa in Dubai is valid for 2 years.
How do I get the Emirates ID?
The following steps are necessary to obtain an Emirates ID:
- Entry via Employment VISA
- Medical test
- Application for EID at the local authority
- Biometrics
After a few days, you will receive your Emirates ID by post.
6. bank account
As soon as the company is established and you have the Emirates ID, you can create a Open a bank account in Dubai. There is a wide range of local and international banks to choose from. There are also FinTechs, which are interesting for smaller companies.
7. ongoing management
From 2023, companies in Dubai will be required to register with the tax system on an ongoing basis. This also means keeping accounts and potentially paying taxes. Above the USD 100,000 profit threshold, 9% corporate tax is payable.
Registration with the FTA is required by law within 3 months, even if you do not make any sales. In addition, you must also pay VAT on a quarterly basis, if applicable. If this is not due, you can apply for a VAT exemption.
Once a year, I have to file a tax return or prepare and submit the annual financial statements. If there is no turnover because you are only using the company for the residence visa, you are still obliged to submit a simplified report.
Mainland Company Foundations
The Foundation of a mainland company in Dubai is different and generally more complex and cost-intensive. For certain projects, however, it is necessary to choose this legal form. Basically, if you are active in Dubai and do business there, you must set up a mainland company.
1. select business activity / license
The first step is similar to the Freezone company, you have to choose a license. However, the selection of licenses and business activities is different and more extensive. The complete list can be found at Dubai Economic Department.
As explained at the beginning, this includes all licenses for local business activities that are not permitted for free zones. You should also be aware that certain activities, especially in the infrastructure sector, require a local sponsor. These include telecommunications and energy supply.
2. select name
The next step is to select a suitable name that also complies with the DED regulations. In practice, the legal form LLC is then added to the name. For example, Global Setup LLC.
3. initial confirmation requests
With the name and purpose of the company or the license to be issued, you can submit the documents and apply for initial confirmation. As soon as this is completed and the government approves the company, the process continues.
4TH MOA
The next step is to formulate a Memorandum of Association, or MOA for short, for the company. This legal document regulates the distribution of owners or shares, capital and rights among each other. This must then be notarized by a local notary.
5th office
The next step is to rent a physical office. This step is crucial and also a fundamental difference to freezone companies. Because a freezone company can also exist with a virtual office. The office must be physical and lockable. A desk in a coworking space is not enough. The cheapest variants cost the equivalent of EUR 2,000-3,000 per year. An EJARI certificate is ultimately issued for the office, which confirms the rent and legitimizes the company.
6. submission of all documents
As soon as you have the rental agreement or the ejari confirmation, you can submit it together with the MOA and the requested license with the pre-approval from step 3. Payment of the licenses and other fees is also due here.
All further steps regarding Emirates ID including VISA, account opening and ongoing compliance are the same as for the Freezone company.
Costs
The costs for the entire setup vary greatly and depend on the factors mentioned above such as licenses, freezone and company structure. In general, however, it can be said that a freezone company formation in Dubai with professional implementation and support usually costs €8,000 - €10,000. The annual costs then amount to around €5,000 for a company with a visa.
For mainland companies, you can expect to pay €13,000 - €15,000, depending on the licenses and the number of VISAs the company is required to carry. The annual costs here are also higher than in a free trade zone and amount to €7,000-8,000.
The more VISAs the company holds or sponsors, the more expensive they are to set up and renew each year. As a rule, the company incurs additional costs of around €1,000 per VISA per year.
FAQ
Frequently asked questions when it comes to setting up a company in Dubai.
Setting up a company in Dubai with residence in Germany - is that possible?
Theoretically, of course, this is possible. Anyone can set up a company in Dubai, regardless of their place of residence. However, anyone who lives in Germany and manages the company from Germany must also pay taxes in Germany.
This is because the place of effective management is decisive for the tax domicile and not the place of incorporation or registration.
However, if you manage to rent an office in Dubai and hire a local managing director, you can also live in Germany as the owner and the company is resident in Dubai for tax purposes, as it is also managed there.
Setting up a company in Dubai with residence in Austria - is that possible?
The same principle applies in Austria as in Germany. Theoretically, you can set up a company in Dubai with residence in Austria. However, you are still subject to tax in Austria if there is no local substance such as an office and management in Dubai.
Setting up a company in Dubai without residency - is that possible?
In the meantime, the compliance requirements for setting up a company in Dubai have increased and you definitely have to be able to provide proof of residence. A utility bill with name and address or a bank statement with the same information is sufficient.
If you are traveling as a digital nomad, you need a so-called compliance residence if you do not have a real one. Paraguay, for example, is popular for this.
Do I have to enter the country to set up a company?
Freezone companies in Dubai can be set up completely remotely. However, you must enter the country for the VISA process and to open an account.
Which company should I set up in Dubai?
This depends primarily on the business activity and the place where the activity is carried out. If you want to set up a physical company in Dubai or the UAE, you usually need a mainland company. For international business, a freezone company is definitely sufficient. The latter is much more popular and cheaper.
The biggest mistakes when setting up a company in Dubai
Here is an overview of the biggest mistakes that can occur when setting up a company in Dubai and which should be avoided at all costs.
Wrong freezone choice
The choice of freezone is crucial for many aspects when it comes to running a company in Dubai. If you choose the wrong freezone, in the worst case you will not get the right licenses, you will not have access to a decent infrastructure or support and in the worst case you will not be able to do business.
Banks also pay attention to which free zone you set up in and this can be a reason for rejection.
No corporate tax registration
Since many people only set up a company in Dubai because of the corporate tax, the corporate tax registration is often forgotten. However, this is necessary even if you do not carry out any activities with the company or if it does not generate any turnover. The corporate tax must be registered within 90 days of incorporation.
Missing permits
In addition to selecting the right licenses, problems can also arise if you do not obtain the right additional licenses or permits from various authorities. This is necessary for certain activities such as social media content creation, strictly regulated trading activities or services in the free zone or in Dubai.
Opening an account without the right documents
Without an account, the company is de facto unable to do business. This makes it all the more important to prepare for opening an account and bring the right documents with you. In addition to the founding documents, the bank also requires further information on education, online presence and Linkedin. If you do not provide any information or provide false information, you may be rejected.
Summary
Setting up a company in Dubai is becoming increasingly popular. The main advantages are obtaining a residence visa, low taxes and the excellent infrastructure for entrepreneurs in Dubai. Depending on the business activity and location, you have to choose between setting up in a free zone or Milan. Although the latter is more expensive, it is usually necessary when setting up a physical company in Dubai.
Setting up a company in Dubai, just like in Germany, Austria and Switzerland, is a process that should be carefully considered. However, if you have a clear goal, know what you want and have a professional contact person on site, the process only takes a few days. For a non-binding initial consultation on Company formation in Dubai you are welcome to contact us.
