3 Key Steps to Set Up a Business in Dubai

Can you imagine a safe and dynamic work environment where you are not subject to income taxes? It may seem like a pipe dream, but in Dubai it has become a reality for many generations.

As countries in the East struggle with trade disruptions and soaring gas prices, wealthy individuals are flocking to safer countries with flexible immigration and business laws. Considering factors such as great professional prospects, safety and ease of settlement, the United Arab Emirates (UAE) ranks first in the list of countries with a positive influx of business. Expats currently make up 8.92 million of the country’s 10.08 million people, indicating that the UAE remains a popular destination for foreign investors.

To attract foreign investors, the UAE is introducing various legislative changes to its legal landscape. For example, the UAE has introduced a 5-year Green Visa and a 10-year Golden Visa, allowing foreigners to apply for a residence permit on their own instead of being sponsored by an employer. Thanks to the introduction of new schemes for remote workers and freelancers, as well as the easing of Covid-19 restrictions, many people have moved to Dubai, the UAE’s most populous city, over the past few years. Moving to Dubai is attractive to expats as the process is quick, relatively cost-effective and allows for zero income tax.

Here are three key steps to setting up a business in the commercial hub of the Middle East from a business owner in Dubai for the past ten years.

Step 1: Select the type of business.

The first step is to choose the right type of activity for your company. To understand what the right type of activity is, you must first focus on your passions and motivations, and then conduct market research to determine whether the activity is suitable for the market you are targeting.

As the UAE is one of the four largest economies in the Middle East and North Africa region, Dubai offers a variety of industries in which foreign investors can thrive. The UAE set a record for gross domestic product in 2021, the fourth highest in the region. The leading industries in Dubai are e-commerce, real estate, healthcare and wellness, and construction services. With Dubai’s thriving startup ecosystem, it’s clear that residents of this modern city are open to new endeavors and ideas.

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Step 2: Select a jurisdiction for your company.

Investors can choose from various jurisdictions in Dubai to set up their business. It is important to understand the differences between a mainland company and a free zone company. Each jurisdiction has its own advantages and disadvantages.

On the one hand, setting up a business in one of the free zones can be beneficial if you want to take advantage of 0% corporate and personal taxes and 100% foreign ownership. The disadvantage of a free zone company is that to trade directly in the UAE market you must partner with a local mainland company.

On the other hand, opening a mainland company in Dubai allows you to trade directly in the UAE market; however, there may be restrictions on foreign ownership. Some licenses and activities require a local partner owning 51% of your company’s shares.

There are more than 30 free zones in Dubai, and they are usually designed for businesses in a specific industry. For example, the Dubai International Financial Center (DIFC) is a financial free zone located in Dubai and is aimed primarily at professional companies in the financial services sector, while Dubai Internet City (DIC) is a free zone aimed at technology companies in the region. If you want to open a company in Dubai Free Zone, you should also choose a suitable free zone depending on your industry and type of business.

Step 3: Apply for the necessary permits.

Last but certainly not least, you must apply for the necessary permits to operate the business. If you are setting up a mainland company in Dubai, apply for a license from the Dubai Department of Economy and Tourism (DET), formerly known as the Department of Economic Development (DED). If you are setting up a company in a free zone, you will need to obtain a license from the relevant authority.

Once you have your business license, you must apply to open a bank account. One of the requirements for opening a bank account is having a valid UAE resident visa. Therefore, an important step in this process is to apply for a UAE Resident Visa along with an Emirati ID to meet your business and banking needs.

Depending on the type of business you operate, you may need to apply for additional licenses and permits. For example, if you want to open a financial services company in the DIFC, you must obtain not only a business license but also a financial services permit (FSP) from the Dubai Financial Services Authority (DFSA), which regulates financial services in the DIFC.

If you follow these three steps that I have learned from my 12 years of professional experience in Dubai, I am confident that you will be on your way to successfully launching your business in this global hub. These steps will give you access to the diverse UAE market, but they can also give you the opportunity to expand your business to other countries in the region.