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Doing Business in Dubai, UAE

Doing Business in Dubai, UAE - Makebiz

Dubai attracts entrepreneurs from all over the world, but to successfully launch a business in this emirate, it is important to understand the intricacies of local legislation and registration procedures. Knowing the key points of opening a company in Dubai can help you avoid pitfalls and maximize the efficiency of the process. 

Jurisdictions of operation

Choosing a jurisdiction to do business in is important. The United Arab Emirates can be divided into main land and free economic zones. 

1. FEZ or freezone is an ideal option for internationally oriented businesses. The main advantage is a simplified registration procedure. The process of starting a business is generally faster and easier than in the UAE mainland. However, it should be taken into account that the activity is limited to the territory: companies cannot do business in the mainland without obtaining a special permit.

2. Mainland is ideal for those who plan to do business throughout the UAE. Mainland companies can engage in any type of business without restrictions on the types of business. An important advantage is that they can participate in government tenders. However, the registration procedure here is more time-consuming and financially expensive.

The procedure of business registration in the Emirates consists of several stages, regardless of the chosen jurisdiction:

1. Obtaining preliminary authorization from the state authorities.

2. Selecting a suitable name for the company, which must comply with the legal requirements.

3. Selecting the type of license depending on the type of activity (commercial, professional, industrial, etc.). In some cases, it may be necessary to obtain external approvals from regulatory authorities. 

4. Lease or purchase of office, warehouse, retail space depending on the requirements and objectives. 

5. Company formation and appointment of directors, which includes drafting of articles of association defining the structure and management of the company and appointment of directors/authorized persons.

6. Registration of the company with the Ministry of Labor and recruitment of employees, if required. 

7. Opening a bank account in the name of the company. 

Before starting a business it is worthwhile to study the local legislation, as well as to determine the target audience, conduct market research, select qualified employees, prepare marketing strategies, etc. 

To successfully register a business in Dubai, we recommend seeking assistance from a law or consulting company specializing in international business. The Makebiz team will help you choose the best form of business, prepare all the necessary documents, negotiate with government authorities and provide legal support at every stage. 

Taxes in the UAE

The UAE has long attracted foreign investors and entrepreneurs with its favorable tax climate. However, in recent years the situation has become somewhat more complicated due to the introduction of new rules. Therefore, it is worth considering the key points of taxation in Dubai.

Now the following taxes are in force in the Emirates:

1. VAT at the rate of 5%. It is valid for local and freezone companies. Businesses with an annual turnover exceeding AED 375 thousand must register to pay VAT. Otherwise, a fine is imposed. Some activities in the fields of education, real estate, health, transportation, etc. may fall under 0% VAT. It is worth checking with the Federal Tax Service for up-to-date information. 

The standard tax period is three calendar months. However, the FTA may, at its discretion, assign a tax period other than the standard one for a certain group of taxpayers.

2. Corporate tax at the rate of 9%. It is payable if taxable income exceeds AED 375 thousand. The object of taxation of the new corporate tax in the UAE is recognized precisely as net profit. This amount is defined as all income of the taxpayer for the tax period less expenses. The final amount of the received profit must necessarily be reflected in accounting and financial documents.

There is also a small business exemption which applies to income of less than AED 3,000,000 in the relevant tax period. In such a case, the company can claim a zero tax rate.

Companies established in certain free zones may be exempt from corporate tax if they are recognized as a “qualified” resident by an authorized government body. 

However, even if exempted, the company must maintain transparent financial statements, according to Federal Law 2 of 2015 on Commercial Companies. This requirement applies to both companies registered in Mainland and Free Zones. Failure to comply with this requirement is subject to penalties. 

Tax returns are filed through the Federal Tax Administration (FTA). The office provides an online platform for filing returns and also conducts regular audits to ensure that companies are complying with tax laws.

It is important to remember that UAE tax laws are constantly evolving, so it is important to keep up to date with updates and changes. Careful study of the legislation and consultation with experts will minimize tax risks and maximize the benefits of doing business. 

Personnel policy

Labor legislation in the UAE requires special attention due to constant improvement. In addition to the basic procedure of company registration in MoHRE, obtaining visa quotas and opening labor files for employees, it is worth paying attention to the active process of emiratization. 

Due to the government’s goal to increase the level of employment of local citizens in private and public companies, a new rule is now in effect. If an organization employs between 20 and 49 employees, one of them must be a citizen of the country. As of next year, there must be two locals per this number of employees. 

The current legislative initiatives within labor law are aimed at expanding workers’ rights, flexibility of working conditions, increasing the skilled workforce, etc. It is crucial for any private organization to keep up to date with current legislation to avoid hefty penalties. 

Starting a business in Dubai is a complex but promising process. By familiarizing yourself with the key nuances and using the help of experts, you will be able to successfully launch your company and take advantage of the many benefits offered by this dynamic region.

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