Company Setup & Registration in Dubai

Dubai is a global city and the business hub of the Middle East. It is the most populous city in the UAE and is located in the northeastern part of the country. Dubai is one of the world's fastest-growing economies, with the most significant contributors to its GDP being real estate, trade, tourism, and financial services industries. Despite the Emirate's infrastructure having built on the oil exports over three decades ago, oil and natural gas contribute to less than 5% of its GDP now.

Dubai has gained the reputation of a leading trading hub in UAE, owing to premier business locations and an environment that is not unduly restrictive. It offers business people the most liberal operating conditions, tax exemptions, asset protection, complete privacy, and limited liability, in establishing a business in Dubai. The tax haven also offers tremendous promise to overseas companies, as it has:

• Excellent growth trajectory (imports have doubled since 1990) and unique policies of liberalization
• Prosperous market located in one of the world's wealthiest regions that are diversified and offers ample opportunities to traders
• No trade barriers, quotas, exchange controls (open market)
• High accessibility through air or water (around 90 airlines and 170 shipping lines)

Types of Company Formation in Dubai

Xcellence is well-versed with the company formation laws and regulations in Dubai. We can help you set up your business here by availing the licenses like Industrial/Service License, Trading/Commercial License, and Professional/General Trading License). You can choose from among a free zone, mainland, or offshore company in Dubai.

Onshore and offshore sectors dominate the UAE economy. The difference between these two is that offshore industries contain free zones that bring foreign investment. And onshore sectors put restrictions on foreign ownership and take care of local business interests. Here's a little summary on the three types of company formation in Dubai:

1. Free Zone Company

Free zones in Dubai are the most sought-after locations for international business operations. They attract foreign direct investment due to their policies that generate employment while supporting economic reforms. Free zone company registration Dubai is a highly profitable investment option for organizations because of incentives like:

• 100% foreign ownership
• Exemption of taxes
• Customs privileges
• More significant growth potential due to the strategic location
• Well established transport network and road connectivity
• Proximity to a large customer base
• Affordable cost for high-quality labor

There are many such positive aspects of setting up a company in Dubai free zone.

2. Offshore Company

Many businesses prefer to set up an offshore company, also known as the non-resident company, in Dubai, as the income obtained from a holding company (offshore company) is not taxable.

Other than tax savings, people prefer having an offshore company as a holding company so that they can hold:

• The interest of other companies in a separate jurisdiction
• Licensing of franchises
• Intellectual property rights like patent, trademark, copyright, etc.

There are many features of offshore company formation Dubai like,

• Complete tax exemption
• Virtual office facilities
• No exchange control
• Provision to open a multi-currency bank account
• Stringent privacy laws and reliable confidentiality

Offshore business setup in Dubai has several benefits associated with it, due to which many established businesses outside Dubai go for this option.

3. Mainland Company

A business entity falling under commercialized geographical areas and directly registered under the Emirates government and its authorities are known as a mainland company. A mainland company in Dubai can carry out business across the UAE but permits maximum foreign shareholder equity capped at 49%. Mainland represents the most developed economy as it is set up directly following the legal structures of the Government policies.

Difference between Mainland, Free Zone, and Offshore in Dubai

For a foreigner, it might get difficult to understand the concept of 'free zone,' 'offshore,' and 'mainland' in Dubai. One must have complete knowledge of what each jurisdiction provides to its businesses. Hence, to clear away the confusion, a differentiation table has been prepared.

	Mainland	Free Zone	Offshore
Ownership	An expat can own 49% of shares in their company for business setup in mainland Dubai. A local sponsor must be appointed who will own the majority of shares	A foreigner can have complete ownership of their business in any of the Dubai free zones. There is no need for appointment of local sponsor or a service agent	A full ownership is granted to an expat in offshore Dubai only if they have a business outside the UAE
Visa	A residence visa can be obtained depending on the size of the work premises	A residence visa can be obtained depending on the size of the work premises	There is no need for an office space for an offshore company, hence residence visa is not granted
Cost of Business Setup	High	Medium	Low
Audit Requirement	It is mandatory for mainland companies to prepare audit by the end of financial year	Only a free zone company and a free zone establishment have to prepare audit in free zone	It is not mandatory for an offshore company to prepare audit for the company

There are many such differences when it comes to these three jurisdictions. Read our blog on the difference between the mainland, free zone, and offshore company in the UAE to find out more.

Why Invest in Dubai?

With unabashed architecture and exciting skylines, it is easy to comprehend why Dubai remains the fastest growing metropolis in the world and the tourism hub of the UAE. Growth here has been expediential, having transformed from a tiny fishing village to a major trading hub in less than 30 years. There are many reasons why one must invest in Dubai; they are as follows-

Benefits of Company Incorporation in Dubai

Apart from the advantages mentioned above, there is more to Dubai and its business culture. Dubai's strategic location is just the first in a long list of causes to invest in the city. It provides a gateway towards Eastern businesses and is an excellent hub for imports and exports. Not just this, its growing and diverse economy makes it possible for the foreign investors to concentrate their attention on areas different from the one that made the city famous. Oil, logistics, trade, transportation, tourism, and real estate are some of the business areas that have become essential over the last few years. Regardless of the business field one chooses to enter; the Emirate has a qualified workforce. The city also attracts expats from around the world, and the labor policies make it very easy for employers to hire personnel from different parts of the globe. Dubai is considered as one of the safest cities in the world and one that has a high quality of life. Here are a few benefits if you want to open a company in Dubai-

• No limitation on visas
• Flexibility to rent office anywhere
• No restrictions in office space requirement
• Great opportunity to expand by forming branches
• New permit to grow the business in the mainland without establishing a branch office
• No minimum capital investment required
• Permission to undertake government projects
• Easy accessibility of office space

To know more about such advantages of starting a company in Dubai, read our blog.

Types of Business Entities in Dubai

As per the Federal Law, a commercial company in Dubai must have not less than 51% local equity (participation of UAE nationals). The law also defines seven categories of business organizations that are permitted to register a business in Dubai. These are:

Out of these seven company types, Limited Liability Company (LLC) is the most commonly chosen one by foreign investors. Moreover, 51% participation of UAE nationals is the general norm in the seven company mentioned above types, except for the following scenarios:

• Where 100% of local ownership is required
• Free Trade Zones, where 100% foreign ownership is allowed
• In activities with 100% Arabian Gulf Cooperation Council (AGCC) ownership, where wholly owned AGCC companies partner with UAE nationals
• Where foreign companies register a representative office or branch in Dubai
• In artisan or professional companies, where 100% foreign ownership is allowed

Commercial License

If an investor wants to involve in trading activities or buying and selling of goods, they have to obtain a commercial license in Dubai. The DED issues this license for the businesses.

Industrial License

The industrial license in Dubai is issued for those businesses which transform natural material or natural resources into their final products.

Things to Know Before Company Formation in Dubai

There are many terminologies that one is unaware of before new company formation in Dubai. They are as follows-

1. Local Sponsor

Local Sponsor in the UAE refers to a local service agent or a nominee shareholder in mainland companies with foreign investment. A sponsor has to be an Emirati with a family membership card. If one wants to open a business in mainland Dubai, then they must have a local sponsor. A local sponsor will own 51% of the shares in the company, while the foreign investor will own the remaining 49%.

2. PRO Services

In Dubai, setting up a business involves legal guidelines following the Department of Economic Development (DED), Dubai Immigration, the Ministry of Labour, and other public departments. PRO services can come in handy if one is new to the corporate milieu in Dubai or doesn't have considerable experience in business set up here.

3. Dubai Business Centre

To start a business in Dubai, you must have a registered office. For that, one must research the market they wish to cater to. It can be the mainland, free zone, or an offshore. The different types of office space options are-

• Serviced office
• Onshore office
• Free zone office

4. Tax Residency Certificate

Also known as the Tax Domicile Certificate, TRC is issued by the Ministry of Finance, to take advantage of the double taxation avoidance signed between the foreign jurisdictions and the UAE. It means that if you are an expat with a business in the UAE, you can avoid paying taxes in your home country by obtaining a TRC. This can be done only if your country is in agreement with the UAE.

Dubai is the commercial capital of the United Arab Emirates. The 'City of Gold' provides vast business opportunities and innovative commercial modules for enterprises from around the capital. International exposure and an investor-friendly government are just two of the factors that motivate entrepreneurs to start a business in Dubai. Don't forget about the perks on investments and tax benefits when compared to other countries.

For new company registration in Dubai, these steps may be followed:

1. Choose the Trade Name for your Business

The first step is to secure a trading name and do the necessary research to make sure that the name isn't already in use. Submit the proposed company name and registration application to the Department of Economic Development (DED)

2. Determine the Type of Business

From the list mentioned above, determine the corporate entity you wish to incorporate in Dubai. The type of business depends on the business activity that you choose. In Dubai, a Limited Liability Company is the most-preferred business entity in the Emirate

3. Choose a Business Activity

The nature of the business can have a bearing on which business jurisdictions one chooses. For example, if an investor wants to start a company in any of the Dubai free zones, the different free zone is dedicated to different business activity. And an investor can choose depending on what they want their business to be.

4. Draft a Memorandum of Association

An MoA includes the details of shareholders and the company. Minimum share capital is usually set out in the Memorandum of Association of your proposed company. Get the company's Memorandum of Association in notarized in the DED

5. Submit Required Documents

Apply for registering a Dubai business at the Dubai company register. Attach documents of the company with the DED to obtain a trade license from the Chamber of Commerce and Industry. While perhaps the most difficult of all these steps, the paperwork does not have to be too taxing providing it is undertaken with expert help. A business setup partner can advise you on the paperwork required and help you complete it.

6. Other Approvals

Certain activities require special approval from a corresponding Ministry/Department. These are:

Business Activity	Licensing Ministry/Department
Medical Pharmacy	Ministry of Health
Telecommunication Equipment	Ministry of Communication
Air transport, Air Cargo	Department of Civil Aviation
Financial Institutions, Banks, Money Exchange	Central Bank
Agriculture, Veterinary	Ministry of Agriculture
Engineering & Construction	Municipality
Industrial Project Expansion	Ministry of Finance and Industry
Legal Consultancy	Ruler's Office
Education, Training	Ministry of Education
Publishing, Printing, Newspaper, Advertising, Video Film, Photography	Ministry of Information
Branch of Foreign Company, Insurance Company, Chartered Accountancy	Ministry of Economy
Customs Clearance, Freight Forwarding Sea Cargo	Seaports and Customs Authority