Starting a business overseas can be daunting. But the UAE is an exception. The UAE boasts an incredibly enthusiastic and supportive business environment.
This is also one of the reasons why thousands of companies are established in Dubai every year. Even amidst the pandemic, Dubai issued over 40,000 new trade licenses during 2020.
Since the expatriate community accounts for about 85% of the country's population, many new companies are founded by international entrepreneurs.
If you are considering starting a business, here is everything you need to know about doing business in Dubai—from the main advantages to choosing a company name and applying for licenses and visas.
Advantages of Starting a Business in Dubai
There are many reasons why thousands of entrepreneurs from around the world flock to the UAE and Dubai to do business.
The benefits are as follows:
Low Taxes
The UAE still prides itself on zero tax for personal and business income. The only significant tax to note in the UAE is the Value Added Tax (VAT) introduced in January 2018, with a unified rate of 5%.
Establishing in a free zone also benefits you with 100% repatriation of capital and profits, no currency restrictions, and 100% tax exemption on imports and exports.
What does this mean for entrepreneurs?
Taxes are a major outflow reason for most businesses in other parts of the world. This can be a huge expense when early-stage startups have tight cash flow.
This is not the case in the UAE, where both your personal and business income will be zero-taxed. This not only improves your operational profitability but also provides more liquidity for your business, potentially improving your cash flow and giving you more disposable income to reinvest in your company.
Startup Support
The UAE has many financing programs aimed at accelerating business growth. For example, the Mohammed Bin Rashid Innovation Fund, with 2 billion AED, helps fund innovative projects and provides expert guidance and support to turn business ideas into reality. Many free zones in the UAE also include startup incubators and venture capital forums aimed at helping small businesses grow and seek funding.
The UAE government also commits to awarding at least 10% of government contracts to small businesses annually. Meanwhile, Dubai recently announced plans to shorten payment cycles for SMEs to increase liquidity and promote growth.
What does this mean for entrepreneurs?
An environment aimed at helping businesses develop means that whether you are seeking advice, guidance, or even funding.
Clearly, this is an effective system—SMEs account for 95% of Dubai's business population and contribute 40% to the emirate's GDP.
Strong Economy
The UAE is the second-largest economy in the Arab world, with a GDP of approximately 1.5 trillion AED ($42.1 billion), second only to Saudi Arabia.
Furthermore, with a diversified economy, non-oil and gas industries account for 70% of its GDP. From numerous sectors such as healthcare and hospitality to technology, trade, and banking, the UAE's economy is growing continuously, providing many business opportunities for aspiring entrepreneurs and companies seeking international expansion.
Therefore, the Economic Freedom Index praises the UAE economy as "broad-based and vibrant growth... based on sustained efforts to strengthen the business environment, promote investment, and foster the emergence of a more dynamic and diverse private sector."
What does this mean for entrepreneurs?
A large and diverse economy brings wide opportunities for entrepreneurs. A strong economy fosters trust and encourages investment—companies are more willing to invest in new products, and the cycle of economic stimulus continues.
A strong economy also often leads to wage increases. In the UAE, wages grew by 3.9% in 2019, with a net positive growth in disposable income—if you are directly consumer-facing, this is good news.
Strategic Location
Dubai's geographical location makes it an ideal hub for trading with huge markets in both the East and West. Its time zone overlaps with many commercial cities globally, and two busy airports allow one-third of the global population to reach within four hours by flight, and two-thirds within eight hours.
What does this mean for entrepreneurs?
The UAE is the perfect place to conduct international business. Its strategic location at the center of the Middle East provides it with a time zone that overlaps with working days in most major commercial cities in Asia, Africa, Europe, and the US East Coast.
The UAE also operates the world's two busiest airports—Dubai International Airport and Dubai World Central Airport—providing direct passenger and cargo services to most parts of Asia, Africa, and Europe—even as far as the US and Australia. If you want to import or export, the UAE also has excellent sea freight services, with Jebel Ali Port ranking among the world's top ten busiest ports.
Are You Ready to Start a Business in Dubai?
Process:
Choose a business activity: The business activity you choose may affect where you can set up, so this needs to be decided in advance. The Department of Economic Development (DED) lists over 2,000 business activities for you to choose from.
Choose a Free Zone or Mainland: If you choose to establish in a Free Zone, you will benefit from 100% company ownership, 100% repatriation of capital and profits, no currency restrictions, and 100% tax exemption on imports and exports, but you will need to partner with someone to trade locally within the UAE. Establishing on the Mainland allows you to trade directly with local markets and overseas, and undertake government contracts. Additionally, new regulations now allow foreign companies to own 100% of their business on the mainland for specific activities.
Choose a company name: You need to comply with the UAE's strict naming conventions. Company formation experts can help ensure you meet the standards.
Apply for a license: Whether you establish in a Free Zone or on the Mainland, you typically only need some standard documents: a completed application form, copies of shareholder passports, etc.
Open a bank account: With a license, you can freely open a UAE company bank account. You can choose from numerous international, local, and Islamic banks located in the UAE.
Apply for visas: The final step of the business establishment process is immigration and visa processing. Similarly, company formation experts can guide you through this process.
