First step is to figure out which of the 48 or more free zones or mainland company structure you may need or want.There are more than 3,000 company activity types available across both mainland (Dubai Economic Department DED) and the 48 free zones across the UAE. You need to have a very clear plan of what your company will be doing in Dubai, who you will sell to, is it to a business or is to private customers? Will your company need storage? Will you need an office? Have you considered logistics, if your company is dealing with sales of products? A full business plan is a sensible idea. It helps you crystallize exactly what your company will be doing. The most popular location within the UAE to establish a company is in Dubai. It has excellent logistical support, an extremely busy international airport, millions of tourists every year and a massive expat population. For the ease of this document, we will use Dubai as the location. First step is to figure out what legal structure you want for your company, and see if that structure and activity is allowed for you as a foreigner to own 100%, or will you need to have a local Emirati partner? There are restricted business types and regulated business types. Many need government approvals. www.aston.ae
For DED mainland licenses, there is an interactive website called “Invest In Dubai” https://invest.dubai.ae/ which suggests you can open a company within 5 minutes, highly unlikely but a nice idea. Once you have registered, you can work through this platform, it will ask you many questions. Firstly, it asks you to start your business, click "yes", then it will be the next question, choose “ open a new business”, then select “ new trade name.” At this point you are now asked to add the main activity of your business. A box opens with 18 different business sectors, there is also a search function in the same box, use this as it’s much easier. Software sales, type in software and so forth and click the search button. A small description and list of all business activities with software in their description arrive, scroll through, and select the first one that is a good match for your business. You can add more than one activity, so try to find two or three which cover off many of the business activities your company deals with. You’ll then be asked to add a partner, this will be the person who technically owns the company in most cases.
Once you click "next", you will then be offered the legal structure which applies to
your companies’ activities, there are 6 different legal structures that any company in the UAE will fall under.
These are as follows:
1. Sole establishment (for 1 partner only) 2. Limited Liability Company (LLC 2 to 50 partners) 3. Civil Company (2 to 50 partners) 4. Limited Liability Company – single Owner (Only available for GCC or locals) 5. Public Joint Stock Company (2 to 50 partners)
6. Simple Partnership Company (2 to 50 partners)
At this stage you will also notice that to the right column, titled “Roles” it tells you if you are able to own the company on your own, or if you will be required to have a local sponsor, or a local service agent, these are Emirati nationals that you appoint to represent your company to Dubai Government when required. A Local Service Agent (LSA) is not as expensive as their role is very basic with very little need of involvement. The local sponsor will cost you more and this depends on the size of your business, the main bone of contention here is that the sponsor is legally required to own 51% of your company.
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Mainland companies (DED) typically must take a physical office / commercial space, this is mandatory and the activity of your company. The activity code as it’s called, can also dictate if you need a certain office size and the location in Dubai where your company can be housed, you don’t get to choose just anywhere.
So, now you have the company structure it’s time to pay the fees. The license itself is relatively cheap, but does need to be paid every single year without fail, if you don’t adhere to this, down the line your company will be closed, you’ll receive fines, and the company account will also be closed.
There are numerous government fees you need to pay (mostly small fees that to a westerner make little sense) to get your business legally up and running, it can take several attempts to get the documents all in order, so be prepared for a few visits to a DED office. During this process, you need to reserve your trade name, some name types aren’t allowed, so you will be notified at the time, avoid names with “Group”, these are often declined. You’ll be asked to pay for name reservation, and things like knowledge fees, these are basic government charges that we all must pay, it’s part of the government’s revenue stream.
During this time, you will have also taken the lease on your office / commercial space and as part of the legal process of starting your mainland company, taken the lease for a 12-month period, you’ll receive what is called an Ejari, this means My Rent in Arabic. Hopefully, you will have found a decent real estate broker to help with parts of this. The other option some business types can use is for a serviced office, this is a good short-term solution and a much smaller headache to deal with. It is very important that your office has your company name on the door or wall, banks expect to see this. Let’s say you have managed to get all the documents in place, you’ve paid all fees and you now have possession of a DED trade license, you still need to get your residence visa and Emirates ID arranged. To get this, you need to request the ministry of labor to visit your office, they will confirm the office is suitable for the number of people needed, depending on the size of the office. Once this is done, you can apply for your residence visa. To get your residence visa, you will first need to get a medical done, at one of the many medical centers in and around Dubai. The results are usually received the next day. The next step is to go and get your biometrics done, there are several places you can do this too. Then, you need to submit your passport to Dubai Immigration, they will insert the residence visa and return your passport back to you, this will take 3 or 4 days usually, Emirates ID always takes a little longer, anticipate 2 weeks for both to be done. You will need to have health insurance, this is a legal requirement in Dubai, set aside anything from 1,000 AED to 25,000 AED per year for this cost.
Once you have both the Emirates ID and residence visa, now is the time you should arrange to see one of the many banks in the UAE to setup your business account. This can take from 10 days up to and over 30 days if you aren’t properly prepared, and many business owners new to Dubai really are completely unprepared for what the banking system is like here in the UAE. UAE banks used to prefer mainland companies, this isn’t as much the case now.
You need to be physically present to open your business bank account, to give signatures. These can’t be done online or remotely.
• Home Country Address of the signatory
• Trade license
• Memorandum Of Association / Power Of Attorney / Local Service Agent contract, all originals
• Passport, emirates ID and visa copies for all partners, signatory must be originals
• Any utility bill to show your Dubai proof of address
• Company stamps
• Address proof local /PO BOX for the owner (bank statement is fine)
• Company address proof (Ejari / office lease)
• Bank Statement personal or any other company, in English
• Contact details
• CV of all the partners with more than 3% shares
• Business plan
• Contracts with matching invoices of clients and suppliers (6 of the highest)
• All company Legal documents (originals)
• Expected company turnover
Before you begin any banking application, check the companies’ activities, website, directors backgrounds are all in line with what the company is supposed to be doing, this allows a faster more professional service from start to finish. Often bank accounts are declined because one, or all of these aspects is incorrect, this adds weeks and months onto a process if done incorrectly, your account is declined and the bank never tells you why. Failure to supply the documents to the bank will cause serious delays or the account being declined. Each business account requires you to supply close to 1.5KG of physical paperwork, some original documents are required, some will need to be legally attested as genuine from your home country. The banks cannot accept large documents by email due to AML (Anti Money Laundering) checks, so you need to deliver these in person. This can take several meetings to get everything done. As your business is taking a physical office, the bank will come to your office to see if it is real, this is part of the bank’s physical substance requirement testing, this basically means that your company can show it has commitment in the form of taking office leases and not just a tax vehicle. Some business types are not allowed to use serviced office spaces, some business types are required to have a minimum office size, you have to triple check this.
The turnaround time can be as little as 10 days for a low-risk company (digital design or no trading) with all documents available, in the right order and signatories available. A medium to high-risk company (trading of any kind, real estate, currencies, oil) bank account can take up to 90 days, the bank(s) will continue to request additional information until they are confident, they understand the risk your company poses to the bank. This allows the bank(s) to request the right level of security deposit on account opening. Most banks will request from 150,000 AED up to 1 million AED as an opening deposit, although some business accounts can request with zero deposits for new companies. The logic here, the bank wants to see they can earn enough from your account to maintain it properly and can allocate staff and resources to look after your business account. Many banks offer a “Priority” style banking service, if your company has high value transactions and regular activity, this is usually the smartest option. Each meeting with the selected banks can last up to one hour each. You should typically apply with three banks at the same time to give the best possible results.
If your business is not generating over 12 million AED a year, many banks will try to push you onto their online accounts, the only benefit is no security deposit, but you get no help from the bank when you need it.
One of the most popular company types for foreigners in the UAE and especially Dubai, is
a free zone company. 100% foreign ownership, no local involvement at all, no real need for an office unless you need one in most cases.
There are many free zones to consider in the UAE, however, if you think you’ll want a bank account. Stick to Dubai as the results are always better. The reason for that? Banks here know that companies in Dubai had to go through more due diligence, paid more money and are more likely to be a real business, not just a vehicle for tax or visas, which the cheaper locations in the Northern Emirates have that reputation with the banks. So, if you do choose to go with one, expect problems with banking. Northern emirates look cheap to start with, but the banks expect you to have a physical office for places like RAKEZ. This adds a huge yearly amount and ends up costing more than a Dubai free zone with the wrong or unusable result. The greedy man pays twice as the saying goes!
As with the mainland, you need to really spend time looking at which of the free zones you want to work with. We suggest either DMCC or IFZA, for most companies, since they both have good reputations, and both are known to the banks. There are others which may suit your company too like JFZA or DAFZ, so make sure you investigate properly within your industry. There are again, more than 3,000 activities you can have with a free zone company, so whatever you’re planning to do, it’s quite likely available. www.aston.ae
When you contact the Dubai free zone best suited to your industry, they’ll often not be so bothered about what you’re doing, they’re interested in getting a new client after all. Some activities are regulated and need third part approvals from Dubai government authorities. If you are planning to give financial advice or manage someone else’s money as a fund manager, this sort of business needs approvals from The Book of Securities and you’ll need to provide proof that you’re qualified to do that type of work. So, you may get the trade license, but not actually get the government approval, which renders your business dead in the water. Make sure you check and, check again, measure twice, cut once. With a free zone you can have up to 6 activities. Make sure these are all related and relevant to what your business is actually doing, don’t have something like "Mechanics” and then “Accountancy” these don’t make sense and will end up causing issues you’ll need to pay for later on. Why? Because changing activities on a licence isn’t free once the company is formed, this also looks bad to the bank if you want an account. The free zone will want you to choose 3 company name options, again, avoid anything with “Group” as these are often declined. The process is much easier and far less painful than a mainland license, the results are often very good if done properly. Once you’ve completed the free zone application, supplied a copy of your passport and proof of home address from your home country, you’ll pay the fees and await approval on the company name.
There are a few different types of free zone companies:
1. Free Zone Limited Liability Company (FZ LLC)
2. Free Zone Company (FZC)
3. Free Zone Enterprise (FZE)
Depending on how many people are as shareholders, will change this. Also, if your license will be professional or commercial, will also change it. As an example, a professional license could be an interior design firm, a commercial company would be a construction firm. There may also be third party approvals with any of these too, you’ll need to ask and also check what the cost of the approval is, as these are yearly fees. The process to receive company documents is typically 4 or 5 days, you’ll get a trade license, articles of association, share certifies and sometimes a bank letter too. The bank letter basically says the company has sufficient share capital. Although all free zones state a share capital amount on the documents, most don’t expect you to pay this, DMCC is the exception to that as they will expect the share capital to be paid from the new company bank account. The next stage is to receive the establishment card, this is a main difference from a mainland company, they don’t have establishment cards, instead they use a labour card. Your establishment card is basically the Dubai Immigration approval to have a visa issued under the new company name. The company is sponsoring your visa, sounds a little odd as you’re also the owner.
Once you have the establishment card, you can go ahead and apply for the visa or visas on the company. These can be applied for either in country or outside of country. The latter is certainly easier and less costly, if you’re already here in Dubai, you’ll need to apply for a change of status, this costs around 1,600 AED and will add a few days at least onto the process. You will need to go for a medical once you have the establishment card, results usually after 1 day, then biometrics which can take a day or two. You will need to have found and paid for health insurance for yourself too, you can submit the applications without this proof, this will cost from 1,000 AED to 25,000 AED per year, depending on the level of care you choose. Insurance brokers are everywhere, if you have a serious medical condition, this will be far more expensive. There are recurring costs with any company in Dubai, trade license is usually every 12 months, as is establishment card, your visa should last you three years. Although a free zone doesn’t need a physical office, it is highly recommended that you use a free zone that gives you an office address. This is going to be a huge help when it comes to getting a company bank account.
Now that you have completed the formation of your free zone company, you need to get the ability to send and receive payments and invoice. A company bank account is required to do this, not many clients will feel happy sending money to a personal account.
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All companies in Dubai are required to submit a yearly audit from a Dubai based accountancy firm. These aren’t expensive but do charge dependent on the level of work that may be required, this is based on value and frequency of transactions, nature of your business, where the income is derived from and so forth. If your business is selling products or services inside of the UAE, you will be required to charge VAT at 5%, you’ll need to register for VAT to do this. As part of the application is in Arabic, pay someone a small fee to do this for you, you can have this done from as little as 500 AED.
Bookkeeping is not expensive in Dubai, 200 AED a month gets someone on the job for you and ensures you don’t forget. It is required that you check if your company type needs to register with GoAML, this is an online platform use to report potentially fraudulent or suspicious transactions. Failure to register can cost you up to 50,000 AED.
Dubai has become a highly compliant location for business and banking over the last two years, the UAE needs to protect its economy and attract real businesses and foreign direct investment to the region. Part of this is the strict anti-money laundering laws (AML) that all companies must adhere to. The reason an office is required or an office address at least, is to show the company has real substance, to show it’s not just a tax vehicle to avoid paying taxes where it should. This is called Economic Substance Requirements (ESR), all companies in better business locations need to follow these rules, banks are no different. Compliance and AML play a huge role in the life of every business in Dubai. As a new business owner, you need to be aware of every aspect of your companies’ potential legal liability in the UAE. If you are unsure, hire a qualified expert to do the work for you. Conclusion If you have the time, and you’re able to find your way around and spend two months to get everything done, setting up a company on your own may be something you’d be happy to do.
