Entering the UAE Market: Frequently Asked Questions

This content has been translated from the original text.

Setting Up a Company in Dubai: Permits, Licences, Work Permits and General Assessment, Permits and Licences Required for the Company to Begin Lawful Operations, and the Licence Renewal Process

Over the last three weeks we have published a series of guides presenting the basic information for investors who wish to set up a company in the United Arab Emirates, and this week we meet for Market Entry, the final article in the series. This article addresses the options for setting up a company on the mainland and in free zones, the procedures for opening a branch or representative office, work permits and immigration legislation, the critical points investors should bear in mind, and the advantages of setting up a company in the UAE. In addition to explaining the characteristics of each type of company and the company formation procedure, the article also provides information on UAE business culture, distribution channels, participation in public tenders and key sectors. Finally, there are also resources from which Turkish companies wishing to do business in the UAE can obtain support.

For the last three weeks, we have published a series of articles providing the necessary information for investors who want to start a company in the United Arab Emirates. This week we meet in the last article of the series, Market Entry. This article covers the options for setting up a company both on the mainland and in the free zones, procedures for opening a branch or representative office, work permits and immigration legislation, critical points that investors should be aware of, and the advantages of setting up a company in the UAE. In addition to explaining the characteristics of each type of company and the procedure for setting up a company, we also provide information on UAE business culture, distribution channels, participation in public tenders and important sectors. There are also resources available for Turkish companies seeking to start a business in the UAE.

In the United Arab Emirates (UAE) there are three main types of commercial activity for foreigners: setting up a company (in particular a Limited Liability Company – LLC), opening a branch, or opening a representative office. Let us begin here.

What route should those who wish to set up a company on the mainland follow?

Setting up a company on the mainland provides direct access to the UAE domestic market. However, it is subject to more regulatory provisions, and the incorporation process is more costly and time-consuming. To set up a company on the mainland, a trade licence must be obtained from the Ministry of Economy and registration with the Chamber of Commerce and Industry is required. The company licence must be renewed every year or at specific intervals depending on the type of licence. Failure to renew may lead to penalties.

What route should those who wish to set up a company in free zones follow?

Setting up a company in free zones is easier and faster. They offer tax advantages, fewer regulatory provisions and a competitive ecosystem. However, the ability to trade directly on the mainland is limited. For permits and licences, an application must be made to the relevant free zone authority.

What route should those who wish to open a branch or representative office follow?

Foreign companies may open a branch or representative office by obtaining approval from the Ministry of Economy and registering with the Foreign Companies Registration Department. The Ministry of Economy then issues a licence and membership of the Chamber of Commerce and Industry is registered.

What are the key points regarding work permits and immigration legislation?

Work Permit Requirement:Foreigners must hold a work permit in order to work in the UAE.

Sponsorship System: A sponsorship system applies to work and residence permits. A UAE national, a public body, a public company, a private company, a branch of a foreign company or a free zone company may act as sponsor.

Job Security and Minimum Wage: In the UAE there is no job security mechanism or minimum wage regime for foreigners.

Salary Payments: Employees' salaries must be paid through certain exchange houses and banks.

What are the critical points investors should pay attention to?

Local Partnership: Before 2021, setting up an LLC on the mainland required a local partner holding 51% of the shares. However, this requirement has been abolished, with some exceptions.
Types of Commercial Activity:The types of commercial activity in which foreigners may hold 100% ownership are limited.
Choice of Free Zone: Each free zone has its own advantages and disadvantages. Investors should choose the free zone best suited to their business objectives.
Commercial Agency: In order to export to the UAE, a local commercial agent or distributor must be appointed.
Cultural Differences: UAE business culture may differ from that of other countries. It is important for investors to understand the local culture and ways of doing business.

What are the advantages of setting up a company in the UAE?

The UAE, and Dubai in particular, offers various advantages for doing business. Some of them are as follows:

Tax advantages: The corporate tax rate in the UAE is low and tax exemptions are available in some free zones.
Strategic location: The UAE is strategically positioned as a regional hub, acting as a bridge between Europe, Asia and Africa.
Advanced infrastructure: The UAE has a modern and advanced infrastructure. Its transport, telecommunications and logistics systems are highly developed.
Openness to foreign investment: The UAE has adopted policies that encourage foreign investment and facilitate doing business.

What types of company can be set up in the UAE?

There are various types of company that can be set up by foreign investors in the UAE. The most common are as follows:

Limited Liability Company (LLC): This is the company type most preferred by foreigners. Under the new regulations, 100% foreign ownership is possible in some sectors.
Branch: Foreign companies may open a branch in the UAE. A branch is limited to the activities of the parent company.
Representative Office: This type may only engage in activities such as market research and promotion, and may not engage in commercial activities.
Free Zone Company: It is possible to set up a company in the various free zones in the UAE. These companies may benefit from 100% foreign ownership, tax advantages and other incentives.

What is the procedure for setting up a company in the UAE?

The procedure for setting up a company in the UAE varies depending on the type of company and where it is to be established (free zone or mainland). In general, the following steps are followed:

Determining the field of activity: The activities in which the company will engage must be determined.
Determining the legal structure: The appropriate legal structure, such as an LLC, branch or representative office, must be selected.
Registration of the trade name: The selected trade name must be registered with the relevant authorities.
Pre-approval application: Pre-approval must be obtained from the competent authorities for the company's incorporation.
Preparation of the required documents: Documents such as the articles of association and the lease agreement must be prepared.
Licence application: A licence application is submitted to the relevant authorities together with the required documents.
Obtaining the licence and registration: Once the licence is approved, the company is registered with the relevant chambers of commerce.

What is business culture like in the UAE?

Business culture in the UAE is based on Arab customs and Islamic values. Some important points to bear in mind when doing business are as follows:

Arabic is the official language, but English is widely used in the business world. It is helpful for business cards and other documents to be in both Arabic and English.
Personal relationships are important. Before establishing business relationships, importance is attached to getting to know one another personally.
Meetings should be attended on time. However, delays may be met with tolerance.
The pace of business may slow down during the month of Ramadan.

What distribution channels can be used to enter the UAE market?

The most common distribution channels for entering the UAE market are as follows:

Local distributors: They can provide market knowledge and an established distribution network.
Agents: They can carry out sales and marketing activities for specific products or services.
Free zones: Setting up a company in a free zone can be used as a hub for distributing products to the UAE market and other regions.
Online sales: It is possible to sell directly to consumers through e-commerce platforms.

How does participation in public tenders in the UAE work?

Participation in public tenders in the UAE is subject to specific rules and procedures. Generally, priority is given to UAE companies. However, foreign companies may also take part in tenders by working with a local agent or partner.

What are the important sectors in the UAE?

As a result of economic diversification efforts, many sectors have developed in the UAE. Some of the important sectors are as follows:

Energy: The UAE is a major oil and natural gas producer. Investments in renewable energy are also increasing.
Tourism: The UAE is home to world-famous tourist destinations.
Logistics: Thanks to its strategic location and advanced infrastructure, the UAE is an important logistics hub.
Real estate: With the opportunities it offers in the real estate sector, the UAE presents a highly profitable investment opportunity both in terms of obtaining a residence permit and in terms of rental yield.
Construction: The construction sector in the UAE is highly developed and large projects are being carried out.
Finance: The Dubai International Financial Centre (DIFC) is one of the region's leading financial centres.

What resources are available for Turkish companies wishing to do business in the UAE?

Turkish companies wishing to do business in the UAE can obtain information and support from the following sources:

Commercial Counsellor's Office of the Embassy of the Republic of Türkiye in Abu Dhabi: Provides information and guidance on the UAE market.
Dubai Chamber of Commerce and Industry: Provides information on doing business and setting up a company in the UAE.
UAE Ministry of Economy: Provides information on company formation and licensing procedures.
Turkish Business Council Dubai: https://www.instagram.com/turkishbusinesscouncildubai?igsh=MWt4aDlkaHd5MGtucw
Free Zones: Each free zone offers information and support on company formation and doing business on its own website.

What are some other important points of information?

English is used on a large scale in the UAE business world. Since expatriates make up the majority of the population, Arabs also speak English, and Arabic is a second language rather than a mother tongue.
Since foreign companies make up the majority of the companies that steer the economy and are established there, decision-making processes are integrated with international standards.
The UAE Dirham is pegged to the US dollar.
Credit cards and cheques are widely used.
There is no trade union organisation in the UAE.

Trainee Attorney at Law Nazlı Kayalar