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In last week's article, we mentioned that in recent years Dubai has become a shared destination for many investors from the global business world. This week, we have prepared a question-and-answer article containing the basic information on the process of setting up a company in Dubai, UAE. Covering stages such as company formation, business plan preparation, legal documents, company name and licensing, the article provides details on mainland, free zone and offshore company types in Dubai and explains the advantages and disadvantages of each. This article serves as a legal guide for investors who wish to understand the process of setting up a business in Dubai and to proceed effectively.
In last week's article, we mentioned that in recent times Dubai has become a shared destination for many investors from the global business world. This week, we will focus on the most important issue that investors in the emirate must consider when setting up a company: the types of companies and choosing the company type that suits your business objectives. We have compiled for you the information you may need when choosing and setting up one of these companies.
How does the company formation process work?
The company formation process is as follows:
Business Plan Preparation: It is important to prepare a detailed business plan, define the vision and mission, and draw up a foreseeable roadmap.
Legal Requirements and Documents: Documents such as a passport, photographs, a business plan and application forms are required.
Company Name and Licensing: The company name must comply with Dubai's rules, and a commercial licence must be obtained according to the field of activity.
Choosing Between Free Zone / Mainland / Offshore: It must be decided which company type is advantageous.
Professional Consultancy: It is beneficial to obtain consultancy services to make the process easier.
Opening a Bank Account: A local bank account must be opened after the company is established.
Visa and Immigration Procedures: Work visas must be obtained for company owners and employees.
What types of companies can I set up in Dubai?
The main types of companies you can set up in Dubai are as follows:
Mainland Companies: Ideal for trading directly in Dubai's local market. They can operate anywhere in Dubai. Although the 51% local partnership requirement has been removed under the new law, it may still apply in some sectors. In general, 100% foreign ownership is permitted.
Free Zone Companies: They operate in special economic zones that are exempt from customs duty on import and export transactions. They offer 100% foreign ownership, tax exemptions and simplified regulations.
Offshore Companies: Used for conducting international business and protecting assets. They cannot carry out commercial activities within Dubai. They have no physical presence in the UAE. They offer tax advantages.
It should be mentioned that, although it is not attractive for foreign investors, a sole proprietorship is also one of the company types that can be set up in Dubai. A sole proprietorship is a structure owned and operated by a single person. Only UAE and GCC nationals can set up a sole proprietorship with an industrial or commercial licence. Turkish citizens can set up a sole proprietorship only with a professional licence and must sign a Local Service Agent Agreement with a UAE national for residence, visa and work permits.
What Are the Advantages of Setting Up a Free Zone Company?
Free zone companies have many advantages:
100% foreign ownership
Exemption from income and corporate tax
Low operating costs
Advanced infrastructure
Easy setup and operating process
The process of obtaining residence visas for investors and staff is also easier.
What are the advantages and disadvantages of setting up a company on the mainland?
The advantage of setting up a company on the mainland is the ability to operate anywhere in Dubai and to interact more directly with the local market. However, the requirement of a 51% local partner in some sectors may be a disadvantage.
What conditions are required to qualify for 100% foreign ownership?
To qualify for the 100% foreign ownership exemption, applicants must meet a number of conditions, including significant capital contributions, the use of technology and the employment of UAE nationals. Final approval is at the discretion of the relevant licensing authority.
What is the cost of setting up a company in Dubai?
The cost of setting up a company varies depending on the company type, the sector of activity, the need for office space and other factors. In general, free zone companies have lower set-up costs than mainland companies. On average, the cost of setting up a free zone company starts from AED 15,000, while the cost of setting up a mainland company may start from AED 25,000. For offshore companies, a cost of between AED 10,000 and AED 15,000 can be expected.
What should I pay attention to when setting up a business in Dubai?
Prepare your business plan and choose the appropriate company type and legal structure.
Research local regulations and the necessary licences.
Work with reliable local partners or consultants.
What are the main advantages of setting up a company in Dubai?
Strategic Location: Dubai occupies a strategic position linking the Middle East, Asia, Europe and Africa.
Tax Advantages: Dubai offers low corporate tax rates, income tax exemption and various tax exemptions in free zones.
Foreign Investment-Friendly Environment: It offers regulations that allow 100% foreign ownership, an easy company formation process and business-friendly policies.
Advanced Infrastructure: It offers modern transport systems, world-class telecommunications infrastructure and advanced logistics services.
What are the tax advantages of setting up a company in Dubai?
The UAE offers tax advantages for both companies and individuals. We will examine these advantages in detail in the article we will publish next week.
What are the challenges of setting up a business in Dubai?
There are also some challenges to setting up a business in Dubai:
Adapting to the local culture and way of doing business may take time.
Competition is quite high.
Visa and sponsorship regulations can be complicated.
Although the requirement to find a local sponsor has been abolished in most sectors, it may still be an obstacle for some businesses that wish to operate in the sectors where it continues to apply.
What Documents Are Required to Set Up a Company in the UAE?
The required documents may vary depending on the company type and the sector in which you will operate. However, the following documents are generally requested:
Photocopy of the passport
Passport-size photograph
Business plan
Application forms
For the important points to be observed in these documents, you can seek help from a professional who specialises in Dubai.
How Long Does the Company Formation Process Take?
The formation period may vary depending on the company type, the sector in which you will operate and the complexity of your application. It can generally take between a few weeks and a few months.
Which sectors are suitable for investment in Dubai?
Dubai has a dynamic economy that offers investment opportunities in a variety of sectors. It is a hub offering business opportunities in sectors such as tourism, real estate, logistics, finance, technology and trade. There is also growth potential in areas such as renewable energy, e-commerce and healthcare.
Can I set up a company with 100% foreign ownership in Dubai?
Yes, it is now possible to set up companies with 100% foreign ownership in Dubai's mainland and free zones. However, in some strategic sectors a local partnership may still be required.
What are the latest changes to foreign ownership laws in the UAE?
Until a few years ago, companies operating on the UAE mainland were required to have UAE nationals hold a majority share (51%). However, the new amendments introduced by the Foreign Direct Investment Law (FDI Law) allow foreigners to hold up to 100% of the shares in certain sectors. These amendments remove the requirement for UAE companies to have Emirati shareholders and local agents hold the majority when registering a company in Dubai. They provide investors in the UAE with 100% foreign ownership in companies located on the UAE mainland, that is, onshore companies subject to the policies specified by the UAE cabinet in the form of a cabinet decision.
Which sectors will these changes affect?
The new law eases foreign ownership restrictions in certain business sectors known as the “Positive List”. However, strategic sectors (such as oil and gas, telecommunications and utilities) are expected to remain subject to foreign ownership restrictions. The local licensing authorities in each Emirate will retain the discretion to impose an element of UAE national ownership.
How are the public offering rules for joint-stock companies changing?
Before the new provisions that entered into force on 1 June 2021, joint-stock companies were permitted to offer only 30% of their shares to the public. With the new amendments, this ratio has been raised to 70%.
How have shareholders' rights been affected?
The new law provides shareholders with stronger protection against directors and general managers who engage in activities that may harm the company. Shareholders now have the right to sue the company in court.
Have there been changes to the board of directors structure?
Yes, foreign nationals are now permitted to serve on company boards of directors, and meetings no longer need to be chaired by a UAE national.
Can I obtain residence by setting up a company in Dubai?
Yes, by setting up a company in Dubai you can obtain a residence visa in the nature of an investor visa. This visa is generally valid for 2-3 years and is renewable. The Golden Visa, which is issued for 2 or 10 years, is also an option that offers many opportunities.
Can I open a local bank account in Dubai?
Yes, when you set up a company in Dubai you can open a local bank account. However, local banks generally have stricter requirements and may ask for a Dubai residence permit. Alternatively, online banks may be more flexible and may allow you to open an account without a residence permit.
Should I get professional help to set up a company in Dubai?
The process of setting up a company in Dubai can be complex and requires familiarity with local regulations. For this reason, obtaining professional help from a consultancy firm or a law firm can make the process easier and smoother. There are many professional consultancy firms that can assist you during the company formation process. These firms can guide you on legal requirements, documents, procedures and other matters.
What are the commercial relations between Türkiye and the UAE?
The UAE is an important trading partner for Türkiye. Türkiye's exports to the UAE have been increasing in recent years. The trade volume between the two countries is steadily growing, and mutual investments are continuing.
