Why is Dubai a good place to do business?
Entrepreneur in Dubai Blog Series
By Bilal Hamdan, CEO 800Flower.ae
Hi everyone, it’s been both fun and challenging being an entrepreneur in the UAE. I have been mentoring several startups and entrepreneur’s in the region and wanted to take this opportunity to share information, my lessons learned and my experiences to help you. I will be posting as part of the 800 Flower entrepreneur series on the regular basis. Make sure to come back often to check us out. I’ll look forward to hearing from you!
Why is Dubai a good place to do business?
Businesses from all over the world have started establishing their presence in Dubai. From leisure and entertainment to banking and construction, businesses in various areas have opened their branches in Dubai. Whether you are looking for an international fashion outlet or a world-class restaurant offering exotic cuisine, you are sure to find it in Dubai.
There are various reasons why businesses are setting up in Dubai
Strategic location: Dubai is located midway between the east and the west thus linking the good of both the worlds. It has both seaport and airport that makes logistics easier. Thus, business related to international trading, import, export, tourism, and logistics can flourish successfully in this region.
- Political and economic conditions: The Dubai government has taken businesses seriously and are providing the right political and economic conditions for a business to survive. The Government in the center is stable and has a long-term vision regarding the growth of the Emirate. It provides the best in infrastructure, residences, education, health and recreation which attracts more businesses to this region. Dubai is investor friendly and starting a business in Dubai is not very difficult. Moreover, when compared to the rest of the world, Dubai is safe, both for residents and investors, which makes it one of the favorite places for investment.
- Excellent infrastructure: The country has an excellent infrastructure with a good public transport system. The world-famous Dubai metro connects the length and breadth of the Emirate. In addition to this, Dubai taxi, buses, tram, and water taxi (abra) makes transportation across the Emirate easier. In addition to this, the Emirate also has a world-class airport that makes connectivity to other countries easier.
- The existence of free trade zones: Free trade zones are areas where expats can invest in a business without partnering with an Emirati Sponsor. This gives the investors the complete freedom to run the business and enjoy the various facilities provided by a free trade zone.
- The existence of venues: If you want to hold any international conference or company meetings, finding a venue with international standards is not a difficult task in Dubai. Most of the hotels provide state of the art conference facilities along with world-class accommodation and cuisine.
- No income taxes: Dubai is an income tax-free economy ie it does not charge tax on the income of individuals. Thus, individuals who invest in the country do not have to pay anything to the government in the form of tax. There is a recently introduced a VAT (Value Added Tax). The VAT in the UAE is limited to select goods and services. Value Added Tax initially set at 5%.
- Expat friendly visa: Once you start a business in Dubai, you can easily obtain a UAE residency visa. With this visa, you can lease property, buy a vehicle and easily travel in and out of the country. Obtaining a Schengen visa for a UAE visa holder is also easy.
- Comfortable lifestyle: Dubai is a happening destination. Whether you are staying in the Emirates as a bachelor or with family, you are sure to find something interesting happening. The various relaxation avenues, eateries, parks and shopping centers make Dubai a favorite with all.
- In addition to this, UAE has a huge expat population. Finding people from various nationalities is quite easy in Dubai which also adds to its credibility as a world-class business destination.
How to start a business in Dubai?
- Type of business: First, you should decide on what business to start in Dubai. The license that you obtain depends on the type of business. The business can be a professional, commercial or industrial business.
- Ownership: There are two types of ownership of a business in Dubai. If you apply for a license in any of the free trade zones in Dubai, you get 100% ownership over the business. But if you want to start a business in Dubai outside the Free Trade Zone, then you need to find a local partner. This local partner can be an individual or company and they are not required to contribute financially for the start up. All licenses are controlled by the Department of Economic Development (DED) who can even put forward restrictions on ownership.
- Select the location: Next, you should decide on the right location for your business. The right location is one where the customers can find you easily. There are certain areas where certain types of business are popular. For eg: Al Karama area is well known for Asian eateries, Jumeirah area has a lot of Arabic and continental joints. Areas such as JLT, Media City, and Internet City hosts a number of Media and Technology companies. Once you decide on the location, make sure that all the basic facilities like storage, communication, and most importantly space is available.
- Visa requirement: You need a residence visa to set up a business in Dubai. Once you set up a business you will be provided with a certain number of visas depending on the square foot of the office space. If yours is an on-shore business, then you require the help of your Emirati sponsor to obtain the visa. First, the sponsor should apply for your visa as an investor in the business and subsequently, you can apply for the visa of your employees.
- Registration procedure: A memorandum of association(MOA) should be prepared with the sponsor and submitted to Department of Economic Development (DED) for their approval. There are various legal firms in Dubai that can help you in charting the agreement. The agreement should specify the special arrangement with the sponsor including the ownership percentage. The MOA along with the license application should be submitted to DED along with the legal documents like certificate of incorporation, passport copies of individual shareholders, director and general manager and tenancy contracts. Once submitted, you should get a license after a week.
What are the different free zones in Dubai?
Free zones are special economic zones that allow expats to establish a business without the support of a local sponsor. There are about 30 free zones in Dubai. Few of the well know free zones are:
- Dubai Airport Free Zone: This free zone has around 1600 companies spanning across various sectors like IT, electronics, Pharmaceuticals, engineering, and aerospace.
- Dubai Healthcare City: This free zone was established with the objective to provide high quality, patient-centric healthcare and to promote medical tourism.
- Dubai International Academic city: This free zone was established with the objective of providing world-class education through schools, colleges, and universities.
- Dubai Internet City: This is an information technology park where companies from around the world can establish their base and target the local emerging market.
- Dubai International Financial Center: This is the hub of financial activities and houses a number of financial institutions including wealth fund and private investors in addition to hotels and residential space.
- Dubai Knowledge Village: This is a knowledge-based free zone aimed at promoting human resource, professional learning, and education.
- Dubai Media city: This is the hub of regional media that includes new agencies, online media, production and broadcasting facilities. It is also home to the International Cricket Council.
- Dubai Gold and diamond park: This park was established with the aim to promote gold and diamond sale in the country and to woo tourists and residents.
- Dubai Silicon Oasis: This is both a residential and commercial trade zone and houses a large number of high tech industries.
- Jebel Ali free zone: The world’s largest free zone, the Jebel Ali free zone houses both offices and warehouses that cater to different types of businesses.
For operating in the free zone, you should obtain either a trade, service or industrial license from the concerned authorities.
Where can you hire employees in the UAE?
Finding the right employees and retaining them is the biggest challenge faced by most of the businesses. Even if you are running an online business in Dubai, such as for 800Flower.ae , recruiting the right employees to support you is crucial. When it comes to highly skilled workers and specialists, it’s a very competitive market in Dubai. Hence I recommend seeking the help of a reputed recruiting firm to find the right talent. They can either source talent from UAE itself, or if needed, bring them from a different country.
Small-scale business in Dubai who do not have the financial means to hire the service of a recruitment firm, can provide an advertisement in local newspapers. They can also provide an advertisement in online employment sites or free classified sites. I have found Linkedin to be really useful.
What are the costs to setup a business in Dubai?
You should have a clear idea of the cost of setting up a business in Dubai as that’s exactly the same plan I had when I started 800Flower.ae; Lack of knowledge can lead to frustration and disappointment later on.
The following costs are associated with setting up a business in Dubai. The cost of setting a business in Abu Dhabi maybe similar. NOTE: Costs subject to change
- Initial approval cost: The Department of Economic Development (DED) provides an instant license for running a business which is valid for a period of 6 months. Once you get this license, you can start operating the business while completing the documentation and other formalities. The initial approval cost comes to AED 120 and it is a one-time fee.
- Trade name approval: The trade name is the name under which you run the business. This name should be approved by DED before you start using it. There can be a slight fluctuation in the fee depending on the name selected. This fee includes various sub categories like a reservation fee, commercial name fee and foreign company name fee. The trade name approval cost comes to around AED 620 and it is a one-time fee.
- Office rent: Renting an office space is mandatory for registration as it let the authorities know that the business is legitimate. The authorities might also visit the rented office for inspection and monitor the operation. The cost of renting out an office depends on the location. Usually, the cost starts from AED 45000 per annum. This is an annually recurring expense.
- Attesting the memorandum of association: The attestation is done between the partners of the company. The fee for attestation can be different and it depends on the share capital. The average fees are AED 1800 which is a one time fee.
- Drafting the contract and attesting the court agreement: The contract for LLC is drafted in mutual agreement with both the parties. It is drafted in both English and Arabic for better understanding. Translation cost is also included. Once the contract is drafted, both the parties or their attorneys have to go to the court and sign the agreement. The cost comes to an average of AED 1000-2000 and it is a one-time fee.
- Department of Economic Development fee: The department charges a fee for registering the company. This again depends on the type of license issued. The average cost would be around AED 10,000. This fee covers the commercial license fee/ Tejari fee (AED 700), Chamber of commerce fee, commercial service improvement fee, and administrative service fee.
In addition to this, if you are taking the help of a professional for company registration, you would have to pay their fees as well.
In short, starting a new business in Dubai is not very difficult. Having a detailed business plan, a good understanding of the local business law and regulations should hopefully make it a little easier.
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