Why start your business in Dubai?

Starting a business overseas can be a daunting prospect. When the foreign country in question is the UAE, however, it is anything but. The Emirates has an incredibly welcoming and supportive business environment.

That’s one of the many reasons thousands of businesses launch in Dubai alone every year. In fact, in 2020, more than 40,000 new business licences were issued in Dubai despite the pandemic. 

With an expat community making up around 85% of the country’s population, many of these new businesses are set up by international entrepreneurs.

If you’re considering adding to that number, here’s everything you need to know about starting a business in Dubai – from the key benefits, to choosing a company name and applying for licences and visas.

Benefits of starting a business in Dubai

There are plenty of reasons why thousands of entrepreneurs over the world flock to the UAE and Dubai to do business. These include:

Low tax

The UAE still proudly boasts zero tax on both personal and corporate income. The only significant tax to be aware of in the Emirates is Value Added Tax (VAT) – introduced in January 2018 – which stands at a flat rate of 5%.

Set up in a free zone and you’ll also benefit from 100% repatriation of capital and profits, no currency restrictions, and 100% import and export tax exemption.

What does this mean for entrepreneurs?

Tax is a major outflow for most businesses in other parts of the world. When cashflow is tight in the early days of a startup, it can be a significant expense.

Not so in the UAE, where you’ll pay zero tax on both your personal and corporate income. This not only improves the profitability of your operation, but it also gives your business much more liquidity, potentially improving your cashflow and leaving you with more disposable income to reinvest in your company.

Startup support

The Emirates is home to many funding initiatives designed to accelerate business growth. The AED 2bn Mohammed Bin Rashid Innovation Fund, for instance, helps finance innovation projects and offers expert guidance and support to turn business ideas into reality. Many of the UAE’s free zones also feature startup incubators and venture capital forums aimed at helping small businesses grow and find funding.

The UAE government is also committed, by law, to award at least 10% of government contracts to small businesses every year. Meanwhile, Dubai recently unveiled its plans to shorten payment cycles for SMEs in an effort to increase liquidity and promote growth.

What does this mean for entrepreneurs?

An environment that is set up to help businesses grow means you’re never short of options whether you’re looking for advice, mentorship or even funding.

And clearly, it is a system that works – SMEs account for 95% of the enterprise population in Dubai and contribute 40% to the Emirate’s GDP.

Vibrant economy

The Emirates is home to the second largest economy in the Arab world, with a GDP of around AED 1.5 trillion (USD 421 billion), behind only Saudi Arabia.

In addition, it has a diversified economy where non-oil and gas sectors account for 70% of its GDP. From numerous industries such as healthcare and hospitality, to technology, trade and banking, the UAE has a growing economy that presents many lucrative opportunities for both aspiring entrepreneurs and companies looking to expand internationally.

This has led the Index of Economic Freedom to praise the UAE economy for its “broad-based and dynamic growth… underpinned by continuous efforts to strengthen the business climate, boost investment, and foster the emergence of a more vibrant and diverse private sector.”

What does this mean for entrepreneurs?

A large and diverse economy presents a wide range of opportunities for entrepreneurs. A strong economy promotes trust and encourages investment – businesses are happier to invest in new offerings and the cycle of economic stimulation continues.

A strong economy also tends to lead to higher wages. In the UAE, wages increased by 3.9% in 2019, leading to a net positive increase in disposable income – great news if you’re selling straight to the consumer.

Strategic location

Dubai’s location makes it the ideal hub from which to trade with the vast markets of East and West. Its time zone overlaps with that of many global business cities and its two busy airports put one-third of the world’s population within a four-hour 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 heart of the Middle East affords it a time zone that overlaps with the working day of most leading business cities in Asia, Africa, Europe and the east coast of America.

The Emirates is also home to two of the world’s busiest airports – Dubai International and Dubai World Central – offering direct passenger and cargo services to much of Asia, Africa and Europe – and even as far afield as the USA and Australia. If you’re looking to import or export, the UAE is also well served by sea, with Jebel Ali port among the world’s top ten busiest ports.

Ready to start your business in Dubai?

Here’s how to get things underway:

Choose an activity: Your chosen activities can affect where you can set up, so this needs to be decided upfront. The Dubai Department of Economic Development lists over 2,000 activities which your business can fall under.

Choose free zone or mainland: If you opt to set up in a free zone, you’ll benefit from 100% company ownership, 100% repatriation of capital and profits, no currency restrictions, and 100% import and export tax exemption, but will need to work with a partner to trade locally in the UAE. Set up in the mainland and you can trade directly with the local market and overseas, and take on government contracts. Additionally, new regulation now allows 100% foreign company ownership in the mainland for select activities.

Choose a company name: You’ll need to adhere to the UAE’s strict naming conventions. A company formation specialist can help ensure you meet the criteria.

Apply for a licence: Whether you’re setting up in a free zone or the mainland, you’ll usually only require a few standard documents: completed application form, shareholder passport copies and so on.

Open a bank account: With your licence in hand, you are free to open a UAE corporate bank account. You can choose from a host of international, local and Islamic banks based here in the UAE.

Apply for your visa: The final step in the business setup process is immigration and visa processing. Again, a company formation specialist can guide you through this process.