7 Questions to Consider When Setting Up a Company in the UAE

Seen as one of the most metropolitan countries in the world, The United Arab Emirates has become a host to brands and businesses from each corner of the globe. However, setting up a business here can be rather time consuming and tedious if you are unfamiliar with the country and its policies. The UAE requires a specific method for setting up companies, with various legal documentation and approvals by different governing bodies which has proven to be confusing.

To avoid wasting time and money on your new business venture, or before attempting to take on the formalities in your current country, read the below 7 Questions a business owner must consider when setting up a company in the UAE.

1. Type of Business Activity and License

As a first point, it is highly crucial to decide the business activity of the company as it will determine the license it will be registered under. The license could be either:

• Professional
• Commercial
• Industrial

Depending on your choice of the above, there will be a specific license within each title. Remember that certain industries such as Oil & Gas, Banking or Legal Firms must receive special approval from government departments prior to the license being issued.

You can research more about the licensing requirements on the Economic Department website for the emirate you are interested in doing business in.

2. Legal Form and Ownership

Choosing a specific company structure will be the next step, depending on the location and activity you have chosen to pursue. The two options are a Mainland LLC or an offshore Free Zone.
The main question that needs to be asked is; do you want sole ownership of your company?

If the answer is yes, than as a foreign investor you must choose the offshore Free Zone option. All Free Zones have their own distinct and separate rules and regulations when setting up a company. These Free Zones could be the Jebel Ali Free Zone or the DIFC as an example, each offering a different range of activities, opportunities and fee’s in order to do business.

On the other hand, if you are wanting to set up a Mainland LLC, you must obtain a license from the Department of Economic Development from within your chosen emirate and partner with an Emirati national who sponsors the business and owns a majority 51% of the business, as required by UAE laws.

3. Choosing a Local Sponsor or Agent

If you decide to pursue the Mainland LLC option, choosing the right local sponsor is one of the most important business decisions you will make in order to have a good working experience in the UAE. A helpful and knowledgeable local sponsor can aid in support, giving your company a boost to achieve its goals.

For the companies based in Free Zones, finding a local sponsor is no necessary.

4. Picking a Company Name

Choosing a trade name is also an important consideration. Make sure the company name is related to the nature of the business as it must be approved by the authorities of each emirate.

5. Hiring Employees

The UAE law requires you to hire a manager to oversee all business operations once registration has been approved. For companies based in Free Zones, each authority has its own specific regulation hiring employees.

6. VAT & Business Taxation

Value Added Tax (VAT) is a consumer tax that is charged at 5% of the actual cost of goods.

Tax Threshold
To determine if you will register for VAT, you must surpass the tax threshold which is as follows:
o It is mandatory to register for VAT if your annual turnover exceeds AED 375,000
o It is voluntary to register for VAT if your annual turnover exceeds AED 187,500

What is VAT charged on?
VAT is charged on the supply of Goods and Services.
o A supply of goods would be anything physical that one can acquire ownership over
o A supply of services would be a non- tangible product such as the supply of electricity

7. Legal Assistance

If the process is seeming to be difficult, or you are not currently within the UAE, hiring a law firm to assist you in your business set up would be advantageous.

Our lawyers at MAK & Associates will guide you through the legal processes from aiding in decision making on corporate structure, filling out proper legal documents and properly setting up the company, making it as easy as possible. We routinely advise on complex, high-value projects and can provide a full range of corporate solutions to our regional and international clients.

If you’re interested in learning more you can read on our Corporate capabilities or Call Us at 04 336 8833 and email at info@alkhoulilaw.com

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