Are expats allowed to start their own business in UAE?

The United Arab Emirates has firmly established itself as a global magnet for entrepreneurs and investors, and yes, expats can absolutely open and successfully operate businesses here, thanks to recent progressive reforms.

New Dawn for Foreign Ownership: The Game Changer

For many years, the standard structure for establishing a business on the UAE mainland (outside of a free zone) required a UAE national to hold a 51% shareholding. This often meant partnering with a local sponsor, which, while beneficial for navigating the local landscape, sometimes raised concerns about control. However, a monumental shift occurred with the amendments to the UAE Commercial Companies Law in 2020 and 2021. This landmark reform now allows 100% foreign ownership of mainland companies across a vast majority of business activities. This means expats can now have full control, decision-making power, and profit retention without the mandatory requirement of a local partner or sponsor. This change has truly been a game-changer, significantly boosting the UAE’s attractiveness as a global business hub.

Mainland vs. Free Zones: Choosing Your Jurisdiction

When considering opening a business in the UAE as an expat, you essentially have two primary options: mainland or free zone.

• Mainland companies are registered with the Department of Economic Development (DED) in the respective emirate (e.g., Dubai DED). Their primary advantage is the ability to trade directly with the local UAE market and other mainland companies without restrictions, and they can also conduct international business. With the recent 100% foreign ownership amendments, mainland companies are now even more appealing for businesses targeting the domestic market or requiring a physical presence across the UAE. They are typically subject to more stringent regulations and often require a physical office space.
• Free zones are special economic areas designed to promote specific industries. They have always allowed 100% foreign ownership and often offer attractive incentives like 100% repatriation of capital and profits, full customs duty exemption for imported goods, and simplified setup procedures. However, free zone companies are generally restricted from directly conducting business or trading goods within the UAE mainland. They are primarily geared towards businesses focusing on international trade or providing services within the free zone itself. Choosing between mainland and free zone depends entirely on your business activity, target market, and long-term expansion plans.

Types of Business Licenses and Activities

The UAE offers a wide range of business licenses, categorized by the type of activity your business will conduct. The most common types for expats include:

• Commercial License: For businesses involved in buying and selling goods, import/export, retail, and general trading.
• Professional License: For individuals or companies providing professional services such as consultancy, IT services, legal advice, marketing, and healthcare. Many freelancers also opt for this type of license, often in free zones.
• Industrial License: For manufacturing or industrial operations that convert raw materials into finished products.
• Tourism License: For businesses in the hospitality, travel, and tourism sectors, including hotels, tour operators, and travel agencies. Each license type is associated with a specific list of permitted business activities. It is crucial to accurately define your business activity, as this determines the type of license you need and the approvals required from relevant government authorities. The DED websites in each emirate provide comprehensive lists of these activities.

The Business Setup Process: A Step-by-Step Guide

Opening a business in the UAE, while streamlined, involves several steps. Here’s a general outline:

1. Determine Your Business Activity and Legal Structure: This is the foundational step. Choose from the permitted activities and decide on your legal structure (e.g., Limited Liability Company – LLC, Sole Proprietorship, Branch Office).
2. Choose a Trade Name: Select a unique and appropriate trade name that complies with UAE naming conventions. It must not violate public morality or order, and it must not have been previously registered.
3. Initial Approval: Obtain initial approval from the relevant licensing authority (DED for mainland, or the specific free zone authority).
4. Secure Office Space (Mainland Only): For mainland companies, a physical office address is typically required. You’ll need a tenancy contract (Ejari in Dubai) for this. Free zones often offer flexible office solutions, including flexi-desks or shared offices.
5. Draft Memorandum of Association (MOA): This legal document outlines the company’s structure, share ownership, capital contributions, and business activities. For 100% foreign-owned mainland companies, a local service agent (LSA) might still be required for some professional licenses, though they do not hold shares or have operational control.
6. Submit Documents and Pay Fees: Submit all required documents, including passports, visa copies, and the MOA, to the licensing authority and pay the applicable fees.
7. Obtain Your Trade License: Once approved, your trade license will be issued.
8. Open a Corporate Bank Account: With your trade license, you can then proceed to open a corporate bank account, which is essential for business operations. This step is crucial and can sometimes take time due to bank compliance requirements.

Approximate Costs and Visa Options

The cost of setting up a business in the UAE varies significantly based on the chosen jurisdiction (mainland vs. free zone), business activity, legal structure, office space requirements, and the number of visas needed.

• For a mainland company, initial setup costs can range approximately from AED 15,000 to AED 50,000 or more, not including office rent. This typically covers trade license fees, initial approvals, and government fees. Annual renewal fees also apply.
• Free zone setups can sometimes be more affordable for startups, with packages starting from around AED 12,000 to AED 30,000 for basic licenses and virtual office solutions.
• Office space rent is a significant variable, ranging from approximately AED 15,000 to AED 60,000 annually or more for mainland offices, while free zones offer more flexible and cost-effective office solutions.

As a business owner or investor, you will be eligible for a residency visa. The UAE offers various visa types for business owners:

• Investor Visa / Partner Visa: Typically valid for 2 or 3 years, renewable. This is the most common visa for expat business owners.
• Green Visa: A relatively new 5-year renewable residency visa for freelancers, self-employed individuals, and investors in specific categories, offering more flexibility.
• Golden Visa: A long-term residency visa (5 or 10 years, renewable) for significant investors (e.g., investing in real estate or a startup), entrepreneurs, and specialized talents. This visa offers substantial benefits, including long-term stability.

Taxation and Compliance: What You Need to Know

The UAE introduced a federal Corporate Tax (CT) effective for financial years starting on or after June 1, 2023 (or January 1, 2024, depending on your financial year).

• The standard corporate tax rate is 9% on taxable income exceeding AED 375,000.
• Taxable income up to AED 375,000 is taxed at 0%.
• Qualifying free zone companies that meet specific conditions (e.g., deriving income from qualifying activities and not conducting business in the mainland) can benefit from a 0% corporate tax rate on their qualifying income.
• There is no personal income tax in the UAE.
• Businesses are also subject to a Value Added Tax (VAT) of 5% on most goods and services.
• Compliance with regulations, including maintaining proper accounting records, conducting regular audits, and filing tax returns, is crucial. The Federal Tax Authority (FTA) is the body responsible for tax administration.

Challenges and Opportunities: Navigating the Business Landscape

While the UAE offers incredible opportunities, expat entrepreneurs should be prepared for certain challenges. The business environment is highly competitive, and thorough market research is essential. Understanding the nuances of local regulations, obtaining necessary permits, and navigating banking procedures can sometimes be time-consuming. However, the benefits far outweigh these hurdles. The UAE provides a stable economic and political environment, a strategic geographic location, a pro-business government, access to a vast consumer market, and a highly skilled, multicultural workforce. The government’s continuous efforts to enhance ease of doing business, coupled with initiatives like the 100% foreign ownership law, underscore its commitment to attracting and supporting international investment.

Your Entrepreneurial Journey in the UAE

Opening a business in the UAE as an expat is not just possible; it’s an increasingly streamlined and attractive endeavor. With the recent changes allowing 100% foreign ownership on the mainland, coupled with the existing benefits of free zones, the opportunities for growth are immense. Whether you’re a seasoned entrepreneur or a budding startup, understanding the legal framework, choosing the right jurisdiction, and meticulous planning are your keys to success. This detailed guide has been thoughtfully prepared by the www.few.ae team, aiming to empower your entrepreneurial journey in the Emirates.