Business Setup in Dubai: How To Get Started in 2024

The United Arab Emirates (UAE) strategic location, state-of-the-art infrastructure, and business-friendly environment are quickly turning it into a leading global business hub, especially for those looking to have their business setup in Dubai. For aspiring entrepreneurs and seasoned business owners alike, understanding the full spectrum of business setups in Dubai and the broader United Arab Emirates goes far beyond mere registration.

Before - or maybe even after - registering your business in Dubai or any of the other seven territories called emirates in the UAE or in the free zones, you may want to have an overview of the entire process.

This guide will include not only the registration of your business but also the opening of a bank account in the United Arab Emirates, navigating strict due diligence regulations, labor laws, employment contracts, processes for hiring staff, and so on.

Understanding the UAE’s Economic Landscape

The United Arab Emirates is swiftly transitioning from its label as an emerging market to a more developed economy. This transition is significant for entrepreneurs considering business setups in Dubai, as the economic diversification offers numerous opportunities outside the traditional oil sector. Though more development is to come, the UAE has already made great strides to diversify its economic base, so many seek to have their business set up in Dubai or Abu Dhabi. 

In the 1970s, the sectors outside of oil and gas contributed a mere 10% of the United Arab Emirates Gross Domestic Product (GDP). Fast forward to today, the United Arab Emirates is still an OPEC (Organization of the Petroleum Exporting Countries) member, but over 70% of the country’s GDP is now generated by non-oil industries. The United Arab Emirates’ federal budget has also increased from 40 billion AED in 2011 to nearly 60 billion AED in 2024. 

This remarkable evolution highlights the efforts of the United Arab Emirates that are successful in nurturing and developing sectors such as financial services, trade, and tourism, which have become key pillars of its economy.

Moreover, the favorable business environment of the United Arab Emirates and strategic initiatives have positioned it as a magnet for global investors and entrepreneurs. According to Kearney's Foreign Direct Investment Confidence Index, the United Arab Emirates ranks an impressive 15th worldwide and first in the region. For comparison, Hong Kong ranks 12th, Singapore ranks 16th. 

Adding to its accomplishments, in 2023, Moody’s Investors Service assigned an Aa2 rating to the quality of the United Arab Emirates credit. This means the UAE’s financial obligations are of high quality and very low credit risk. This rating not only highlights the United Arab Emirates’ financial stability but also reinforces its standing as a secure and attractive destination for investment.

Choosing the Right Business Jurisdiction

The first major decision an entrepreneur hoping to do business in the United Arab Emirates must make is choosing where to set up their business. 

There are three major setups possible in the United Arab Emirates - Mainland, Free Zone, and Offshore. 

However, offshore companies are not permitted to operate within the United Arab Emirates. They are primarily used as holding companies or as an intermediary to do business internationally. 

Thus, we will be comparing the benefits and disadvantages of setting up your business in the Mainland vs Free Zone.

📌 Note: We have a guide specifically for the company creation process in the UAE, too.

1. Mainland Companies

Mainland companies are those registered with the UAE's Department of Economic Development (DED) in any of the seven territories called Emirates. These companies can operate in any of the United Arab Emirates free zones or emirates, but they are subject to the rules and regulations of the respective zone.

For entrepreneurs pursuing business setup in Dubai within the mainland jurisdiction, understanding the nuances of local sponsorship requirements is key.

Advantages:

• No Limit on Visas: Generally, there's no limit on the number of visas a mainland company can apply for, but office space must scale up with the number of visas given.

Regulations:

• Local Sponsorship: For most businesses, mainland companies require a local sponsor (a UAE national) who owns 51% of the shares, except in certain professional or service sectors where 100% foreign ownership is allowed. However, full foreign control of the company is possible in all cases, given the right legal agreements. 
• Office Space Requirement: Mainland companies must have a physical office in the United Arab Emirates.
• Financial Audits are mandatory.

2. Free Zone Companies

Free zones are special economic areas offering tax exemptions, customs duty benefits, and less stringent regulations. In simpler terms, businesses here pay fewer taxes and can import and export goods more cheaply. Each free zone is designed around one or more business industry categories and only offers licenses to companies within those categories.

The unique advantages of Free Zone companies, such as 100% foreign ownership and tax exemptions, make them an attractive alternative to those looking to have their business setup in Dubai or the UAE, catering specifically to international businesses looking to capitalize on the UAE's strategic location. Dubai's free trade zones generated a total of $118 billion in trade value in 2017. The Jebel Ali Free Zone (JAFZA) accounts for almost 32% of the foreign direct investment flowing into the UAE.

Advantages:

• 100% Foreign Ownership: Free zone companies can be 100% owned by foreign nationals.
• Tax Exemptions: No import or export duties, personal income taxes, or corporate taxes (for a specified period, often renewable).
• Simplified Setup Process: Generally, the process of setting up a business in a free zone is quicker.

Regulations:

• Business Operations: Primarily, free zone companies are allowed to do business within the free zone or outside the UAE. Conducting business on the mainland directly requires the appointment of a distributor or service agent.
• Visa Limitations: The number of visas may be limited, up to 7 at times.
• There are no mandatory financial audits.

While this is the first major decision, there are still numerous nuances and differences in each of the free zones and emirates, reflecting the diverse economic landscape of the United Arab Emirates. It is recommended to find a local partner in the UAE or a consultant to assist with the details. 

Business Registration Process

After you have selected your jurisdiction, you may begin registering your business in the United Arab Emirates. 

After following these steps, you should be able to collect your business license at a Department of Economic Development center or online for an electronic copy. 

💡 Tip: General trading companies face higher scrutiny due to their frequent use of illegal activities. It’s recommended to choose a more niche business activity for your convenience, if possible.

UAE’s Legal System and Regulatory Compliance

The UAE's legal system is a mix of civil law principles and Islamic Sharia, heavily influenced by Egyptian law. Sharia is a set of laws and guidelines based on the Quran. Civil law here refers to legal systems like the Egyptian and French civil law systems. Civil law systems commonly have adversarial systems, where opposing parties present their arguments and evidence to a neutral judge. Civil law systems usually have a comprehensive set of written laws that govern matters from contracts, property, and family relationships. These laws are codified by the government. 

In the UAE, federal laws have supremacy over individual emirates' laws, except in areas not exclusively reserved for the federation. There is no system of precedent, but judgments of higher courts have a more persuasive impact.

The UAE features a combination of federal and emirate-level courts. Some emirates have their own local judicial systems, while others are integrated into the federal judicial structure. The Dubai International Financial Centre and Abu Dhabi Global Market have their own courts, modeled on the English judicial system.

Parties can generally choose foreign laws for contracts, subject to certain exceptions. Disputes can be submitted to various courts or arbitration centers within or outside the UAE, with several treaties facilitating the enforcement of foreign judgments.

Intellectual Property

In its quest to become a hub of innovation and entrepreneurship, the United Arab Emirates places a high priority on safeguarding the interests of innovators and creators. To this end, the nation has implemented a range of laws and regulations dedicated to the oversight of intellectual property rights (IPRs), ensuring that entities conducting business within its borders are afforded the necessary legal safeguards for their intellectual property.

The UAE acknowledges a variety of IPRs, including patents, trademarks, copyrights, geographical indications, industrial designs, trade names, trade secrets, domain names, and rights related to plant varieties. Many of these IPRs are secured through a formal registration process with the relevant UAE authorities.

Protecting intellectual property is a key concern for any business setup in Dubai and Abu Dhabi, especially – particularly so for those in creative, technological, and innovative sectors. 

Taxes

The corporate tax rate is set at 9% but could be 0% for income less than AED 375,000 or if your business is registered in a 0% tax zone, which is mainly in the Free Zones. In mainland companies, financial audits are mandatory, but in the free zones, they are not always mandatory.

Employment

Emiratization

• The UAE is committed to increasing the employment of UAE nationals in the private sector. Recent initiatives require companies with 50 or more employees to increase the number of UAE nationals by 2% annually until it reaches the 10% Emiratisation target by 2026. Non-compliance may lead to fines and other penalties​​​​.
• While free zones generally offer greater flexibility with visa allocations, there's typically a maximum of 6-7 visas for foreign workers per company in many free zones, sometimes contingent upon the office space leased by the company.

Employment Contract and Termination

• Employment contracts must be of fixed term, with no limit on the term length, and can be renewed indefinitely. 
• Employers can dismiss employees without notice for the reasons stipulated under Article 44 of the Labor Law, including fraud, substantial material loss to the employer, safety violations, failure to perform basic duties, divulging company secrets, and more​​​​.
• Employees can terminate their employment without notice under specific conditions related to the employer’s conduct as outlined in Article 45 of the Labor Law​​.

Working Hours, Compensation, and Benefits

• The UAE has a standard working week of Sunday to Thursday, with Friday (and sometimes Saturday) as the weekend. Employees are entitled to at least one rest day per week and are compensated extra for working on rest days​​.
• There is no statutory minimum wage, but the Wage Protection Scheme ensures timely payment of agreed wages through banks or approved financial institutions​​.
• Tax and social security contributions are not applicable for private sector employees, though UAE and GCC nationals are entitled to pensions. Employers in Abu Dhabi and Dubai must provide private health insurance to their employees​​​​.

Leave

• Employees are entitled to a maximum of 90 calendar days of sick leave per year, with varying pay conditions depending on the length of the sick leave taken​​.

Setting up a Business Bank Account in the UAE

Moving on choosing the right bank is not only a critical step for business setup in Dubai but also for all the territories and zones. This is not about finding a place to store your money for your business in the UAE. It's about selecting a financial partner that offers a suite of services tailored to your business needs. This is why a corporate account is separate from a personal one. 

From basic banking to specialized financial solutions, your choice will impact your business's operational efficiency and growth potential.

Not all banks provide basic banking facilities in the UAE. This may mean that you need to have multiple bank accounts - but that actually is a good practice, no matter where you are.

A good bank should be able to offer most or, ideally, all of the following: 

Loan facilities and credit can be a lifeline for your business. While trade finance services will be important when your business needs to expand or engage in more projects. Having treasury services is important, especially since your business should invest its free cash immediately.

Business Bank Account Types

Documents Required to Open a Business Bank Account

When opening a business bank account in the UAE, in general, you must prepare the following documents:

• Trade License: This varies by business type and location (mainland or free zone).
• Memorandum of Association: Should specify banking authority.
• Recent Bank Statements: Should be up to six months or more prior.
• Invoices
• Office Tenancy Contracts or Proof of Physical Presence
• Shareholder IDs
• Business Plan

💡 Good To Know: All bank eligibility processes are different. Some banks don’t accept certain license types. Some banks do not accept businesses engaged in certain business activities. If you are working with a good local partner, they should be able to advise you on this.

Securing Office Space and Infrastructure

First, determine your needs. You may have already decided whether your business would be best suited for being in the mainland or the free zones, but there are seven emirates and over 40 free zones to choose from. 

Emirates

The largest emirates are Abu Dhabi and Dubai, which should be a starting point. Abu Dhabi produces the most oil and gas and is one of the largest energy producers in the world, while Dubai has diversified its economy beyond oil and gas into business, trade, and tourism. But as you look more into the other emirates, you may find them to be more of a fit for your business. For example, Ras al Khaimah and Fujairah have grown to be focused on agriculture and fishing. 

Free Zones

There are many nuances and specific advantages and disadvantages to each specific free zone we recommend you look into partnering up with a local consultant to finalize your decision. For example, if you are in medicine, the most appropriate free zone for you might be Dubai Health City. If you are in tech, you might prefer the Dubai Silicon Oasis. 

Visa and Residency Requirements

Navigating the visa and residency requirements is a key aspect of business setup in Dubai, ensuring that your workforce complies with the UAE's immigration policies and contributes to the smooth operation of your business. For foreign entrepreneurs and businesses in the UAE, navigating visa and residency requirements is a key step in establishing a legal presence and operational workforce. The UAE is likely one of the most expat-friendly nations in the world. Only about a tenth of the population in the Emirates are ethnic Emirati citizens.

Here are three types of visas for foreigners seeking to work and live in the UAE.

Standard Work Visa

In the UAE, the typical employer-sponsored work visa enables foreign individuals to reside and work within the country as employees for up to three years, with the necessity for the employer to either renew or terminate the visa upon its expiry.

This form of work visa is the most common for employing skilled workers in the UAE. You will need a formal employment agreement and endorsement from the Ministry of Human Resources and Emiratization (MoHRE).

Prior to their arrival in the UAE with a standard work visa, an international applicant is required to formally accept a job proposal and secure an entry permit. This permit facilitates their entry into the UAE, setting in motion the procedure to formalize their work and residence visas.

Green Visa

In October 2022, the UAE launched the Green Visa, designed to attract and facilitate the stay of foreign freelancers and self-employed professionals within the UAE. This visa provides a five-year residency without the need for sponsorship from an employer, distinguishing it from the conventional UAE work visa.

The Green visa allows for the sponsorship of immediate family members to join the holder in the UAE. It is valid for 5 years, generally. It also provides a six-month grace period in case of visa expiry or cancellation. 

The application for a Green visa requires various documents, which may differ based on the applicant's professional category. 

Generally, applicants must provide a valid employment agreement or a self-employment license from the MoHRE, evidence of academic qualifications, and proof of adequate income to support their stay in the UAE.

Golden Visa

The United Arab Emirates (UAE) has established a forward-thinking and inclusive approach to attract and retain global talent and investors through its Golden Visa system. Valid for five to ten years and automatically renewable, the Golden Visa not only simplifies the residency process but also underscores the UAE's commitment to nurturing a thriving ecosystem of innovation and business excellence.

Investors can qualify for the Golden Visa by demonstrating a substantial financial investment in the UAE, such as owning real estate worth at least 2 million dirhams or having a business with a minimum capital of 2 million dirhams. 

Entrepreneurs with projects valued at 500,000 dirhams or more, or those recognized by UAE-accredited business incubators, can also apply. 

Additionally, professionals in priority scientific fields, top-performing students, and those with unique talents in culture, art, and sports are eligible for this visa, subject to meeting specific criteria such as recommendations from relevant UAE authorities and proof of health insurance.

💡 Tip: You may also use this official UAE government eligibility quiz to figure out for which visa(s) you may be eligible. 

Helpful Links

You may find it helpful to be reminded of all these links to official UAE government portals:

Cultural Insights: Doing Business in the UAE

There are many aspects to doing business in Dubai or Abu Dhabi or the broader UAE area that many expatriates or non-Emiratis can sometimes under-consider. 

Women in the UAE

In the past, Muslim women may have needed to secure permission from a male guardian—be it their father or husband—to work or start a business. The UAE government has been working to combat gender discrimination. Women's presence in the business sector is growing, albeit slowly. Right now, women helm about 10% of businesses in Dubai’s private sector. 

Expanding on women's roles in the UAE's economy, it's worth noting that the government has initiated several programs aimed at empowering women and ensuring their active participation in various sectors. These efforts highlight a commitment to enhancing gender equality, although the journey is ongoing.

Quality of Life

Beyond the legal and financial considerations of doing business in the UAE, the lifestyle and quality of life offered play a significant role in attracting global talent.

Dubai and Abu Dhabi, the UAE's most illustrious cities, offer a lifestyle replete with luxury and modern conveniences. From the Dubai Mall to the Burj Khalifa and from the various souks (markets) to the Museum of the Future, residents have access to a world-class living environment and a rich tapestry of experiences. 

Nevertheless, the quality of life in Dubai, Abu Dhabi, and across the UAE is distinguished by its mix of traditionalism and modernity. While healthcare and education are excellent, living costs can be high. Social life often revolves around expatriate communities, and while this can offer a sense of familiarity, it may also limit deeper engagement with the local culture. The UAE’s cultural norms may also impose lifestyle restraints, such as religious dietary restrictions on pork, dress codes, and other Sharia law prohibitions.

Business Etiquette

Understanding and respecting local business etiquette is paramount for success in the UAE. Relationships and trust are the cornerstones of the Arab business world, necessitating a more personal approach to professional dealings. It's common for business meetings to start with prolonged greetings and personal inquiries, reflecting the value placed on relationship-building.

Dress codes are conservative, and punctuality is highly regarded, reflecting respect for one's counterparts. Additionally, the Islamic practice of prayer five times a day is observed by many Emiratis, which can influence business hours and meeting schedules. Recognizing and accommodating these practices can significantly enhance business interactions.

🔍 Already captivated by Dubai's potential? Before making your final decision, dive into our comprehensive analysis of Singapore vs Dubai. Then continue your exploration by comparing Singapore to Hong Kong. 

Conclusion

The journey from conceptualizing your business idea to operationalizing it in the United Arab Emirates involves meticulous planning and strategic decision-making. The choice between mainland and free zones, understanding the legal and regulatory framework, navigating the banking sector, securing the right (foreign) talent, and ensuring compliance with local laws are all crucial steps on this path. 

Success in this vibrant marketplace requires more than just a solid business plan; it demands an in-depth understanding of the local business landscape and a proactive approach to embracing the opportunities and challenges it presents. With the right guidance, resources, and determination, setting up your business in Dubai or in the broader United Arab Emirates can be the beginning of a rewarding journey toward achieving your entrepreneurial goals.