Dubai is a vibrant country located in the middle-east region. Its world-class infrastructure & economy attracts many foreign investors. Another reason why Dubai is an investor magnet is that the country ranks number 1 in the world banks’ ease of doing business index for 2014. Hence, Dubai is a great place to invest in a business. Dubai is also a country with high living standards hence we see a large expatriate community living here. The official currency is the dirham (AED). The valuation of their currency is 1 USD = 3.67 AED.
Speaking further about Dubai, it is a liberal Arabic country. And that is why Dubai stands out far more than the surrounding neighbors. It is a melting pot of different cultures. Even though Arab Muslims are the majority in Dubai, they have a more liberal way of thinking. The hordes of Europeans, Americans & Asians seem to be the reason why there is more freedom than their neighboring counterparts.
There are three main categories in which you can open a company:
This article intends to elaborate & educate you on how to start an LLC in Dubai as a foreigner.
This is the simplified step-by-step process of limited liability company registration in Dubai, UAE:
Step 1: Decide on a local partner.
- Do you want him to assist you in government procedures?
- Do you want his name on the license? (as a silent partner)
- What fees do you intend to pay to your sponsor?
You and your sponsor must have a good rapport to ensure the smooth function of the company.
Step 2: Naming and Business activity approvals from Department of Economic Development (DED)
Step 3: Look for suitable premises & sign the tenancy contract agreements
Step 4: Prepare a memorandum of Association (MOA) with the sponsor and submit to DED
Step 5: Submit MOA & license application at DED along with legal documents & tenancy contract.
LLC formation in Dubai is a simple and hassle-free process. LLC is the most common business entity in the Country. The rules & laws of LLC registration in Dubai is the same as all around the world. You must have 2 – 50 shareholders to form the company.
As the name suggests, a limited liability company means the owners’ personal wealth is protected. This is the most important feature in this type of business entity. In the case of debt incurred, the shareholder’s liability limits to the share capital value. Hence the shareholders need not involve their personal assets to the company.
A limited liability company acts as a separate unit from its’ owners. Comparatively, there is less paperwork involved in forming an LLC. The rules revolving around an LLC is a little less strict than of other entities. One significant benefit is, holding Annual General Meetings & filing annual reports is not required.
Attractive business ideas in Dubai
Even though there are endless opportunities for you to start a business, we find that the following business ventures are most lucrative.
We all connect to each other irrespective of the physical distance through the use of the internet. E-commerce in short is doing business on the internet. You can buy and sell products & services on the internet. M-commerce is similar to E-commerce but with the use of a mobile device. E-commerce is a profitable venture in Dubai. It may not be as popular like in the west. However, there is so much room for improvement. As you are aware, Dubai is a tech-savvy nation. With the proper approach, you can be sure E-commerce will be very profitable.
It is a known fact that Dubai is high on building & renovating. They want to keep their infrastructure up-to-date & modern at all times. Hence, building & construction companies will never run out of business in the region. If you are thorough in construction and can deliver a quality service, you will be extremely rich in the land of camels in the near future!
Business Consultancy service
Like you, many want to see that their hard-earned money is invested in the right place. There are many investment opportunities in Dubai and there are equally eager investors flocking in. This is a situation where you, as a Business consultant can help. You need to be knowledgeable about incorporating businesses, rules & laws, etc. You can then help the new Entrepreneurs while earning an income for yourself. It is a win-win!
Included in this area is house cleaning services, nanny services, hospice nurse, etc. Residents in Dubai are career-oriented individuals. Hence there are many opportunities in these areas. There is a demand for housemaids. It is a luxury to have a maid in an Emirati household. Thus, you can set up an agency to provide housemaids or cleaning services to these houses. There are visas available to hire maids from other countries.
This is another profitable entry. There is a large expatriate population in the UAE. And there is a demand for good schools, nurseries. Even daycares are in high demand due to the working population.
I have mentioned only the tip of the ice burg here. There are several other opportunities for you to explore and decide what suits you best. At S&F consulting, we have a team that can help you make the right choice. We will pay heed to your ideas & together we can make the best decision for your future!
All companies must adhere to the UAE Commercial Company Law (13) of 1988.
Rules and regulations for limited liability company registration in Dubai
Let us see what rules are applied for LLC company formation in Dubai:
- You need 2 – 50 Shareholders to run an LLC
- You must register your business with the Dubai Chamber of commerce & Industry
- You must get the approval of the Licensing Department of the Economics Department for the company’s commercial name
- An Emirati individual or company should own 51% equity of the company. The foreign party has an equity of 49%
- Either the local, foreign or even a third party can manage the LLC
- Distribution of profits & loss can be agreed upon between the two parties
Documents required for incorporation:
- Copy of Applicants passport (including visa)
- Registration application form from Dubai Economic Department
- Trade name reservation application
- Photocopy of UAE national applicants’ naturalization
- If applicable, the NOC (No objection certificate) of current sponsor
- Approval from Government authorities as per business activity
After you have received the initial approval, the following are the documents you need to submit:
- Initial approval receipt
- Tenancy contract for office or warehouse attested by planning department & civil department of Dubai municipality
- Location plan of same
- Photocopy of Memorandum of association authenticated by Notary public
After company formation, the next step is applying for an Investor/employee visa. This visa holds validity, of, three years to investors. To apply for an investor visa, an applicant must have more than AED.70,000 worth of shares & a refundable deposit of AED.10,000. For applicants with a share value of less than AED.70,000, the deposit amount goes up to AED.20,000.
Costs to register LLC in Dubai
Here are the estimated costs involved in LLC Registration in Dubai.
Certain costs are one time. This means you have to pay it only once at the beginning of incorporation of your LLC.
|Initial approval from the economic department||AED.220|
|Trade name approval||AED.720|
|Notary Fees for Court (according to share capital)||AED.2000|
|Typing LLC contract (In English & Arabic)||AED.1,160|
Then you have the costs that incur annually.
Total Fees for Department of Economic development per Year is AED. 3020.
Here is the break-down.
|Trade license fee||AED.600|
|Government Cultural Fees||AED.10|
|Innovation Dirham Fees||AED.10|
|Trade name advertising||AED.350|
You will pay a total of AED.12,447 as fees for external department.
|Employees Accommodation allowance||AED.1000|
|Public waste related services||AED.1000(Normal)/AED.2000(Industrial)|
|Service improvement Fees||AED.400|
|Fees for the chamber of commerce||AED.2200|
|Ministry of Economy & commerce||AED.3000|
|Smart social responsibility platform fees||AED.1500|
|Trade License (Local) Fee||AED.200|
|Fees for civil defense||AED.997|
|Commercial license (Tejari fee)||AED.200|
Some other important expenses to note are:
- Chamber of Commerce Fee AED.1200 per year for normal trading & AED.2200 for industrial company
- Foreign trade name AED.2000 per annum
- Real Estate Brokers Company Fee for Economic Department AED.5000
- General trading company formation (one-time fees): AED.15,000 onwards
- Contracting license (one time): AED.10,000
- Economic depart. Real estate broker company fees: AED.10,000
- Government charges on rented premises 5% of rent
You must take note that these are intended to give you a general idea about the costs you may face. The actual costs may differ according to activity, business type, number of partners, judicial approvals, external permissions, etc.
It may take approximately 2-4 months for an LLC in Dubai to set-up & start running.
These are the costs involved in the visa process:
|Visa procession Fee||AED.250|
|Refundable security deposit (refundable)||AED.10,100|
|Issue visa without exiting the country||AED.600|
|Visa amendment (entry stamp on a visa without exiting)||AED.600|
|Visa Stamping charges||AED.600|
Additionally, you will need to recruit employees. These are employee visa fees.
|Visa application charges||AED.250|
|Bank guarantee (refundable)||AED.3000|
|Labor Card charges (A/B/C/D)||AED.653/1553/2053/3103|
|Visa issue fees||AED.250|
|Issue visa without exiting the country||AED.675|
|Medical Fees (Normal)||AED.370|
|Visa stamping Fees||AED.560|
Once you have established your LLC in Dubai, you may want to consider living costs in the region as you will be settling there.
Living cost in Dubai
Following is the cost of living for an Individual on a low budget.
Lodging: studio apartment (AED.1500-4000)
Utilities: Electricity (AED.400), Mobile package (AED.100+)
Food: A meal from a decent low budget restaurant will cost you AED.30. So, the budget for food will be about AED 600-1200. You can lower this cost by opting to cook your meals at home. Dry rations, vegetables, fruits & proteins are not only low in price. You will find them in abundance.
Medical: Most companies have you covered with medical insurance. However, those who do not have insurance must register for a Health card. The Dubai Health authority issue these cards & you can receive healthcare at a very low cost from government hospitals. The card will cost AED.320 & you may renew it annually.
Office Rental Cost
It is mandatory to rent office space & Ejari to incorporate a Limited Liability Company in Dubai. It makes your business seem legitimate to the authorities. As it is anywhere in the world, rents tend to be higher in the capital city. Thus, an office of 700sqm in Bur Dubai will cost approximately 98,700AED per annum.
Larger offices (1000 sqm and above) are more expensive, costing around 150,000 AED per annum. Once you decide on office space you must then make a deposit to reserve it & take it off the market. The two parties can sign the final lease agreement after settling contractual terms.
Tax in Dubai
Taxation in DXB
There is no tax legislation in Dubai. Whether you are a local or an ex-pat, you will enjoy tax-free income in the Emirates. Hence, there is no Income Tax, Withholding Tax, No tax on capital gains or inheritance, no stamp duty. Dubai residents can happily receive their entire income without deductions!
BUT, contrary to popular beliefs, Dubai is not all tax-free. There are a few taxes you cannot avoid. And those are indirect taxes.
Indirect Taxes in Dubai
Dubai Tourist Tax: 10%
Council Tax: Tax on utility bills & is receiving much criticism. Because, it is for street lighting, waste management, etc. & residents pay for this through maintenance fees.
Municipality Tax: 10%, 5% on rented accommodation collected for utilities
Dubai departure Tax: This tax is added to the price of the airplane ticket that either lands or takes off from Dubai Airports.
- 4 AED Toll fee
- Knowledge Tax: 10 AED
- Innovation Tax: 10 AED
- Carbonated beverages: 50%
- Tobacco: 100%
- Energy Drinks: 100%
- Alcohol: 50% for bringing it into the country, 30% for liquor license.
Now that we have good knowledge about the formation of a business in Dubai, let us see how we as investors can benefit from starting a business there:
- First and foremost, Dubai is a financial and business hub in the world. Its’ strategic location helps to maintain successful business relationships with surrounding countries.
- Unlike free zone companies, limited Liability companies in Dubai have no restrictions on where to operate. Like any LLC company, shareholders’ liability is limited to their shares invested.
- An LLC can conduct any business with the exception of banking, insurance or investment.
- There is no restriction on the number of visas you can get.
- No restrictions on location in which you choose to operate.
- The most important benefit is, that the government has permanently waived off capital paid-up requirements.
- The local partner may/ may not be involved in your business according to the agreement between both parties. You can make your own decisions if you may.
Frequently Asked Questions:
What are the local & international banks in Dubai for foreign investors/companies?
When running a company, you will need to have a Bank account. A bank will provide you loans, manage your income & savings. There are four main types of banks in Dubai.
- Commercial Banks: Emirates NDB, Commercial Bank of Dubai
- Industrial Banks: Emirates Industrial Bank
- Merchant Banks: Gulf merchant Bank
- Islamic Banks: Abu Dhabi Islamic Bank
Which company does incorporation need special approval & license?
- Health care
- Architecture & Engineering consulting
- Shipping, freight forwarding & logistics
- Dubai world community companies (Trakhees)
- Educational Services
Please contact us if you require more information on how to open LLC in Dubai as a foreign national.