UAE: Opportunities and Challenges While Setting up a New Business

Nowadays, the United Arab Emirates’ incorporation process has evolved to be one of the simplest and most straightforward jurisdictions to incorporate a company. New laws favourable to foreign investors were implemented and digitalization had been embraced by the authorities for efficient and modern government service.

Due to UAE’s stable economy and government, the country became an ideal place for many foreign companies in the field of e-commerce, construction and infrastructure, tourism, real estate, health, hospitality, marketing, hotel and restaurants and consultancy services. 

The following factors must be considered before establishing a presence in UAE:

1. Mainland vs Freezone and activity

2. Law updates

3. Incorporation process and challenges

Mainland vs Freezone and Activity

Foreign investors may opt to establish their companies either in the Mainland or Freezones. 

A Mainland company is registered under the Department of Economic Development. The status quo allows 100% ownership by a foreign investor if the legal form is a limited liability company. This is applicable to all activities, whether commercial (e.g., trading, consumer supplies) or industrial (e.g., manufacturing and production of goods). Furthermore, external approval is required for professional activities (e.g., legal advisors, engineers, medical experts, etc.).

Another common legal form in the Mainland is a branch or representative office. A branch or representative office will require a local service agent to facilitate the administrative procedures with the authorities per se in exchange for an annual fee. The said agent is not a partner in the company nor has decision-making power.  

On the other hand, full ownership regardless of activity and legal form is being offered by more than 40 multidisciplinary free zones in UAE. Free zones have their own independent laws and regulations.

Legally speaking, a company licensed from a free zone jurisdiction must operate only within the free zone and outside the UAE, whereas a company licensed in the Mainland can perform the activities anywhere in the country.

Law updates

According to the Federal Decree, Law No. (26) of 2020 that amended some provisions of the earlier Federal Law No. (2) of 2015 regarding ownership of commercial companies onshore effective 1st June 2021, we can conclude that both Mainland and Free Zones may offer Limited Liability Company (LLC) and Branch of Foreign Company options with complete foreign ownership.

UAE will introduce Federal Decree-Law No. 47 of 2022 known as the Corporate Tax Law by 1st June 2023. Accordingly, a 9% corporate tax rate is applicable should the company’s taxable profit will exceed AED 373,000. The said rate is one of the lowest in the world. It is expected that all companies in UAE must comply with the new tax regulations. 

The new labour law in the UAE Mainland became effective on 2 February 2022. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector aims to protect both employers and employees to uphold their rights in a balanced manner. A Freezone has its own labour law and some free zones in case of conflict refer to the Mainland’s labour law.  

Incorporation process and challenges

Generally, a company can be incorporated in UAE between four (4) and six (6) weeks reckoned from the submission of original documents that are notarized, apostilled, and stamped by the UAE Embassy. Some of the Free zones like Abu Dhabi Global Market had dispensed with the notarisation and legalisation requirement. Other Free Zones are allowing for the incorporation within 10 working days, thereafter, the release of the license with the condition that original documents will be submitted within 60 days. Thus, regardless of jurisdiction, UAE authorities adopted various measures to assist foreign investors to speed up the incorporation process.  

Upon completion of the incorporation, the opening of a corporate bank account in the UAE can be a time-consuming process especially if the company structure is complex. It is advisable that foreign investors will open their corporate accounts with the same international bank in which they have already a well-established relationship to expedite this process.

Basic processes and requirements for the incorporation of a company in the UAE:

1. Choose your legal form by considering the activity of the entity to be established and the target market

2. Application for registration must be submitted before the Department of Economic Development for Mainland or Registration/Licensing Authority in the Free Zone

3. Initial approval application from the relevant authorities

4. Registered office location must be selected 

5. A corporate bank account must be opened

6. Residence visas and work permits for staff must be obtained

Considering that there are options and opportunities available in the UAE market, the challenge is for foreign investors to determine and be fully aware of the activities and target market of the business. This will ensure that the company is in the right jurisdiction, compliant with the correct activity and will be able to deliver the service or products to the right target market.

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About the Author

Stewart Adams is TMF Group’s market head of Middle East and Africa. He has over 25 years of experience in consulting and financial services in Europe, the Americas, Pakistan, Asia and the Middle East. His experience covers asset management, asset servicing, consulting, company incorporation plus tax and trust structuring.

With his 12 years of experience in the Middle East, he has developed a deep understanding of the region and the unique way to work with clients, regulators, and authorities.

In his current role as Regional Managing Director, Middle East & Africa, TMF Group he oversees strategy, client service, product, and business development plus P & L responsibilities and relationships with regulators, intermediaries and authorities. In addition to these roles, Stewart sits on multiple Boards in over 10 jurisdictions.

TMF Middle East & Africa is the largest Corporate Service Provider in the region with over 450 staff located in Dubai, Abu Dhabi, Israel, Cape Town, Johannesburg, Mauritius, Egypt, Turkey, and Saudi Arabia

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