Points to remember before starting a Business in Dubai
• Begin with preliminary research before applying for your trade license. This means attending trade shows and exhibitions, networking through Dubai’s various business councils.
• Formal process of obtaining a trade license
The formal process of obtaining a trade license through the Department of Economic Development. Regardless of what business structure you’ve decided on, if you’re an expatriate you will need a local service agent, also known as a sponsor.
- Local Partner
The law requires that you have a local partner who holds the majority interest and can therefore control the business. The local partner, be it a company or an individual, doesn’t need to contribute to the start-up investment or participate financially at all. As with self-employment, there are various ways that a partner can be remunerated. The local partner requirement is currently under review in some states, however, in order to encourage foreign investment.
- Money to Invest
When the business is registered, you must show the Ministry of Commerce that you have a substantial sum of money to invest. The required sum varies (it’s between $10,000/£6,500 and $50,000/£33,500 in most cases) and is regarded as a guarantee against liabilities; you may withdraw the money shortly afterwards!
The process is complex, meaning that local knowledge is important. You must also consult a good lawyer. An experienced lawyer will guide you through the registration and to protect your interests. This applies whether you’re opening a modest shop or a major enterprise.
- Shared Ownership
Local Partner Since non-GCC nationals are not permitted to be majority share holders outside of free zones in the UAE, a system of shared ownership has been developed in which UAE nationals formally own 51% of the company and the foreign proprietor owns the remaining 49%; details of profit and loss distribution are then agreed upon in a separate contract. Local sponsors can be individuals or locally owned businesses. For the most part, a local sponsor will not have any responsibility towards the business but is obliged to assist with all government related procedures such as obtaining permits, trade license, visas and labor cards. The local agent or sponsor’s signature will be required on most official forms.
• Depending on the legal structure of the business, the Department of Economic Development has certain capital requirements for obtaining a trade license. Those requirements are detailed in the DED’s official explanation of legal business structures on its website.
• Remember that certain businesses require separate approvals from varying government ministries before the trade application can be completed. When applying for a trade name, be sure to enquire about any external approvals that will be needed for the proposed business activity. Do note that ‘Virtual offices’ are not allowed by DED which has advised potential investors that any commercial enterprise in Dubai must have a physical address and an actual office.
Don’t let these warnings put you off. All isn’t doom and gloom.
Many people have developed successful, highly profitable businesses in Dubai. New operations are encouraged by the government and your local partner might be enthusiastically supportive. Export and manufacturing industries are especially strongly supported by government, particularly as regards the acquisition of land on which to construct a factory. If you set up such a business in a free trade zone, of which there are several in the region, it’s granted exemptions from import and export duties, commercial taxes, building and property license fees, land tax and restrictions on the transfer of capital invested in the zone.
An alternative to starting a new business is to buy a going concern, which is a more straightforward process, as it doesn’t involve lodging capital, obtaining sponsorship or registration; all you have to do is agree a price and transfer the ownership of the business.
Local Chambers of Commerce can advise about start-ups. Winning the confidence and support of a Chamber of Commerce will help your cause. Contact details are as follows:
- Dubai Chamber of Commerce and Industry, PO Box 1457, UAE
(Tel. 971-4-221 181) - Federation of UAE Chambers of Commerce and Industry, PO Box 8886, Dubai, UAE (Tel. 971-4-212 977)
Final Note:
Doing business with Arabs, you will meet with hard but polite bargaining and they are expert at bargaining. You need to be completely confident about the contents of your contractual agreement. If there are gaps, Arabs are brilliant at finding and exploiting them. Arab businessmen meet their obligations fully. The experience of doing business with Arabs is pleasant and friendly.
Remember that Arabs rarely say a direct ‘no’ to a proposition, if the response is ‘Leave it with me’ or ‘I’ll think about it’, there’s a good chance that the project will go nowhere.
Investment in the UAE
You can have complete information on investment in the UAE through the Ministry of Economy’s website.
By: Adma Dababneh
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