Dubai is the new frontier for both multinational companies and small companies battling it out to get a market share of the investor friendly United Arab Emirates. Just how does one start and what are the requirements for setting up a business in Dubai?
One important requirement when stating a business in Dubai mainland which comes under the direct implementation of license by DED is to have a UAE national who acts as a local sponsor. All the foreign companies operating businesses in Dubai are required to have legal documents stating that 51% of the company is locally owned. This leaves the company with only 49% ownership. However, businesses can have an MOU with the local sponsor and negotiate a deal that is favorable to the investor by signing the investor protection agreement or safe agreement.
For professional services, a company requires a local agent (so called Wakeel Khidmaat) who only acts as a representative when drafting LSA Local Service Agent Agreement and verifying that the company has other legal business documents required in Dubai. If the professional license contains more than one owner , the company status is called as Civil Company.
There are three types of licenses issued in Dubai:
- Professional License:
Professional License is issued to (including but not limited to) the service providers, professionals, artisans and craftsmen, Cafeteria, Businessmen Services or Document Clearing, Consultancy Services (All types), Carpentry, Cleaning Services which can later be formed as LLC if there is an addition of other activities like Technical Services), Garage, Internet Content Provider, Computer Graphic Design Services, printing and publishing, repairing-watch/mobile etc…, Saloon (gents and ladies), Typing & Photcopying, Training (all types), Security Services, Web Design, Gents Tailoring, Ladies Tailoring, Gents Wears Tailoring & Embroidery Workshop, Shoe making, Publishing of books and other publications, Typesetting Services, Design and Artwork Services, Audio & Visual Records Recording, Audio Cassettes Recording, Video Cassettes Recording, Metal Doors, Windows Making & Fixing, Agriculture, Metal Products and Engraving, Blacksmith & Welding works, Dental Laboratory, Ships & Boats Repairing, Ships & Boats Maintenance Services, Furniture Upholstery, Stamp & Seal Making, Electrical Fittings & Fixtures Services, Sanitary Installation & Pipes Repairing and other related services, Fishing Net Making, Auto Air-Condition Repairing and Maintenance, Auto Denting & Painting, Car Washing & Cleaning, Motorcycles Repairing, Birds Training, Musical Instruments Repair and maintenance, Dates Seller, Shoe Polishing, Tobacco Seller, Fish Seller, Meat Seller, Fruit & Vegetable Seller, Publications & Stationery Outlet, Beverages Canteen, Electric Household Appliances Repairing & Maintenance, Electronic Instruments, Devices & Equipment Repairing, Air-condition Repairing and maintenance, Telecommunications Equipment Repairing, Mobile Phone Repair, Curtains Preparing & Fixing, Shoe Repairing, Jewellery Repairing, Watches & Clocks Repairing, Locks Repairing, Restaurant, Coffee Shop, Cafeteria, Sandwich Shop, Juice & Soft Drinks Shop, Ice Cream Shop, Fish & Seafood Cooking, Sweets & Candies Preparing, Money Order, Delivery Services, Financial Analysis & Consultancy, Banking & Finance Consultant, Insurance Consultancies, Business Center, Computer Consultancies, Network Consultancies, Information Technology Consultants, Internet Consultancy, Computer Graphic Design Services, Data Entry Services, IT Infrastructure, Internet Services, Computer Repairing & Maintenance, Photocopiers Repairing & Maintenance, Public Networking Services, Lawyers & Advocates, Legal Consultants, Auditing of Accounts, Accounting & Bookkeeping, Marketing Research & Consultancies, Marketing Management, Real Estate Consultancies, Management Consultancies, Human Resources Consultancies, Spa & Fitness Clubs Consultant, Technical and vocational secondary education , and many other activities that comes in the context of Professional License.
- Commercial License:
If the activity type is Commercial, the license is issued under the following business section which covers multiple groups and activity names and few of them require special approvals from governmental authorities
a) Agriculture, Hunting & Forestry
Activity: water well drilling contracting
c) Electricity, Gas & Water Supply
d) Financial Intermediation
e) Hotels and Restaurants
g) Mining and Quarrying
h) Other Communities, Social and Personal Service Activities
i) Private households as employers and undifferentiated production private households
j) Real estate, renting and business activities
k) Transport, storage and communications
l) Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods
- Industrial License:
Whereas Industrial License covers the following business categories:
a) Agriculture, Hunting & Forestry
Activity: Charcoal Production & Packaging
b) Electricity, Gas & Water Supply
d) Mining and Quarrying
e) Public administration and defence; compulsory social security
f) Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods
Tourism License is a special type of license which covers following business categories:
a) Hotels and restaurants
Activity: Five Starts Hotel
b) Transport, storage and communications
c) Real estate, renting and business activities
SPECIAL APPROVALS IN SOME CASES:
Special approvals may be required from other government entities prior to obtaining the license.
For example, college which comes under the group of higher education will be required the approval from Knowledge Authority and Ministry of Higher Education & Scientific Research.
Similarly, a Tourism License which accommodates the services of travel agencies and tour operators; tourist assistance activities n.e.c. under the activity of Travel Agent will be required the Committee - Tourism Approval, Committee – Approval
And a professional license under which a category of legal consultants is facilitated under the group of legal activities, accommodating the business of Real estate, renting and business activities will need approval from Legal Department, H.H. The Ruler’s Court.
Also a professional license entertains lawyers and advocates activities under the group of legal activities, require the approval of Legal Department, H.H. The Ruler’s Court.
APPROXIMATE COST OF GENERAL TRADING LICENSE BY DED
The average fee charged for general trading license by the Department of Economic Development is AED 15, 000 as at the writing of this article. However, this depends on factors such as the type of business and the tenure period since business license renewals are generally cheaper. Additional costs that may apply include municipality fees such as the municipality market fee which is charged at 5% of tenancy lease, name change and name reservation fees among others.
A physical business address verifiable by the Dubai Municipal council is also another requirement when setting up a business in Dubai. Since office space requirements are also verified by the authorities based on the type of business, the company should ensure a valid tenancy contract before applying for the business license.
These regulations are however not applicable when forming a company in the UAE Free Zones. Free zones are usually attractive to foreign investors who would like complete ownership of their businesses. They also attract 0% income tax.