Setting up a business in the UK is fairly straight forward, but in the UAE there are certain things you need to be aware of, including obtaining a license to run a business in the Emirates. This guest blog has been written by Rav Parmar, the Managing Director of My Freezone.
Although it may seem there are so many options for when you want to set up a company in the UAE, there is one thing you must remember “Ask, ask and keep on asking”. If you are not sure take your time and get advice.
Most entrepreneurs carry out extensive internet based research and have a pretty good idea on which route they wish to take having spoken to close friends and family.
You may be aware of people who are flying in and seeing clients, conducting business and then flying out who will also tell you that they do not need a license…STOP - they do. If anyone is conducting any form of business or trade within the UAE they must have a Trade License that fits their activity whether it be a license from a FreeZone or from the DED (Department of Economic Development) from one of the Emirates.
Freelancing is a word thrown around without hesitation and in most cases you can swerve the requirement for a license, however, if you are regularly freelancing and earning a steady income then you must obtain a trade license. In this case a FreeZone License would suffice. A company would be set up in your full name and a permit issued for you to practice your freelancing and invoice correctly.
The DED is the Government Authority that overlooks the issuing of all Trade Licenses in each Emirate. Each Emirate has its very own DED Office. The general rule is that if you have a DED License from Abu Dhabi then you cannot conduct business in Dubai however, this is not policed as regularly as it should be and most companies accept licenses from other Emirates. The only time this requirement would be of importance is if you were engaging with Government entities and/or Petroleum Companies across Emirates.
The DED is split into four types of license categories:
Professional – Owned 100% by you in industries such as Marketing and Consultancies. A Local is present in the set up but only as a Service Agent whereby he does not own any of the shares.
Commercial – Ownership is split 49% with you and 51% with the local. This license is used mainly in trading and service activities.
Manufacturing – Ownership again is split with a Local at 49% and 51% with the Local owning the larger share. As the name suggests the activities here would mainly be in the manufacturing arena.
Industrial – Ownership here follows suit with the same share split.
It is possible to eliminate the ownership being split with a local but, you will need to incorporate an offshore or freezone company first and then open a branch set up with the DED and the local will act again as a Service Agent. These types of set ups can be quite lengthy and confusing as it involves layers of incorporation and share splits and must prepared and executed in the correct way to avoid any rejection from the Authorities upon final approval.
There are of course freezones where as an expat you can own your company 100%.
There are several freezones catering for specific types of industries. There are also freezones that will cater for all types of activities. You will find that most freezones in Dubai will give you the 100% ownership, however you will also need to pay for an office space or a flexi desk. Flexi desks can be a good part of the deal but only if you intend to turn up every day and use them.
A freezone setup does not have to be difficult and most cases it is not. Recently some of the freezones have tried to become “Tech Friendly” but this has unfortunately resulted in delays as the authorities go through the teething process. There are some zones that are able to turn the license process around within a matter of days and others that can take weeks due to the sheer volume of applications. Again here as well there is some “Red Tape” and it is very important you find yourself the correct agent to take you through the process.
Some zones will have restrictions on how many visas you can issue, or how the visa process will work. Some may even restrict the activities you can have and how many you can have. During the life of your license you may wish to amend the underlying documents – be careful here to not be shocked with high “Amendment Charges”.
For any Entrepreneur it is vital you understand the Do’s and Don’ts of the licensing procedures so that you do not get caught in the future when you wish to expand or change your budding enterprise.