Things Need To Know Before Setting Up A Business In UAE

Things Need To Know Before Setting Up A Business In UAE
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January 9, 2021

UAE is an investor friendly nation, and offers an attractive tax regime to entrepreneurs. UAE’s progressive-business government administration encourages investments from small businesses to large corporations.

Let’s look in to World Bank’s ease of doing business report:

  • UAE secured 11th rank globally in the 2019 Ease of doing business report and continues to keep its score high in the areas of global ranking.

In the country economic perspective, UAE’s federal budget “UAE cabinet approved a zero-deficit federal budget of AED 61.354 billion for the year 2020”

  • 14% is allocated to infrastructure and economic resources

  • 31% for social development

  • 6.5% allocated to social benefits

  • 32.6% allocated to government affairs

This federal budget 2020 was 300X times higher since the first budget in 1971 and also “with zero deficit” for the third consecutive year.

From the economic point of view, the federal budget witnessed the UAE’s welcome note for investors and entrepreneurs to progress their business growth and development.

Everything To Know About Taxation

Taxes play a pivotal role when it comes to managing your business’s finances. There is a myth about the UAE’s taxation policies. 

          Let’s discuss more about in detail:

  • The UAE boasts zero percent on personal and corporate tax. But, except oil business and foreign banks. Oil businesses are levied tax at 55 per cent and for the foreign banks operating in their country are taxed at 20 per cent. Apart from that, Entertainment tax levied at 10 per cent. In the UAE, every restaurant and hotel levied 10% tax addition to the total bill amount.

  • The UAE’s major revenue from the exports (Oil Production) other than that literally everything is imported from other countries. So, most of the imports are exempted from the taxation except following two products:

  • Alcohol – Levied tax at 50 per cent.

  • Tobacco’s products or cigarettes are taxed at a significantly higher level at 73.54 per cent. In addition to that, all tobacco products are subject to 5% VAT( value-added tax)

Without the tax, no country is able to wheel the economy. Calling, the UAE’s tax-free is a mere statement. Typically, effective tax planning strategies help to achieve the business’s financial goals.

To Know About The Types Of Company Establishments In The UAE

In the UAE, 3 major types of company formations and choose the best fit among these zones. There are:

  • Free Zones

  • Mainland 

  • Off shores

Free Zones

Free zone is the golden egg for many young entrepreneurs and it is exclusively built for the entrepreneurs who have a feasible idea or concepts. Free zones give them a chance to kick-start their venture in the UAE. There are more than 37 Free zones in the UAE and more focused on locals.

 It offers the following features

  • 100% ownership

  • Tax exemptions with respect to federal tax policies

  • Leasing– Entrepreneurs can avail the options for 25 years of leasing options

  • Documentation process is less, and that's more favorable to foreign investors.

  • Availability of legal, housing and other immigration facilities.


 A mainland company is an onshore company licensed by the Department of economic development (DED). It is not only to operate in the commercialized local market areas but also has the option to operate outside of the UAE.

  • In terms of regulations, businesses need to appoint a local promoter or sponsor before establishing the company.

  • In terms of ownership structure,  

  • For commercial licenses: 51% shares held by a UAE National. 49% to the expat partner

  • For professional licenses: complete 100% shares held by the ex-pat partner.

  • No restriction on visas on the mainland license.

Off Shores

According to the Europe emirate groups study, “Companies are looking to secure presence from establishing the offshore business”. Generally, the offshore business stands out from the commercial activities. One of the major benefits is the income incurred from the offshore company is not taxable.

           Other attractive features of offShore Company are:

  • Freedom for operation the business

  • 100% foreign ownership

  • Setup cost of business is minimal

  • Avail the intellectual property rights like patent, trademarks, and copyrights

  • Options for opening a multi-currency bank account to operate the financial needs of the business.

  • The probability to access global funding.

Bottom Line

Execution is more important than planning for every business, but proper executions need the right strategic planning.  The above mentioned suggestions can help to kick-out the business sky-high growth.

Things Need To Know Before Setting Up A Business In UAE
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