Top Challenges of Doing Business in United Arab Emirates

Top Challenges of Doing Business in United Arab Emirates

08 February 2019

Find out about how TMF Group can help you set up a business in UAE. With our extensive local knowledge we can help you set up without all the hassle.

Disclaimer: This article was accurate at the time of publishing. To obtain the most up-to-date information, please get in touch with our local experts. 

Companies looking to trade and operate in or from the UAE will typically be required to register a legal entity such as a company, branch or place of business. However, it is important you determine early what activities you want to carry out from this entity.  Every company in the UAE requires a company license which is linked to its registered activity.

In general you have two options when setting up an operational entity within the UAE.

Free zone

Under the UAE federal constitution, each emirate is permitted to set up "free zones" for general or industry-specific activities to encourage foreign direct investment. Free zone entities are not generally required to have any UAE nationals as owners. There are at least two free zones in every emirate; Dubai alone has more than 20. Each zone has its own laws and regulations, and are sometimes referred to as "offshore" jurisdictions.

The types of companies available within free zones differ, but the basic types available are:

  • Representative office
  • Branch office
  • Subsidiary (for example, companies with suffix DMCC, JLT, FZ-LLC, FZE, FZCO)

The entities established in the free zone can have 100% foreign ownership and there is no requirement for having a local service agent for a branch or representative office.

Onshore jurisdiction

These zones are ruled by federal laws and regulations.

The most common types of companies within the onshore jurisdiction for corporate clients are:

  • Representative office
  • Branch office
  • Limited Liability Company (LLC)
  • Sole Establishment/Professional License

An LLC in the onshore jurisdiction requires a 51% local UAE shareholder. A branch office, a representative office or a sole establishment in the onshore jurisdiction requires a local service agent to be their representative in front of the local authority.

Office space requirements

An entity set-up in the UAE is always a combination of license, legal entity and facility. The UAE has always been a real estate-driven economy and it is law that a company license is always linked to the size of the office space as stated in the official office space tenancy contract.

Several free zones offer flexible desk solutions to provide companies with affordable options for office space. The conditions of minimum office space differ from one jurisdiction to another. Local statutory rules will often require companies to appoint officers such as a manager, directors and a company secretary.

Company license

Every free zone specialises in a certain industry and business activity, so when you're choosing a free zone jurisdiction you need to think about the type of activity and industry of your future company.

Almost all company licenses in the onshore jurisdiction are available in any sector, but the licenses are then linked with the permitted type of entities. Some business activities are reserved for LLC and some are for branch of foreign entities.

A company license from a free zone jurisdiction allows the company to operate only within the free zone and outside the UAE, whereas a company license from the onshore jurisdiction can be used to operate in the whole UAE.

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