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Setting up a business in Dubai

The respective authorities in Dubai had worked hard to create such kind of environment that it is neither suffocating nor hard and fast for anyone to run a business there. Instead, they are being offered such conditions that allow them to run their business independently with certain set of rules and in an ethical and dignified way.

There is a vast spectrum of opportunities for many companies who wish to collaborate with Dubai to run their business.

The key to run a business successfully is to maintain a good personal relationship with the business partner. This factor is taken more seriously in Dubai than in any other state. The stronger the relationship is, the more they can invest in it, hence making it more successful.

Licensing:

There are three kinds of licenses which are required to do any kind of business activity in Dubai:

  • Commercial licenses, which covers all the acts of trade into it.
  • Professional licenses, which are responsible to cover all kinds of professions a person opts for themselves.
  • Industrial licenses, which are responsible for forming any kind of activity which are related to any industry or manufacturing units.

 

All of these licenses are granted to the people by the Dubai Department of Economic Development. But there are licenses of certain categories that still uphold approval from their respective or concerned authorities. Like, 

  • Banks and financial institutions from the Central Bank of the UAE.
  • Insurance companies and all the agencies that are related to the Insurance Authority.
  • Manufacturing license, that needs permission from the Ministry of Finance and Industry.
  • Pharmaceutical and medical products which needs approval from the Ministry of Health.
  • Contracting, Building Maintenance and similar activities that are related to the Municipality.
  • Transportation and vehicle rental activities from road and Transport.
  • Printing, publishing and advertising activities which required approval from the National Media Council.
  • Cargo Clearing, Cargo packaging, Canal dredging contracting and Fishing cages manufacturing activities, all requiring permission from the Dubai Maritime City.
  • Travel and tourism activities (direct approval is needed to be granted from the DED. There is no need to seek approval from the Department of Tourism and Commerce Marketing DTCM).
  • Gymnasium Club activity which needs approval from the Dubai Sports Council.
  • Social Club registration and licensing is needed to be completed from the Community Development Authority.
  • Tents, awnings and Tarpaulin manufacturing which is needed to seek approval from Environment Protection Section of Dubai Municipality.
  • Car Wash License is issued only in locations where there is a petrol filling station. It is required to sign an agreement with the respective oil company to lease the space at their filling station. Other norms on environment protection and safety have to be followed according to the standards that are given.

More detailed procedures are applied to such kinds of businesses that involves jobs related to oil or gas production.

Doing certain kinds of trades, that are related to jewelry and insurance, they all are needed to submit financial guarantee issued by a bank which operates in Dubai.

In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.

Tourism Companies:

  • For Inbound Tourism DH 100,000 to be deposited in Bank.
  • For Outbound Tourism DH 200,000 to be deposited in Bank.

These deposits are irrevocable till the license cancelled.

Travels:

For Travel Agency DH 100,000 to be deposited at Department of Tourism & Commerce Marketing. This deposit is irrevocable till the license is cancelled.

Building Contracting Companies:

For Building Contracting Company License, Dh 10,000 is needed to be submitted at the Department of Economic Development when the license issued first time.

General Trading:

For General Trading License, Dh 15,000 is paid to be extra at the Department of Economic Development when the license issued first time.

Customs Broker:

Dh 50,000 is supposed to be deposited at Dubai Customs. This deposit cannot be returned till the license is cancelled.

RTA Activities:

These are the certain fees that are needed to be paid for RTA initial approval:

  • Rent a Car: Dh 5000 
  • Bus Rental: Dh 1000
  • Passenger Transport by rented Buses: Dh 1000

Telephones & Telecommunications Equipment Trading:

DH 55000 should be paid at Telecommunications Regulator Authority (TRA). This is one time fee.

Security Service:

  • Property guard & Surveillance Services.
  • Party security.
  • Private guarding services.
  • Oilfield & Natural Gas related activities.
  • Initial approval from Ruler's Court.

Money Exchange:

Initial approval is required to be taken from the Central Bank of UAE and Department of Protective Systems in:

  • Jewelry.
  • Mobile SIM Card Trading.
  • Stamp.
  • Seal Making.

Initial approval from Department of Protective Systems is needed for the supermarket:

Supermarket:

  • For a supermarket, 2000 square feet area is required.

Electrical Fitting Contracting:

  • Minimum 360 square feet office area is required.

Cafeteria/Coffee Shop:

  • Minimum 175 square feet kitchen area is required.
  • Street Food Truck License in Dubai is controlled by Dubai Municipality.
  • Only ready-made meals and fry-ups are allowed to be served by food trucks.
  • Get No Objection Permit from Permits and Applied Nutrition section at Dubai Municipality to conduct this activity.
  • The kitchen area in the vehicle must be fit to do what is supposed to be done in there. The floors, walls and ceilings should be made of smooth materials and they should not be too hard to clean, like they should absorb water without any issue, can handle fire without any problem, should not be too brightly colored, should not be at all toxic and must be free from any bits and scraps from the wall or floor.
  • Food trucks must also provide good passage of air and lighting.
  • There should also be a double sink in the kitchen which must be near the food preparation area.
  • It is also required to provide enough and suitable places to store food which are not to be frozen after using once. Also, defrosted meats and seafood are not to be cooked there.
  • All what the food truck should be doing is to fry or heat certain foods like burgers, sausages and French fries.
  • Fruits and vegetables are not to be washed inside the vehicle. Instead, it should already be washed and sterilized in the container which should not be kept inside the truck.

The minimum area that is required for a normal, commercial or a professional shop/office is 200 square feet.

 Ownership Requirements:

Fifty-one per cent participation by UAE nationals is the general requirement for all UAE established companies except:

  • Where the law requires 100% local ownership.
  • In the Jebel Ali Free Zone.
  • In activities open to 100% AGCC ownership.
  • Where wholly owned AGCC companies enter into partnership with UAE nationals.
  • In respect of foreign companies registering branches or a representative office in Dubai.
  • In professional or artisan companies, that are consulting, educational service where 100% foreign ownership is permitted.

 

Legal Structures for Business:

  • In the past few years, Dubai use to run its business by using their own procedures to maintain and control the foreign business interests. But now, Dubai follows a general system. And that works in three ways:
  • Through a local sponsor,
  • Through a partnership with a UAE national or company,
  • Or through a private limited company or public shareholding company incorporated by Ruler's decree.

 

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organization which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures.

The seven categories of business organization defined by the law are:

  • General partnership company
  • Partnership-en-commendams
  • Joint venture company
  • Public shareholding company
  • Private shareholding company
  • Limited liability company
  • Share partnership company

 Limited Liability Companies:

In order to make a limited liability company, one must arrange minimum of two and a maximum of fifty people who are liable to limit themselves to their shares in the company's capital. The companies who do that are widely recognized as somewhere who offers a suitable structure for organizations that are vaguely interested in developing a long term relationship in the local market.

In UAE, the minimum capital requirement law was abolished on 10th August 2009. While foreign equity in the company cannot be more that 49% profit and loss distribution. In order to manage a limited liability of a company, it can be vested in the foreign or national partners or a third party.

The following steps are required in establishing a limited liability company in Dubai:

  • One must choose an appropriate commercial name for the company and have it approved by the Licensing Department of the Economic Department.
  • Get initial approval for the activity from the department of economics.
  • Draw up the company's Memorandum of Association and have it notarized by a Notary Public in the Dubai Courts.
  • Seek approval from the Department of Economic Development and apply for entry in the Commercial Register.
  • Once it is approved, the company will then be ready to entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce's Bulletin. The license will then be issued by the Department of Economic Development.
  • The company should then be registered with the Dubai Chamber of Commerce and Industry.

Trade Names that cannot be reserved:

Name of country, Name of Continent, Famous regions and Towns, Colors (blue, red etc.).

Foreign words and short words will be charged extra fee of DH 2000 per year.

Branches and Representative Offices of Foreign Commercial Companies:

The Commercial Companies Law also covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed.

Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents (which should not be confused with the term "commercial agent"). Local agents - also sometimes referred to as sponsors -- are not involved in the operations of the company but assist in obtaining visas, labor cards, etc. and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.

  • To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:

Apply for a license from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the license, the Ministry will:

  • Send an application to the economic development’s department so that they might get the permission from the government of Dubai.
  • In the application which will be forwarded, all the details of the office and the activities being performed in it will be mentioned.
  • Authorities will hereby to undertake that letter in the UAE, to the Federal Foreign Companies.
  • Committee will be held for approval of the application.
  • Once this procedure ends, the Ministry of Economy and Commerce will grant a license to the company which will specify the lists of tasks which will be done by the foreign company.
  • The branch or office should be entered in the Economic Department's Commercial Register, and the required license will be issued.
  • The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce.
  • Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.

 

Branches and Representative Offices of Foreign Professional Companies:

There are various branches which are although foreign based but are held by the UAE nationals or there are companies that are fully owned by UAE but they work as local agents in the country. Now such people may or may not be involved in the works of that company but they will be involved in helping out in terms of visas or labor cards. They are also paid. The department of economic development controls such companies under them.

Professional Firms:

In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as local service agent, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licenses, visas, labor cards, etc.

 

Setting up Business in the Jebel Ali Free Zone:

The Jebel Ali Free Zone was established in 1985 with the specific purpose of facilitating investment. Accordingly, the procedures for setting up in the zone are relatively simple.

Jebel Ali Free Zone is not considered as a part of a Dubai, and hence it is used as an offshore area to perform all the legal business activities in Dubai. It was made solely to nourish the economic strength of Dubai but is treated rather differently.

So if anyone who is looking forward to establish their own business manufacturing setup in Dubai, Jebel Ali Zone is the best option for them so far.

Jebel Ali Free Zone Incentives:

  • 100% foreign ownership.
  • Exemption from all import duties.
  • 100% repatriation of capital and profits.
  • Freedom from corporate taxation.
  • Abundant inexpensive energy.
  • Simple and efficient recruitment procedures ensuring the availability of a competitive skilled and experienced workforce.
  • A high level of administrative support from the Free Zone Authority.

Licenses:

All the companies which will be allowed to run their businesses in the Jebel Ali Free Zone will be given one of the following types of licenses: Trading, Industrial, Service or National Industrial. These licenses are renewable annually for as long as the company holds a valid lease from the Free Zone Authority.

Trading licenses will only be given to such companies which are already been given a license issued by the Dubai Economic Department. In all of these cases, the permitted activities on the Free Zone license must conform to those on the existing license. Trading licenses are also issued to Free Zone Establishments (FZE).

Business licenses are issued to businesses included outdoor the UAE and to loose area establishments. Carrier licenses are handiest granted to companies retaining a valid UAE license. Country wide industrial licenses are issued to industrial groups registered inside or outdoor the UAE, provided they meet the conditions of getting at least 51% AGCC equity and their nearby manufacturing accounting for at least 40% cost introduced. Such businesses should attain the provisional approval of the UAE Ministry of Finance and enterprise. A national commercial license offers its holder the equal rights as the ones of countrywide and AGCC companies, and merchandise exported to AGCC states might be exempted from customs responsibilities.

If a corporation needs to follow over one amongst the higher than mentioned activities, it should get a separate license for every class of activity.

Companies holding an area license are allowable to work within the Jebel Ali area and outdoors the UAE. Operation inside the UAE will be undertaken either by a billboard agent, representative, distributor, or the mother company accredited by the relevant UAE authority. Any company holding an area license will itself purchase merchandise or services inside the UAE.

Setting up a Branch of a distant Company:

Any company wish to line up a project in Jebel Ali country should 1st complete an easy form. From the data provided, the country Authority will create a primary assessment of whether or not the company's wants is met.

After thought of this form, the corporate are going to be provided with:

  • A license application as well as associate appendix with details of the documents needed regarding the company's legal status.
  • A preform of knowledge needed for planning.
  • A consumer request for electricity.

On receipt of those documents, the country authority can think about the proposal. If probationary approval is given, the corporate are going to be asked to organize and submit the documents demanded within the appendix to the license application.

After the checking of those documents, a gathering are going to be referred to as to meeting and end the project details. If everything is satisfactory, the authority can issue conditional approval for the project. Thereafter, a lease agreement and, if needed, a personnel second agreement are going to be ready by the authority for signature by the corporate.

At the time of signing, the person are going to be needed to supply the insurance policies demanded within the agreements and will pay the rental and licensing fee before assortment of the license.

If the corporate needs the country authority to sponsor workers on its behalf, applications for entry permits is also submitted once the license has been issued. The bank guarantee demanded within the personnel second agreement are going to be needed at this stage in conjunction with visa charges.

If the company's project involves the erection of a structure, careful plans should be submitted once the lease has been signed. Once the plans are united, a license are going to be issued.

Administrative work, like importation instrumentation or participating labor for installation of apparatus, could proceed in parallel with construction work. However application for entry permits for operatives to be sponsored by the country Authority won't ordinarily be accepted till a completion certificate for the development has been issued.

Joint Venture Companies:

A venture could be a written agreement between a distant party and an area party licensed to have interaction within the desired activity. The native equity participation within the venture should be a minimum of fifty one, however the profit and loss distribution are often prescribed. There’s no need to have to be compelled to license the venture or publish the agreement. The foreign partner deals with third parties below the name of the native partner World Health Organization - unless the agreement is published - bears all liability.

In observe, joint ventures square measure seen as giving an acceptable structure for corporations operating along on specific comes.

Public and personal material possession Companies:

The Law stipulates that corporations partaking in banking, insurance, or monetary activities ought to be run as public material possession corporations. Foreign banks, insurance and monetary corporations, however, will establish a presence in city by gap a branch or representative workplace.

Shareholding corporations square measure appropriate primarily for big comes or operations, since the minimum capital needed is Dh. ten million (US$ two.725 million) for a public company, and Dh. two million (US$ zero.545 million) for a non-public material possession company. The chairman and a majority of administrators should be UAE nationals and there's less flexibility of profit distribution than is permissible within the case of indebtedness corporations.

Putting in an area Establishment:

An area institution - or FZE - is an institution fashioned and registered in Jebel Ali and controlled only by the area authority.

Such institutions should have a capital of a minimum of DH 10 million and liability are going to be restricted to the quantity of paid capital. A FZE want solely have one stockholder Associate in nursing is a freelance legal entity.

Any company, organization or individual wish to make an area institution should submit a completed form to the FZE Department of the area Authority. A call on whether or not permission has been granted are going to be given inside thirty days of receipt of the appliance and the other data and documentation needed.

If permission is granted, the Authority can record all relevant details within the FZE Register and issue a Certificate of Formation. This can specify the date of registration once that the FZE are going to be liberal to conduct any such business as is permissible in its Special License.

| Modified: August 19, 2018 | Author:

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