How to set up your business in the UAE: a detailed guide

As a business owner, the chances are that you have considered setting up shop in the UAE at some point or another (probably whilst submitting your Corporation Tax payment!).

From my own network alone, I know people who have set up in the UAE and many more who are on the verge of doing so. In this article, I’ll break down the costs, the process and some things you really need to consider before going in head-first.

In case you missed it, I recently moved out to the UAE so much of this is fresh learning and fresh context for me on the ground (you can check out my video on why I moved here). I’ve been doing through this exact process and talking to people extensively around it.

Benefits of UAE setup

Commitment to the cause

Before we dive into the practicalities, it is worth outlining exactly what setting up in the UAE may unlock for you and your business.

The first thing is that if you are actually looking to strike deals in the UAE, it is almost certain that you’ll be required to set up locally.

This isn’t because the people you do business with will explicitly tell you that you need to do that (sometimes they will though). Instead, it is more about the signal you send to future partners.

Doing local business requires commitment to the local region. Like many aspects of life, you get out what you put in. Having a local entity and committing to doing business in the UAE and the wider region is a positive signal and gives the impression that you are not a fly-by-night visitor looking to simply extract value without putting any in.

Taxation

This is a pretty obvious one but the corporate and personal tax regimes in the UAE are very friendly. 

As widely reported, corporate tax will go live in the UAE from 1st June 2023. The rate will be 9% and it will only apply to companies on the net profit made above 375,000 AED ($102,093.60/~£85,000). 

There are some exemptions that apply. The main one is that corporate tax only applies from income that derives from mainland UAE. So if you’re deriving income from outside of the UAE or from free zones in the UAE, that income does not count towards this taxation threshold.

In addition, given the fact that there is no personal income, putting through higher director salaries could be a smooth way of driving down the profit figures of companies without incurring tax to extract that money.

Personal residency

Setting up a company is one of the ways in which you can get residency in the UAE. So if you are looking to move your business to the UAE as part of a wider personal move, possibly even with your family, this is a route you can use.

Process of UAE setup

Now that we’ve got the benefits out of the way, let’s talk about how it all practically works and some of the decisions along the way. You’ll start hearing some terminology that you will get used to!

Free zone vs mainland

One of the first decisions you will make is whether you set up a free zone company or a mainland company.

Whether that is in Abu Dhabi, Dubai, Ras Al Khaimah, Sharjah or any other emirate within the UAE can often not really matter. However, from what I have anecdotally heard, it can be wise to set up wherever you are living as sometimes you might be needed to go and sign a document or two. 

The UAE is full of lots of free zones. A free zone in really simple terms is just an area of the country that has its own set of business rules and conduct. Legally, it means that you can set up a company within that free zone and be subject to the rules of that free zone as opposed to being subject to the rules of mainland UAE.

Practically speaking, you don’t really suffer as a company by being free zone. You also don’t really see it physically around you, i.e. there isn’t some kind of land border that says “you are now entering the free zone of X”. 

They legally exist but in reality it’s all very seamless.

There are lots and lots of free zones and they all often compete on price (more on that later).

There is a good comparison on free zone versus mainland here.

DIY vs agent

Once you’ve decided to set up shop in the UAE, the next decision you’ll have to make is whether you go the process alone or whether you go with an agent.

I am personally still undecided on this.

I am someone who tries to do anything like this on my own. I do my own tax returns and often find that people make something a legal process when actually it’s just form filling and following rules.

I’ve spoken to a lot of people on this though and pretty much every single one of them has said just go with an experienced agent for company set up and visa. I value their wisdom a lot and ultimately this is also the route I followed.

For me it was a simple question of should I pay this premium and get a service where things are being looked after for me, or should I save a bit and do it myself and take a slight risk?

Ultimately it is for you to answer but most people here use agents whose day-to-day job is getting this kind of thing done. 

You should budget for about 1 week for the company to be set up and around 2-3 weeks to get your visa sorted.

Costs of setting up a UAE business

Aha, the golden question. And honestly if there’s one thing has took me back a little it’s the cost of certain things like company formation.

I’m used to the UK where company set up is fully online, pretty much immediate and costs £12.

Things are not quite like that in the UAE and so you have to be prepared for company incorporation to be a process. And a relatively costly process at that.

Whilst the fees will differ depending on where you set up (see discussion on free zone versus mainland), you can basically expect to pay something around the £6k-£7k ($7k-$8.5k) (25k-35k AED) mark.

Where exactly you pay in that range will depend on a few factors such as:

• where you choose to set up (free zones often carry special offers so you could end up with a much better deal)
• how many visas you want to process off the back of your company set up
• the premium you pay for the consultant to run the process.

To give you an idea, the quotes I generally got included 6000 AED (£1.3k/$1.6k) for the consultant.

A good consultant should have a good handle on where the best free zone offers are at that time, which ones are quicker and more seamless than others and they should be able to take it from start to finish.

Further costs 

Oh, you thought setting up was the only cost? Sadly not.

Another big thing I’ve learned is that the costs of maintaining a company in the UAE are also relatively large.

When you set up your UAE company, you incur costs that are ongoing. Namely:

• Establishment card
• Office space/shared desk
• Visa

An establishment card is simply a card that you get once your company is formed. It’s like an ID card for your business. You are charged for this within your company setup cost, but there will also be an ongoing annual fee to renew this.

This is typically in the region of 1000-2500 AED (£225-£560/$270-$680). So it shouldn’t break the bank but it’s worth knowing. Some free zones give you longer establishment cards which only need to be renewed every 3 years.

You will also be required in most cases to take out some office space when you set up your company. You may never use this office space in your life but you will be required to take out something.

This can simply be a desk in a large building and you may never even use it. Again, the initial cost you will simply see as the cost of setting up the company but you will also have to renew this annually.

This is definitely one to ask good questions about early on. You do not want to be tempted by an initial cheap desk setup when that free zone forces you to set up a fixed office in that free zone 3 years down the line.

Lastly, if you are getting a residency visa off the back of your company, do bear in mind that these typically last 2 years and you will have to renew them at a cost of ~750 AED (£170/$205).

Do you really need a UAE company?

Armed with that knowledge, the question is whether you really need a UAE company. 

I’m sure there are lots of different scenarios and of course you can only judge your own situation yourself. But the scenarios I typically see are:

• Someone wants to move to the UAE and sets up a company to enable residency (e.g. they’re a small business owner, freelancer etc that would otherwise find it hard to get residency here); or
• Someone genuinely wants to expand their business and needs a legal setup in the country.

For the second type, it is fairly uncontroversial to say that you will have to set up locally in order to get anything done.

But if you fall in the first category, you shouldn’t simply assume that you need to set up a company. Bear in mind that by the time you are done, you will have spent a fairly chunky amount of money that could have been avoided.

Some important factors for you to consider:

• As long as you are spending fewer than 90 days in the UK, you can declare yourself as not being tax resident in the UK. This means any income earned, even in the UK, can be earned without any personal tax being incurred. You can keep your existing UK setup with UK bank account and earn tax-free income. Caveat: I am not so clued up on other global tax jurisdictions like the US.
• The UAE has lots of visa regimes including freelancer and other types.
• If you are moving with your partner and they have an employed route e.g. teacher or some other role where they are being sponsored for their visa, you can get a spousal visa via them. This eliminates the need for you to have a company if you’re just doing it for the visa.

Naturally, always seek proper tax advice because tax residency can be a very complicated issue. 

Conclusion

Setting up in the UAE is neither cheap nor is it always completely necessary. My take on things is that if you are expanding for purely business purposes then this will be a necessary step. And of course you can get your personal residency visa as a result if you intend to be based personally in the UAE.

If, however, you are looking first and foremost to move to the UAE then you should definitely question the assumption that you need to set up a company to achieve that. You might be able to get residency another way and earn your income, even as a freelancer or another type of business owner, tax-free anyway.