So you’re interested in expanding your business to the glitzy city of Dubai. The prospect of tapping into new markets and customers in this commercial hub of the Middle East is exciting. But before you dive headfirst into those shimmering skyscrapers, you need to understand how to navigate Dubai’s legal landscape. The laws and regulations for foreign Business in Dubai and the UAE overall can be quite complex. Fail to follow them, and you might end up in legal trouble that sinks your Dubai dreams faster than you can say “palm-shaped island. The good news is that with some diligent research into the rules around business licenses, trade permits, employment visas, and more, you can thrive in one of the most attractive global business destinations. Keep reading to learn how to make Dubai work for you
Business Structures Available for Foreign Companies in the UAE
As a foreign company looking to establish a presence in Dubai, you have a few options for business structures. The one that’s right for you depends on your long-term goals and tolerance for risk.
If you want to keep things simple, registering as a sole proprietor is easy. There’s minimal paperwork and restrictions. However, you’ll have unlimited personal liability for the business.
A popular choice is founding a private joint stock company (PJSC) or limited liability company (LLC). With a PJSC, shares can be publicly traded, allowing for outside investment. An LLC offers more privacy. Both protect owners’ personal assets. Setting up either requires at least two shareholders or takes a few weeks.
Over 40 free zones offer tax-free operation and full foreign ownership. If you only target overseas markets, a free-zone company could be ideal. Each zone has its own license types, fees, and regulations. Establishing a company usually takes a month or more.
branch or representative office
They guarantee the presence of an existing foreign company but cannot carry out commercial activities. They are easy to set up but offer no legal protection or limited liability. The business world in Dubai can be complex, but with a little patience and the right partner, you can find the right structure to launch your business in this exciting market. Speak to legal and financial advisors to determine which option best suits your goals. With the right knowledge and precautions, the benefits of doing business in Dubai can outweigh any initial challenges.
UAE Commercial Law and Regulations for Foreign Businesses
To run a business in Dubai, you need to understand the local commercial laws and regulations for foreign companies. As an expat, the rules can seem complex, but don’t worry; we’ve got you covered.
Business Structures You have a few options for establishing your company in Dubai:
Free Zone Company:
Set up in a free trade zone with 100% foreign ownership and tax exemptions. Popular for import/export, consulting, and professional services. Requires a local service agent.
LLC (Limited Liability Company):
49% foreign ownership allowed. Outside of free zones, there are fewer tax benefits, but it is easier to conduct business locally. Requires 51% Emirati ownership, so partnering with a local sponsor is needed. Branch Office: Extension of a foreign parent company with no separate legal status 100% foreign-owned but limited to administrative and marketing activities Requires a local service agent.
Once you choose a structure, there are a few more steps:
Obtain the proper business licenses and permits. These vary based on company type and business activity. Your local service agent can help navigate the process.
Lease business premises. As a foreigner, you can’t own land in Dubai, so you’ll need to rent office space.
Hire employees. As an employer, you must provide health insurance and adhere to Emirati labour laws regarding termination, compensation, working hours, etc. Maintain proper records and file taxes. While tax rates in the UAE are very low, companies still must keep records and file returns annually.
Import/Export Regulations and Duty in Dubai
To legally import or export goods in Dubai, you’ll need to understand the regulations set by the Dubai Customs and Free Zones. Dubai has numerous free trade zones that allow 100% foreign ownership, but each has its own set of rules.
Free Trade Zones (FTZs)
Dubai has over 30 FTZs, including Jebel Ali Free Zone, Dubai Airport Free Zone, and Dubai Silicon Oasis. Goods imported into or exported from FTZs are exempt from taxes and duties. However, once goods leave the FTZ, standard duties apply. You must obtain proper permits and licenses to operate in a FTZ. Requirements vary but usually include a business plan, proof of financing, and an economic feasibility study.
Dubai adheres to the Gulf Cooperation Council (GCC) Common Customs Law. All goods entering or leaving Dubai must be declared to Dubai Customs. As an importer, you’ll need to provide a commercial invoice, certificate of origin, and import permit. Certain goods like alcohol, tobacco, firearms or pork products have additional restrictions or are prohibited. Exporting goods also requires permits and licenses. Make sure your goods do not violate intellectual property laws or export controls. It’s best to check with Dubai Customs to determine if your product requires an export license.
Goods entering Dubai from outside the GCC are subject to customs duties of 5% of the cost, insurance and freight (CIF) value. Certain exemptions apply, like goods in transit to another GCC state. Dubai also applies Value Added Tax (VAT) of 5% on most goods and services. However, VAT exemptions exist for certain sectors like healthcare, oil and gas, transportation, and education. Understanding the rules around free trade zones, import/export regulations, and customs duties in Dubai will help ensure your business operates legally and efficiently. With the proper permits and licenses, you can leverage Dubai’s position as a global trade hub to expand your business and access new markets.
Labour Laws and Hiring Considerations in Dubai
Labour laws in Dubai and the UAE differ quite a bit from those in Western countries. As an employer, there are several key things you need to keep in mind when hiring and managing staff in Dubai.
Any employee you hire must have a written employment contract. These contracts must specify details like salary, benefits, job responsibilities, and termination conditions. As an employer, you must provide employees with an Arabic version of the contract if requested. Contracts are legally binding, so be sure to review all details carefully before signing.
Working Hours and Leave
The standard work week in Dubai is 48 hours over 6 days. Employees are entitled to 30 days of paid annual leave, sick leave, maternity leave, and holidays. Ramadan working hours are also reduced. Be prepared to adjust employee work hours and schedules during these times.
Salaries and Benefits
There is no minimum wage in Dubai, but most skilled workers earn a liveable salary with benefits like health insurance, paid time off, and end-of-service gratuities. As an employer, you must provide comprehensive health insurance coverage for all employees. You must also provide a mandatory end-of-service benefit, usually equivalent to 21 days’ pay for each year of service.
Termination and Severance
To terminate an employee, you must provide written notice before the date of termination. The notice period depends on the employee’s contract and time of service. You may also be required to provide the employee with severance pay, again depending on their contract and time of service. Be very careful to follow proper termination procedures to avoid legal issues. Doing business in Dubai can be highly rewarding, but you must go in with a clear understanding of the labour laws and regulations. Following these rules carefully will help set your company up for success and build positive relationships with employees in Dubai.
Taxation and Accounting Requirements for Foreign Businesses in Dubai
When establishing a business in Dubai, you’ll need to understand the taxation and accounting requirements. As a foreign business, the tax rules can be quite different from what you’re used to.
No Corporate Tax
One of the biggest benefits of doing business in Dubai is the lack of corporate tax. There is no income tax for businesses in Dubai and the UAE. This means any profits your company earns are not subject to business tax. However, you will still need to file an annual tax return.
Value Added Tax
In 2018, the UAE implemented a value added tax or VAT of 5% on most goods and services. As a business, you will need to register for VAT, charge VAT on your taxable supplies, and file regular VAT returns. VAT returns are filed quarterly or monthly depending on your company’s revenue.
Dubai follows international financial reporting standards (IFRS) for accounting and financial statements. Businesses must maintain proper records of accounts, income statements, cash flow statements, and balance sheets. These should be prepared annually by an accredited audit firm in Dubai.
Companies in Dubai are required to conduct an annual audit of their financial accounts. The audit must be performed by an independent audit firm licensed in Dubai. Following the annual audit, businesses must file an audited financial statement with government agencies like the Dubai Economic Department.
In addition to taxes and audits, Dubai businesses may need to make other regular filings like employee records, payroll details, and operational licenses. The specific requirements will depend on your company’s legal structure and business activities. Staying on top of the taxation, accounting and filing needs will help keep your Dubai business in good standing. While the rules may be unfamiliar, many find the benefits of doing business in a tax-free zone outweigh any challenges. With the help of good advisors, you can establish efficient systems to meet all requirements.
So, if you want to grow your business in Dubai, study well and enter with your eyes wide open. The benefits can be huge, but you need to understand how the company works and strictly follow the rules. Don’t assume it’s like home – educate yourself on legal requirements and cultural expectations. If you show respect, build good relationships and are willing to adapt to how you do business, Dubai can be an extremely exciting and lucrative market. But you enter unprepared and risk getting burned. Knowledge is power, so empower yourself and your business. If you do, Dubai could hold the key to opening up a whole new world of opportunity.
BSB Legal is your strategic partner in understanding and adhering to these regulations. Our experienced legal team provides comprehensive advice and solutions tailored to your specific business needs. We offer services such as legal consultation, contract drafting, intellectual property protection, dispute resolution, and much more to safeguard your business interests in Dubai.