Dubai Company Registration- An Overview

Dubai is one of the largest cities in the Middle East, offering a multitude of business opportunities to allow foreign investors to set up different kinds of businesses. This city has expanded its opportunities to ensure that there is constant development of trade and business in the area. Apart from this,Dubai has diversified its economy in such a manner that oil production comprises less than 1% of its entire economy.

Dubai has accelerated the pace of its diversification and sustainable economic growth. The city issued 45,653 new business licences in the first half of 2022, which is significantly higher than the licenses issued in the previous year (2021), i.e. 36,647, which shows a 25 % growth in the company registration. The main reason for the growth is the business-friendly government policies and programmes, tax regimes, and infrastructure, to name a few.

From the above discussion, it is evident that Dubai is an excellent place to start a business, and registering a company in this city can be quite beneficial for business owners, especially foreign investors.

Benefits of Company Registration in Dubai

Following are the benefits of company registration in Dubai:

Business-friendly regulatory environment -

The government of Dubai has rapidly adopted technology for starting a business in Dubai. The company registration process is very easy and completed in a few days. There is less paperwork, and the steps are easy to follow.

100% Foreign Ownership-

Certain amendments have been introduced in the Commercial Companies Law of UAE in 2021, allowing foreign investors to have 100% ownership of their businesses in UAE. This allows more than half of the total economic activities in Dubai, where foreign investors have been allowed to hold 100% foreign ownership.

Availability of more than 30 Free Zones-

The investors have the option to set up their companies in the Mainland area and Free Zones. Dubai provides more than 30 Free Zones for entrepreuners and investors to choose from. Setting up a business in Free Zone allows the investor to enjoy 100% ownership of the company. It also allows 100% repatriation of profits earned and the capital invested. It further gives an opportunity to the investor to collaborate with the other players in the same industry.

Tax Benefits Offered by the Government-

One of the major benefits of company registration in Dubai is that the company does not need to pay taxes. There are no corporate or personal taxes applicable in Dubai. Though, a few companies are liable to pay GCC VAT at a mere 5% on certain business activities.

Strategic and Advantageous Geographic location-

Dubai has a strategic and advantageous location as it sits on the crossroads connecting north, south, east and west. It is one of the biggest re-export hub in the world. It has one of the most active and busiest airports and seaports in the world, with one of the most efficient logistics infrastructures. It also boasts as one of the greatest tourist hubs in the world.

Developed Infrastructure-

Dubai is one of the most developed cities in Central Asia, possessing one of the world's best infrastructure. Its infrastructure is ever-evolving and offers excellent public transportation, telecommunication, terminals, etc. Dubai also hosted Dubai Expo 2020, where significant advancements have been made in Dubai's overall infrastructure.

Regulatory Authority/ Body for Company Registration in Dubai

The main regulatory authority for company formation in Dubai is the Registrar of Companies. It is the authority where the new applications for company registrations are filed. It is the place where the companies have to file their compliances and registrations.

Eligible Business Structures under Company Registration in Dubai

An applicant going through the process of company registration in Dubai would have to choose a relevant business structure. Following are the business structures present in Dubai that the entrepreneurs can adopt:

Limited Liability Company (LLC)-

In this type of business structure, the shareholders have limited liability towards the company up to the extent of their contributions made towards the share capital. To set up an LLC in Dubai, the applicant needs sponsorship from a UAE national or a wholly owned UAE-owned company to act as a national agent/ sponsor.

There is no minimum limit on the capital requirement. The generally accepted practice is that an LLC should have AED 100,000. There is no income tax on corporates unless the company is involved in high economic activities such as oil, gas etc. Physical office space is required for its Registration. A minimum of 1 director/Manager is required. There is no constraints on the repatriation of funds. However, the company needs to maintain a legal reserve of 10% of the LLC's net profits.

Branch Office-

Abranch office in Dubai is an extension of the parent company, which is not a separate legal entity. Any local or foreign company can set up a branch office both on the Mainland and most of the Free Zones across Dubai.

Joint Stock Company-

A Joint Stock Company in Dubai has capital divided into negotiable shares of equal value, and a partner of the company is liable only to the extent of its contribution to the company's share capital. There are two types of Joint Stock companies in Dubai, viz. Private Joint Stock Company and Public Joint Stock Company.

A JSC in Dubai should have a minimum of 2-15 directors that are elected for 3 years. The majority of the board, including the chairman, must be UAE nationals. A public joint stock company should have a minimum share capital of AED 10,000,000, and a minimum of 10 founders are required for its incorporation. On the other hand, a private joint stock company requires a minimum share capital of AED 2,000,000 and a minimum of 3 founders for its incorporation.

Free Zone Companies -

The Free Zone companies are situated in a Free Zone where special laws related to customs, taxation, ownership etc., are followed, distinct from mainland Dubai. Two types of companies are established in a Free Zone area, viz. Free Zone Company and Free Zone Establishment.

Free Zone Company/LLC: A Free Zone LLC have multiple shareholders, up to 5. Both natural and legal persons can incorporate such a company. The legal requirements required for incorporation are the rules and regulations framed by the respective Free Zone.

Free Zone Establishment: On the other hand, a Free Zone Establishment has a single shareholder with limited liability. Both natural and legal persons can incorporate such a company. The legal requirements required for incorporation are the rules and regulations framed by the respective Free Zone.

Dual License branch office -

A dual license branch office is an extension of a free zone company in the mainland area. These offices hold an additional license in addition to the free zone license, which reduces their cost and duration to incorporate a separate company.

The mainland office is a branch office of the free zone company and not it's subsidiary. Therefore, it is not required to appoint a local sponsor. This office cannot be registered with the UAE Ministry of Labour and hence is not eligible to issue labour cards or permits. Its staff are holders of free zone resident visas.

Trade Representative Office-

A trade representative office is an extension of its parent company and not a separate independent entity. It is permitted to perform limited functions such as collecting information forprojects completed by the company and acting as Dubai's marketing and administrative centre. In order to establish a representative trade office, a UAE national agent has to be appointed or a wholly-owned company of UAE nationals.

This office cannot purchase any UAE property under its name. For setting up a trade representative office, a non-refundable deposit of AED 50,000 has to be deposited, which cannot be used as working capital.

Procedure for Company Registration in Dubai

Every applicant has to follow the given procedure for company registration in Dubai:

Decision on the legal structure of the company
Choosing and reservation the trade name of the company
Apply for a business license
Deciding the jurisdiction/location of the company in Dubai
Acquiring an office space for the company
Obtaining the appropriate business license from the concerned authorities
Opening a corporate bank account in the name of the company

Deciding the appropriate businessstructurefor the company -

The applicant should first decide the appropriate business structure for the company. The structures that can be adopted include an LLC, Branch Office, Joint Stock Company, Free Zone Company or Trade Representative Office. The selecting a suitable business structure depends on the number of shareholders, the commercial activities undertaken and the company's capital requirements.

Choosing and reserving a name for the company-

The next step involves reservinga name for the company. This is the name under which the company will undertake its business activities. The applicant should confirm the desired name's availability with the Department of Economic Affairs of the UAE or the concerned Free Zone Authority. The applicant should ensure that the chosen name is in consonance with the law of the land and not already taken by some other company.

While choosing a name for the company, the chosen/desired name should:

Not violate the public morale and disturb the public peace of the country
Be according to the legal form of the company
Not have been previously registered
Must be in consonance with the kind of business activities undertaken by the company
Neither contains the name of any religion, the governing authorities, nor the names or logos of any external body.
Not be controversial, derogatory or insulting.
Should reflect full name of the person and not their nicknames when the names of the entrepreneursare chosen as the trade name for the business

Apply for a business license -

After choosing and reserving the name with the concerned authority, the applicant should apply for a business license according to the business activities the company wish to undertake in Dubai. The business license is the legal document that allows its holders to conduct their business activities mentioned in the license. Following are the different types of licenses:

Commercial license: Enterprises engaged in trading need to acquire a commercial license.

Industrial license: Businesses engaged in the activities of production and industrial operations have to obtain an industrial license.

Professional license: Professionals offering services, technicians, and artisans should obtain a professional license.

Deciding the jurisdiction/location of the company in Dubai-

The decision related to the office's location can be a game-changer for your business. Therefore, the location for the office space for the company must be chosen carefully. The entrepreneur has the option to either buy the office space or lease the land. The office space selection depends on the kind of business activity chosen, the number of employees hired and the budget allocated for the same.

Different free zones in Dubai have different office sizes ranging from 20-30 sq. to 2000 sq. m. and beyond.

Obtaining the pre-approvals, business registration and appropriate business license from the concerned authorities -

Companies registered at any place are governed by the respective laws of the jurisdictions where they are located. Accordingly, companies have to apply with the respective documents to obtain the pre-approvals, business registration and appropriate business license from the concerned authorities. The documentation depends on the kind of business activities undertaken by the business, the company's location and the company's business structure.

Opening a bank account

Once all the registrations and approvals have been obtained from the concerned authorities, the company needs to operate a corporate bank account in its name for receiving and sending money in furtherance of the affairs of the company.

Documents for Company Registration in Dubai

Following documents are required for starting your company in Dubai

For Initial Approval

Application form for name reservation and for initial license approval
A well-drafted business plan
Copy of the existing registration certificate/ trade license (if the company already exists)
Last two years, audited financial reports of the corporate entity and Board resolution of the company.
Corporate documents of the shareholder
Coloured Passport copies of the company’s shareholders and the appointed director/ managers of the new company
Specimen signature of the company’s shareholders and the appointed director/ managers of the new company
Details of business to be carried out by the company
NOC from the local sponsor
Registry Identification Code (RIC) form for Director/Manager (Original and notarized)
Name of the company (at least 3 options should be given)
Entry stamp or visa page
Copy of the passport
Passport size photographs

The Freelancers are supposed to submit the following documents:

Completed application form for Registration
Curriculum Vitae (CV) of the freelancer
Bank reference letter
Original and notarized RIC

For Registration of the company

Once the initial approval has been obtained, the next step involves payment of the registration fee and license fee. The fee depends on the commercial activity undertaken and the required license type. Therefore, the following documents are required to be submitted: