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Setting up a Business in Dubai: Your Step-by-Step Guide

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If you’re looking to start a business abroad – look no further than Dubai. As a well-known trading hub of the Middle East and North Africa (MENA) region, Dubai boasts a wealth of benefits for businesses and companies looking to succeed, thrive and connect to the rest of the world. 

In 2023, Dubai’s real GDP growth is estimated to be at 3.6%. For 2024, the forecasted growth in real GDP is 4%. However, the UAE is considered a low-risk nation for business. The UAE has retained its status as the lowest-risk country in the Middle East and Africa (MEA) region for the first quarter of 2023, offering a relatively stable environment for starting a business. If you’re thinking of setting up a business in Dubai the process is relatively simple – especially in the form of the UAE’s free zones.

Things to Know Before Setting Up Your Business

Generally, there are a few things you'll need to understand before you start the process to set up your business in Dubai. Let’s take a look through each of them.

Comparing Economic Zones: Mainland, Free Zones, and Offshore

Before setting up your business, you must decide whether you'd like to operate on the Mainland, in a Free Zone, or Offshore. Each option has its benefits and specifications based on your business requirements.

Mainland

If you’re looking to establish a business with the flexibility to trade directly with the UAE local market and internationally, setting up on the Mainland is a viable option. Mainland companies can operate anywhere in the UAE and are not restricted to designated areas. The UAE government has made it easier for foreign investors to retain full ownership of their businesses in most sectors, thanks to recent changes in ownership laws. Mainland businesses are subject to UAE regulations and enjoy the benefits of being able to trade within the local market, but they must comply with certain Emiratisation requirements and other regulatory guidelines.

Benefits:
  • Trade flexibility: Mainland companies can trade directly and internationally with the UAE local market.
  • Location flexibility: Businesses can operate anywhere in the UAE.
  • No restrictions on office space: Freedom to choose any location for your office.
  • Ownership: As of 2020, most business activities allow 100% foreign ownership.
    However, some strategic sectors may require an Emirati partner.
  • Taxation: Subject to 5% VAT and 9% corporate tax on profits above AED 375,000.
    No personal income tax.
Considerations:
  • Regulatory oversight: More stringent regulations and required approvals from
    various government entities.

  • Emiratisation: It is mandatory to have a minimum of 2% of the skilled workforce as
    Emirati nationals.

Free Zone 

If you’re looking for 100% ownership of your company, consider applying for a licence and location in one of Dubai’s free zones. The free zone concept was introduced by the Dubai government to generate foreign interest to set up businesses in the city. It’s a special economic area where business owners can enjoy full ownership, 9% corporate taxation (to be applied to UAE businesses on profits above AED 375,000), and 0% personal income tax.

However, one of the key limitations of operating a company in a free zone is that you are not allowed to make direct trade with the UAE local market. 

Currently, there are over 30 free zones operating in Dubai. Generally, each free zone is designed around an industry category and offers licences to companies within those categories. Here are some examples:

Benefits:
  • Ownership: 100% foreign ownership without the need for a UAE national sponsor.

  • Business-friendly tax environment: 0% personal tax, no corporate tax, and specific
    VAT exemptions for certain transactions within designated zones.

  • Repatriation: 100% repatriation of capital and profits.

  • No currency restrictions: Freedom to transact in any currency.

  • Industry specific: Each free zone is tailored to specific industries, providing
    dedicated support.

Considerations:
  • Trade limitations: You cannot trade directly with the UAE local market without a
    distributor.

  • Location restriction: Must operate within the designated free zone.

Offshore Companies

Offshore companies can also be registered in a free zone, and enjoy many of the same benefits. However, it’s not a substitute for a free zone company. The main difference between a free zone company and offshore is the operations of the business. Offshore companies are allowed to have business activities outside the UAE and not inside. They also have no requirements for minimum capital deposited before incorporation. 

However, unlike operating as a free zone business, a sponsor is required, which will restrict your foreign ownership to only 49%. 

Benefits:
  • Ownership: Full foreign ownership.
  • Privacy: High level of confidentiality and asset protection.
  • No minimum capital requirement: Flexibility in financial structuring
Considerations:
  • Limited operations: Cannot conduct business within the UAE local market.
  • Sponsor requirement: Requires a local sponsor, which restricts foreign ownership to
    49% for certain operations within the UAE.
  • Banking restrictions: May face challenges in opening a local corporate bank
    account

Types of Licences

Besides deciding on a zone, you’ll also be required to identify the type of licence needed. The Department of Economic Development (DED) issues business licenses and there are 3 main types you can apply for: 

1. Commercial Licence

A Commercial Licence allows you o set up a business in Dubai that involves trading activities or the buying and selling of goods. This licence covers businesses in import & export, sales, logistics, travel & tourism, general stores and real estate. 

2. Industrial Licence

The Industrial Licence is issued to businesses engaged in manufacturing activities that transform natural materials and resources into final products – manually or mechanically. This licence covers businesses such as textiles manufacturing, metal manufacturing and paper manufacturing.

3. Professional Licence

The Professional Licence is issued to businesses that are service providers, artisans or craftsmen. Examples of businesses that apply for this type of licence include medical services, beauty salons and repair services. 

Besides licences, various visas can be applied for in the Dubai free zones; it is essential to
understand the different types.

Sponsorship

No local sponsor is required when setting up in a free zone like DMCC. One of the main benefits of incorporating in a free zone is that you are able to set up an entity with 100% foreign ownership without the need of a UAE national as a partner or sponsor. 

Dubai Free-Zone Company Setup Process

When setting up a business, free zones are popular with foreign entrepreneurs as they offer: 

  • 0% personal tax
  • Low corporate tax rates
  • 100% company ownership
  • 100% repatriation of capital and profits
  • No currency restrictions. 

 

Here are the 7 steps you’ll need to take to set up your business in the free zone:

1. Find Your Business Activity 

It is key to first determine the nature of your venture when starting a business. Whether you are looking to start a small business in Dubai or a crypto business in the UAE, there are over 2,100 business activities​ available to choose from, all falling into different groups within the industrial, commercial, professional and tourism space. You can find the full list on the DED website.

2. Decide On a Free Zone

With over 30 free zones in Dubai to choose from, it generally makes sense to set up in close proximity to businesses in the same sector. The nature of your business can have an effect on which free zone you decide to set up in. 

DMCC – the world’s flagship Free Zone and Government of Dubai Authority on commodities trade and enterprise – has been awarded Global Free Zone of the Year by Financial Times’ fDi Magazine for each of the last nine years.

3. Choose a Company Name

When choosing your business name, it’s important that it conforms to the UAE’s naming conventions. Names that include offensive language could be perceived offensive to religion. References to political groups or the mafia are forbidden. If you’re naming the business after a person, you’ll need to prove the person is a partner or owner of the company (no initials or abbreviations allowed). 

Naming your business could be a complicated process. You can save time and effort by consulting an expert to help you follow the conventions and get your name approved. 

4. Apply for Initial Approval

Initial approval from the Dubai DED is required so that there are no objections on starting a business. You can apply for this online, in person or through a third party (law firm). The documents you’ll need to provide will depend on your business nature, but they generally include:

  • Business registration and licensing form
  • A copy of your passport or ID
  • A copy of your residence permit/ visa
  • The company's articles of association
  • Feasibility study of the project


If you need help applying, please contact one of our experts who can guide you through the process to ensure you’ve correctly filed and prepared documents. 

5. Open a Corporate Bank Account 

Once you’ve been approved and received back all the necessary documents, you can now open a corporate bank account. The UAE has many banks, both local and international, to choose from. These include but are not limited to: 

  • HSBC
  • Citibank
  • Barclays
  • Abu Dhabi Commercial Bank
  • Commercial Bank of Dubai


 To learn more about this, check out our blog, where we outline how to set up your corporate bank account in Dubai.

6. Set Up Your Office Location

It's compulsory for all businesses in Dubai to have a physical address. Fortunately, setting up in a free zone will help you find your new office space easily.

At DMCC, we offer a large range of commercial property, office buildings and business centre accommodation to rent, hire or lease to any size and type of business. All our offices are all well equipped with wi-fi, access to meeting rooms, support services and all utilities available. With 68 towers around the area, you’re sure to find the right office space.

7. Apply For Final Approval 

You’ll need to prepare all your documents, location addresses, and legal information to submit for final approval. In some circumstances, you’ll need to apply for licensing approval from other authorities. Once ready, you’ll need to submit:

  • Initial approval receipt and all the previously-submitted documents
  • The lease contract provided by the Real Estate Regulatory Agency (RERA)
  • Duly attested service agent contract (for civil establishments and companies that are 100% owned by non-GCC nationals), the UAE involving a local service agent
  • Approval from other government entities concerned

    Finally, you’ll need to pay for the licence through various approved payment channels – and your business is ready to run. 

Ready to Set Up Your Business in Dubai? 

Although seemingly a long process, the turnaround for setting up your business will only take a matter of weeks when done right. If you want to start an import and export business in Dubai, check out this essential guide to help you through the process.

Get in contact with us at DMCC to help set up your business in the world’s #1 Free Trade Zone and centre of global commodities trading. We’ll assist you every step of the way from drafting documents, managing submissions and helping with translations. We’ll help you set up your bank accounts, help you, seek approval from authorities and provide general advice and consultancy. Reach out to us today to see how we can help you! 

Setting Up A Business in Dubai 2023

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