Many foreign investors arrive in Dubai annually to take advantage of the emirate’s unparalleled advantages, such as 100% foreign ownership, long-term visas, a safe place for families, strategic location, ease of doing business, modern infrastructure, etc. The Ministry of Economy and Tourism ( DET) issued 24,662 new business licenses in Q1 2022, implying that foreign entrepreneurs are increasingly attracted to Dubai’s start-up scene despite high compliance with economic article regulations, ultimate beneficial owners, etc. Attract, ultimate beneficial owners, and others have recently introduced VAT, corporate tax, and anti-money laundering in the UAE. Therefore, in light of the reforms implemented by the government, a solid strategy is crucial for entrepreneurs to turn the situation around and ensure long-term business growth in Dubai.
Developing an effective company incorporation strategy requires extensive experience and expertise. However, entrepreneurs who come to the UAE to set up companies need an understanding of local laws, regulations, and market conditions. Business setup in Dubai consultants in Dubai can help these investors develop a sound strategy as they are experts in the laws and regulations of the country and can advise you on recent reforms. Let’s analyze the key elements that should form the basis of your successful strategy in Dubai:
UAE Corporate Tax Impact Analysis
Corporate tax comes into effect in the UAE on 1 June 2023. You might be wondering why you should worry about it now. This happened in 2018 when Value Added Tax (VAT) was first introduced in the UAE. As a result, many business owners, tiny ones, need to analyze the potential impact of VAT on their business, leading to non-compliance issues. The proposed UAE corporate tax would be 9% on taxable income exceeding Dh375,000 and 0% on taxable income exceeding Dh375,000.
Companies incorporated in UAE Free Zones (Free Zone Individuals) will also be subject to corporate tax. However, they can still receive tax benefits if they meet all regulatory requirements and have sufficient substance. You will need to prepare for corporate tax by taking into account exempt entities, tax-exempt income, transfer pricing regulations, foreign tax credit regulations, tax group formation, withholding taxes, and more. You can seek help from a Dubai company formation expert to analyze the potential impact of corporate taxation on your company.
Choose the right place to work.
This is one of the strategic decisions you must make when opening a company in the United Arab Emirates. Leveraging 100% foreign ownership has always been one of the USPs of the UAE Free Zones. Today, foreign entrepreneurs can open a 100% owned limited mainland liability company (LLC) in Dubai. The previous condition for the UAE promoters to own 51% of the company’s shares has been permanently removed. While 100% ownership in the UAE mainland can be done like a free zone, sitting remains an integral part of the strategy when doing business in the UAE. Also, the choice of location affects the cost, i.e., renting or buying an office on the mainland. Single window services attract more investors in free zones than on the mainland. Finally, the existence of more than 40 free zones (some designated free zones and some non-designated free zones under the VAT law) makes it difficult for investors to choose the right location, i.e., the right free zone to suit their business setup in Dubai plans.
Use appropriate accommodation options.
Immigrating to Dubai as a foreign investor has never been easier as the government reforms the residency visa regime. Investors can now become UAE residents by applying for the UAE Golden Visa or Green Visa. These visas offer stays of up to 10 years with the option to renew upon expiry. Golden and Green visa holders can also sponsor their family members.
Investors, entrepreneurs, outstanding talents, academics, professionals, students, notable alums, humanitarian pioneers, and frontline heroes can apply for a ten-year Golden Visa. In addition, self-employed/self-employed persons, skilled employees, and investors/partners can apply for a five-year green visa. Advice from Dubai company formation consultants will prepare you to meet the relevant requirements.
Get support to ensure compliance.
Introducing regulations such as VAT, UBO, ESR, and AML reflects the UAE’s strong commitment to building a highly optimized economy that meets global standards. Therefore, you should regularly assess whether your business falls within the scope of these regulations. If so, you must take appropriate steps to ensure compliance. Ensuring compliance is not a do-it-yourself task; you can use business training services in Dubai to meet these requirements. In addition, compliance with the law can improve your business’ image with authorities, banks, and the public.
Consider an exit strategy.
Your business registration strategy in Dubai will only be complete with an exit plan. Your business plan will be weak and ineffective if it doesn’t include an exit strategy. Business owners must know when and how to shut down their business operations to avoid surprises. You can think of liquidation as the best strategy to liquidate your business.
Develop the right strategy with VVAS Business Setup in Dubai Consultants
Due to Dubai’s dynamic business registration scenario, foreign investors must develop a sound strategy before applying for a Dubai business license. You can seek advice from start-up consultants in Dubai like VVAS to simplify starting a business in UAE jurisdictions and free zones. They offer custom business start-up services from start to finish. Additionally, as part of the VVAS can enhance compliance cases by providing services related to UBO, ESR, AML, and corporate tax advisory. With comprehensive solutions from VVAS, you can confidently start your dream business in Dubai.
The Economic Importance of Dubai Free Zones
Now that we have moved beyond the goal of free zones in the economy, we must first understand why the authorities want to create these zones. The purpose of establishing the free zone is to facilitate the expanding economic growth of the UAE. Therefore, they try to establish profitable companies in these specific economic regions. It also offers great incentives for foreign companies to come and work in the UAE.
The UAE economy has grown significantly as the introduction of free zones has played an important role in elevating the status of Dubai and the UAE. But how does the importance of Dubai Free Zones translate to the overall economy? Data from the Dubai Free Zones Council in 2018 showed that Dubai Free Zones accounted for 31.9 percent of Dubai’s GDP in the first nine months of that year.
The free zones have helped drive strong growth in non-oil foreign trade as Dubai, and other emirates seek to diversify away from traditional oil and hydrocarbon industries. From 2000 to 2019, Dubai’s non-oil foreign trade grew from AED 143 billion to AED 1.271 trillion.
Many malls in the UAE are located in free zones, attracting foreign investors. These investors bring increased employment opportunities, competitive salaries, a strong knowledge base, and overall excellence through their companies. With most of the city home to ex-pats, Dubai is one of the favorite destinations for ex-pats, many of whom work in free zone companies due to its high growth rate, safety, and quality of life.
Benefits and costs of free trade zones in Dubai
What are the top four advantages of doing business in UAE Free Zones? Organizations find the Free Zone model attractive because of the seamlessness with which they can conduct business across borders, especially if your customer base is based in the Middle East and not just the UAE. While each zone has attractive incentives, each free zone has the following incentives for potential clients:
- 100% foreign ownership,
- 100% repatriation of capital and profits,
- 100% exemption from import and export taxes,
- 100% exemption from income tax and corporate tax.
What are the other benefits of living in a free zone? If you are interested in DMCC, you will enjoy 50 years of personal and income tax exemption when you register there. You can also take advantage of warehouse space and use on-site co-working options.
How much does it cost to form a free zone company? We have made a comprehensive cost comparison of the free zones we work with here; prices vary by free zone. Free zone prices in Dubai range from AED 11,500 (£2,320.49 according to the article exchange rate) to a whopping AED 51,053 (£10,303.59 according to the article exchange rate).
Are you interested in registering a company in a free zone in the UAE?
As experts in managing the local nuances, laws, and customs of business setups in the UAE, VVAS can guide you through establishing a company in a free zone. We will take a comprehensive look at your business needs and understand how best to use your free zone license to ensure you strike the right balance between accessing the local market and increasing your tax burden.
Working with our team of experts will ensure you get a comprehensive comparison of all available options. Our approach will help you avoid potentially costly pitfalls and tailor the optimal structure for you across our network of free zones in Dubai and the rest of the UAE. Prepare to be amazed at how easily our team of experts can meet your business needs.