Starting a new business in an unknown country is a very special and a very critical decision in an entrepreneur’s life. It takes a lot of deliberation, research, and brainstorming before you finally decide to establish a company in a country you haven’t lived before. However, things change completely when you talk about Dubai. The city is a marvel in the desert and the rulers have facilitated the foreign investors to a degree that doing business in Dubai is more of a luxury than a challenge. The market competition always intensifies everywhere in the world, and the same is the case with Dubai as well. But this is where your intellect as an entrepreneur gets tested. The way you plan your business in Dubai and the type of products you have in your mind will eventually go a long way in writing success story of your company.
Dubai is currently in a transition phase. The government is in a process of diversifying its economy from oil to various other sectors like real estate, construction, hospitality, tourism, etc. Their decision to roll out Value Add Tax is an important part of their strategies to find out new ways to finance the national economy. Although, many companies have pushed the pause button for now to see the impact of the VAT, which is set to take effect from January 1, 2018, there are many other companies which have no problem with a tax at 5 percent rate. About 80 percent of Dubai’s population consists of expatriates and the state’s business climate is also overwhelmed by the foreign companies which have found a great market for their goods, products, and services in Dubai.
The companies which are planning to shift their international business to Dubai have a multitude of alternatives. They can form a Limited Liability Company (LLC) which allows them to become a shareholder incorporated in Dubai. In order to form an LLC in Dubai, the foreign company will have to find a local sponsor, who would hold 51 percent of the total shares of the company. After arranging a local sponsor, the next step is to make payment worth 300,000 AED in cash or cheque as the initial share capital which must be paid before setting up the LLC. A foreign selling shareholder can’t purchase the shares of the local sponsor.
The best option to form a company in the UAE is to establish it in one of the many free zones across the Emirates. This allows the foreign investor to keep 100 percent ownership of the company, he will not have to pay any taxes, and he can always repatriate profits and capital, and many more. Currently, the Jebel Ali Free Zone, Dubai Airport Free Zone, Dubai Technology, Commerce, Electronic, and Media Zone, and others are catering to the needs of the foreign businesses.