The Middle East is a prosperous and dynamic investment center. It has a growing population combined with significant efforts to stimulate activities outside the oil and gas industry, which now provides business opportunities across the region.
The Middle East has some of the least demanding tax systems in the world, making the region attractive for foreign business.
In this article, you will read about running a business in Dubai and Saudi Arabia. Also, how to move your things there.
Business Setup In Dubai: Mainland Vs. Freezone
Business owners have the opportunity to start a business in Dubai, either on the mainland or in the free zone. The main difference between them is their rules of ownership.
To start a business in the mainland of Dubai, foreigners need to have a UAE citizen holding 51% of the company as a sponsor. This rule has changed with the introduction of the 100% Foreign Ownership Act in 2018. Now foreigners can consider starting a new business in Dubai without having a UAE citizen as a sponsor.
If foreigners want to start a company in the Free Zone, also known as the Dubai Free Trade Zone, they can have 100% ownership in the business. However, these companies can only do business and trade with companies outside the UAE.
Profit Of A Company Setup In Dubai’s Mainland
- You have the opportunity to run the business anywhere in the UAE.
- You have a limitless number of visas available for you.
- You have a greater option of commercial activities for licensing.
Who Is Eligible To Set Up A Business In Dubai?
Foreigners can start businesses in Dubai Mainland, but there are restrictions.
The new business organization in Dubai excludes some industries, among others:
- Oil exploration and production
- The investigation, security, military (including the creation of military weapons, explosives, clothing, and equipment)
- Banking and finance activities
- Water and electricity supply
- Fishing and related services
- Postal, telecommunications, and other audiovisual services
- Road and air transport
- Printing and publishing
- Commercial Agency
- Medical retail (including pharmacies)
- Blood banks, quarantines, and poison banks
Cost Of Setting Up Business In Dubai
As you can expect, starting a business requires a significant amount of capital that will go into office space, licensing fees, visas for employees, and so on. This cost will also vary depending on the actual type of business you are going to start. (commercial, industrial, service).
The amount of capital required to do business in Dubai also varies depending on the form of business – for example, the PAE needs MAD 30 million. In contrast, the PAE needs MAD 5 million paid in full.
There is no minimum capital requirement for other activities. Still, whatever this capital is, it must be specified in the Memorandum of Association. It must also be in an amount considered “sufficient” to meet business objectives.
How To Run A Business In Dubai
There are eight steps you need to undertake to start a business in Dubai.
- The first thing you will need to decide what your business is and what type of license it needs. Currently, the Dubai Economic Department (DED) has over 2100 varieties of business licenses divided into travel, industrial, commercial, and professional. Depending on the type of business you choose, you may need different permits.
- The next step is to determine what type of legal entity (legal form) you are going to create (e.g., LLC, branch, SME, etc.). Though, depending on the type of business, the type of legal entity you are going to create may differ.
- It is now time to make a decision about your trade name and apply for its registration. This can be done through a lawyer, a DED service center, and the Business in Dubai application. Keep in mind that you will need to make sure your proposed name complies with guidelines.
- You will then need to apply for initial DED approval. If you are going to set up a company dealing with goods, securities, or legal services, you will need additional agreements.
- Once approved, you should go to an authorized organization (such as a DED or law firm). They will prepare an MoA project for your business and then sign an LSA or corporate agent agreement. Again, these requirements rely on the legal form of your business.
- It is time to find office space in Dubai, as all businesses in the city require an actual physical address. To register in Ejari, you will need a certificate of initial approval along with your lease and other documents. Only after you get this document in Ejari will you be able to start getting a valid business license.
- You may need to apply for optional licenses from the governing body of your kind of business.
Setting Up A Business In A Dubai Freezone
One of the free zones in Dubai in Jebel Ali, where you do not need a local sponsor to start a business
The main difference between starting a business through the Dubai Economic Department (DED) than being stuck in a company allows you to have 100% ownership of your business without having to be a sponsor or partner with a UAE citizen. However, the type of business and the costs will depend on the free zone you are accessing.
Benefits Of Company Setup In Dubai’s Free Zones
- Enjoy 100% import and export tax exemption
- Enjoy 100% profit and capital repatriation
- Less bureaucratic licensing procedures
When Moving, Research International Moving Companies
Before you take your big step to start a business, you will also need to consider moving your belongings when you move to Dubai.
It is essential to seek assistance from international shipping companies. They have experience in the relocation process and the rules for the country in which you plan to live.
For example, when moving to Saudi Arabia, the laws are different. Therefore, it is crucial to investigate the international moving companies that you plan to use before making any commitments.
How to start a company in Saudi Arabia
Starting a business in Saudi Arabia should be guided by three primary considerations:
1. Knowledge of the region
You must know the part well. Be prepared for extensive research into the business area you are going to work in. You must have a viable business plan that includes research into market conditions, competition, and the results of your forecasts.
You should also be prepared to find the necessary investments from your funds or through your bank. Preferably in ways other than applying locally, especially if you are new to the region and have no experience.
2. Choosing your local partner
The law requests a presence local partner who has a controlling interest and, therefore, can control the business (and close it down if he wants to).
A local partner, whether a company or an individual, is not required to contribute or participate financially in an initial investment. The same applies to a self-employed business. There are various ways to reward a partner. However, in some places, the local partner requirement is currently being reviewed to encourage foreign investment.
3. Investment capital
When a business is registered, you must show the Ministry of Commerce that you have a significant amount of money to invest. The amount required varies from state to state (in most cases, it ranges from $10,000/£6,500 to $50,000/£33,500). It is considered as a guarantee against liabilities. However, you can withdraw your money shortly afterward!
Exports and manufacturing are mostly supported by the government, especially in building a factory. If you create such a business in a free trade zone, you are granted an exemption from import and export duties, commercial taxes, construction, and licensing fees on real estate, as well as land tax and restrictions on the transfer of capital invested in the zone.
When doing business with Arabs, you are likely to encounter difficult but polite negotiations and find specialists in them. You need to be fully confident in the content of your contractual agreement.
The potential benefits of starting and running your own business are great, but not for the faint-hearted. You have to remember, you are not a citizen of the country, and when the time comes to leave and sell your interests, your partner has time on his side, and you may not.
Company Registration & Legal Obligations
Corporate law in Saudi Arabia is similar to that of Western countries. Enterprises may be managed as limited liability transactions, private companies, or other types of concerns. As mentioned above, starting a business or buying an existing business can be difficult, and you should get local legal advice and guidance on registration formalities.
As a foreigner, you will most likely use the services of a Western or Arab law firm to set up joint ventures. When choosing a firm, seek advice from the Arab-British Chamber of Commerce, the DTI, the Middle East Association, and the commercial departments of your embassy.
To Sum Up
The Middle East is a developing and dynamic investment center. It has a growing population combined with significant efforts to stimulate activities outside the oil and gas industry, which now provides business opportunities across the region.
The Middle East has some of the least demanding tax systems in the world, making the region attractive for foreign business. Therefore, it is an up and coming place to live. However, you should follow the advice on how to start a business when moving to the middle east.