Mainland Business Set-up in Dubai, UAE: Your Comprehensive Guide
Mainland Business Set-up in Dubai, UAE: Your Comprehensive Guide
Dubai, a vibrant city in the United Arab Emirates (UAE), is an attractive tourist destination and a thriving business hub. Its robust economic policies, world-class infrastructure, and strategic location make it an ideal place for entrepreneurs looking to establish a mainland business. This article will serve as your comprehensive guide to setting up a mainland business in Dubai, UAE.
Understanding Mainland Companies in Dubai
To successfully establish a business in Dubai, it’s crucial to have a deep understanding of the region’s different types of business entities. One of the most preferred options for businesses is a mainland company.
Definition of a Mainland Company
A mainland company in Dubai is a legal business entity registered and licensed by the Department of Economic Development (DED). At the same time, free zone companies are licensed by free zone licensing authorities and offer licenses to operate from respective jurisdictional territories. Unlike offshore or free zone companies, mainland companies do their business anywhere in the UAE. These companies can engage in a wide variety of business activities, practically everything permitted in the country, making them a popular choice for entrepreneurs who wish to reach a broad market, especially within the country.
The Scope and Reach of Mainland Companies
Mainland companies in Dubai have an extensive scope and reach. The primary advantage is their ability to conduct business freely within the local UAE market and outside the country without any restrictions. Since mainland companies can establish their office anywhere in the emirate, it offers an extensive advantage to base operations close to its customers and suppliers, which are abundant in the mainland. They also have the liberty to bid for lucrative government contracts. Mainland companies also have the advantage of hiring as many employees as they need as long as the requirements for facilities are met. These factors combined make mainland companies in Dubai an attractive prospect for businesses targeting growth and expansion.
Distinguishing Mainland Companies from Free Zone Companies
While both mainland and free zone companies have their benefits, fundamental differences distinguish them. Mainland companies, as mentioned, can conduct business anywhere within and outside the UAE. On the other hand, free zone companies are restricted to doing business within their respective free zone, with other free zones, or outside the UAE. However, many free zones do not practically restrict doing business on the mainland. The only difference remains with the tax treatment if licensees intend to operate tax-free.
Earlier, mainland companies had the requirement to have a UAE national as a local sponsor, owning 51% of the shares. The condition has been waived for most activities, except for critical sectors such as professionals in the legal domain or public accountants. In contrast, free zone companies were always permitted to have 100% foreign ownership. While free zone companies may have certain restrictions on the types of activities they can license for, mainland companies have 100% coverage in this regard.
Use our comparison tool to make informed decisions about licensors that best suit your business objectives and operational needs.
Advantages of Establishing a Mainland Company in Dubai
Dubai, a prominent hub for international trade, offers many advantages for businesses. Establishing a mainland company in Dubai, in particular, comes with numerous benefits that can substantially contribute to your business’s growth and profitability.
Unrestricted Trade Opportunities
As mentioned earlier, one of the most prominent advantages of setting up a mainland company in Dubai is its unrestricted trade opportunities. Unlike free zone companies that are limited to conducting business within their specific zones or internationally, mainland companies can trade freely within the entire UAE without any restrictions. This means you can do business with any company in the UAE, whether in a free zone or on the mainland. This unrestricted market access significantly widens your potential customer base and opens doors to many business opportunities.
No Limit on Employment Visas
Mainland companies in Dubai are not subject to a cap on the number of employment visas they can issue. This is particularly advantageous for businesses that anticipate rapid growth or those in industries that require a significant workforce. The only condition the authority looks at is you are hiring for your own business and may ask you to produce the contracts or lease agreements. The ability to recruit from anywhere in the world and hire as many employees as needed can help businesses to scale effectively and meet their operational requirements.
Greater Access to UAE and GCC Markets
Establishing a mainland company in Dubai provides access to the UAE’s lucrative market. It opens doors to the wider Gulf Cooperation Council (GCC) markets. This is a considerable advantage for businesses looking to expand regionally. Moreover, mainland companies are also eligible to undertake government contracts, which can be a significant source of revenue. With the UAE government frequently outsourcing projects to the private sector, this provides an excellent opportunity for mainland businesses to secure high-value contracts.
With the above considerations, setting up a mainland company in Dubai makes an attractive option for entrepreneurs aiming for wide market reach, limitless growth potential, and lucrative business opportunities.
Key Steps to Setting up a Mainland Business in Dubai
Embarking on the journey of establishing a mainland business in Dubai involves a series of steps. From having a robust business plan to registering your business and obtaining the necessary approvals, each step plays a critical role in the successful set-up of your business.
Having a Solid Business Plan
The first step towards setting up your mainland business in Dubai is developing a robust business plan. Consider your business concept and objectives in detail, do your market research about where your customers and suppliers are, develop strategies, and project your finances. It serves as a roadmap for your business, helping you identify potential opportunities and challenges that may arise and make them to your advantage. A clear understanding will have long-term repercussions in terms of cost, operating efficiency and can affect your competitiveness.
Selecting your licensed activity
One of the first steps you have to decide before starting the business set-up process is to decide on the activities your business has to engage in. With the suitable activities selected, your set-up process will get smoother as you will have clarity on what approvals are required until you obtain the license and during the renewal process. Further, banks and other service providers look at the activity you are licensed for and your relevant experience field as part of their compliance check. This can be relevant while you are opening a corporate bank account even.
Further, licenses are categorised into different types, such as commercial, professional, and industrial. The classification depends on the nature of your business activities. The license type can be an important consideration when choosing the legal structure.
Choosing the Appropriate Legal Structure
Once your business plan is in place, the next step is choosing the appropriate legal structure. The legal structure you choose will determine the number of shareholders permitted, the liability of those shareholders, and the corresponding documentation during formation and in the future. This can also play a key role while integrating your business in UAE with other entities in your group. Options include sole proprietorship, limited liability company (LLC), and public or private shareholding company.
Registering the Trade Name and Acquiring Initial Approval
The next step in setting up your mainland business in Dubai involves registering your trade name and acquiring initial approval from the Department of Economic Development (DED). The trade name should reflect the nature of your business and must abide by the trade name guidelines set by the DED. You can choose business names in the English Language, as you prefer.
Preparing the Memorandum of Association (MOA)
The Memorandum of Association (MOA) is a document that outlines the relationship between the company and the shareholders. This document should be drafted carefully and notarised by a legal counsel in the UAE. The MOA contains essential details about the company, including its capital, rights and duties of shareholders and key management personnel.
Obtaining your lease agreement
Every business must have a tenancy contract linked to the license in mainland Dubai. This will be the registered address of the company. It is permitted to enter into a lease agreement on behalf of the company after obtaining initial approval for the company. You have to be careful while selecting the office/warehouse/ shop, as the visa quota varies based on the area occupied by you. Further, there can be inspections by the labour departments and banks as they approve your visa applications or corporate bank accounts. It is good to have a closed office, with a name board showing the company name in English and Arabic. Dubai offers options to get a business license in the first year without an office, which is preferred by many startups that do not require visa quota allocation in the first year.
Enter into a service contract with a local sponsor, if opted for
While many expatriates and foreign businesses do not prefer entering into a sponsorship with a UAE national sponsor, it has its benefits. At this stage of company formation, you must enter into a service agreement with the sponsor if you have opted for this option. The service contract can be notarised, and you can get it attested as well.
Applying for the Business License
The final step in setting up your mainland business in Dubai is applying for a business license. After submitting the necessary documents and paying the required fees, the DED will issue your business license, marking the official start of your business in Dubai.
By following these steps and ensuring all legal requirements are met, you can pave the way for a successful mainland business set-up in Dubai.
Legal Requirements and Regulatory Bodies for Mainland Businesses in Dubai
Navigating the legal landscape of business set-up in Dubai can be complex, particularly for foreign investors. Understanding the essential legal requirements and the roles of regulatory bodies can simplify the process and ensure compliance.
For mainland businesses in Dubai, the primary regulatory authority is the Department of Economic Development (DED). The DED oversees the business registration process, issues licenses, and ensures compliance with the rules and regulations related to business activities in Dubai.
However, depending on the nature of your business, you may also need to interact with other regulatory bodies. For example, suppose your company operates in the financial sector. In that case, you may require approval from the Central Bank of the UAE. Healthcare businesses must work closely with the Dubai Health Authority (DHA), and those in the food sector must comply with regulations set by the Food Control Department of Dubai Municipality.
Understanding these regulatory bodies’ roles and ensuring compliance with their regulations is vital for the smooth operation of your mainland business in Dubai.
Tips for a Successful Mainland Business Set-up in Dubai
Setting up a mainland business in Dubai can be a rewarding endeavour. However, every entrepreneur should keep a few key considerations in mind to ensure a smooth and successful set-up process.
Adapting to UAE's Business Culture and Etiquette
Understanding and adapting to the local business culture and etiquette is crucial for any business aiming to thrive in Dubai. Respect for local customs and traditions is highly valued in the UAE.
It’s also important to be aware that Dubai follows a calendar week while other countries in the Arab region follow the Islamic working week, which traditionally runs from Sunday to Thursday.
Dubai is a multi-culture city, wherein you will need a multi-culture environment to be developed for a balanced and motivated team.
Dubai will also have reduced working hours during the holy month of Ramadan, in which most employers offer flexible working hours to employees in solidarity with those who fast during the period. Further, Dubai cares a lot for humanity. In summer, when the mercury soars, employees working outside covered spaces shall be provided with mid-day breaks as directed by the government.
Seeking Professional Assistance
Setting up a mainland business in Dubai involves navigating complex legal and financial landscapes. Engaging professional assistance to help you through these processes can be beneficial. Professionals can guide you through the intricacies of local laws, regulations, and the company formation process. They can also provide valuable advice on how best to structure the company.
Consultants can also help understand the local tax environment, set up banking, and manage financial records following local regulations. They can also assist with the financial planning aspects of your business, helping ensure the economic viability and sustainability of your operations.
By keeping this information in mind and proactively addressing the challenges associated with setting up a mainland business in Dubai, you can pave the way for a successful entrepreneurial journey in this vibrant city.
If you need any assistance, contact us or schedule a meeting with one of our consultants.
FAQ - Mainland companies –
- Setting-up
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1. What is the timeline required to set up a business in the mainland?
The timeline needed to set up a business in the UAE mainland can vary depending on several factors, including the type of business activity and the efficiency of the registration process. On average, it can take 7 to 14 days to complete the process. However, the overall timeline can get extended if additional approvals are involved. -
2. What is the cost of setting up a business in mainland Dubai?
The cost of setting up a business in mainland Dubai can vary depending on factors such as business activity and size. However, a rough estimate for trade license fees could be over AED 14,000. Use our cost calculator or talk to our consultants for a specific estimate. -
3. Is there a subsequent renewal of the license every year?
Yes, the Trade license has to be renewed every year unless you have obtained a longer-term license. -
4. What is the process and cost?
The process is comparatively simple compared to the process of setting up a mainland company. The cost of subsequent renewals can vary based on many factors, but roughly 60% of the initial set-up cost can be budgeted for decision-making. -
5. What are the types of licenses permitted on the mainland?
In the UAE mainland, several types of licenses are permitted depending on the nature of the business activity. Some common types of licenses include:
- Commercial License: Required for businesses engaged in buying or selling goods.
- Professional License: Required for service-oriented professions such as consulting, engineering, accounting, etc.
- Industrial License: Required for businesses involved in manufacturing or industrial activities.
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6. What are the documents required to set up business on the mainland?
The documents required to set up a business in the UAE mainland may vary depending on the business type and the authorities involved. However, the general shareholder's and manager's identity and address proof are required. If the shareholders are corporates, the incorporation documents shall be produced in original. Further, all documents originating outside the UAE shall be attested by the UAE embassy in the originating country and subsequently by the Ministry of Foreign Affairs in UAE. Apart from documents, information relating to the company, such as preferred name, share capital and its denomination, financial year, etc. Additional documents requested during the process include the initial approval, drafted MOA, tenancy contact, and any additional approvals required for the activity. Get in touch with us for a list tailored to your business activity. -
7. How many business activities are permitted in a trade license?
In the UAE, a trade license can generally cover multiple business activities under a single license. However, getting activities from different activity groups will require additional approvals and costs. In general, companies can select up to 3 activities without extra cost. It is important to note that activities from professional, industrial and commercial groups will not be issued in one license. Contact us for more clarity on this. -
8. What is a primary business activity in the trade license? What is its relevance?
The primary business activity in a trade license refers to the principal or core activity of the company. It represents the primary focus or specialisation of the business. While a trade license can cover multiple activities, the primary business activity holds significance as it determines the regulatory requirements, compliance measures, and industry-specific regulations applicable to the company. -
9. Are there any guidelines to be considered while naming a mainland company?
There are guidelines to be considered while naming a mainland company in the UAE. The name should comply with the UAE's naming conventions, which include the following:
- The name should not violate public order or morals.
- The name should not contain any religious references or offensive language.
- The name should not be the same as or similar to the name of an existing company or trademark.
- The name should reflect the business activity without misleading or exaggerating the nature of the business.
- The name should typically end with a legal form identifier, such as "LLC" (Limited Liability Company) or "PJSC" (Joint Stock Company) for mainland companies.
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10. Can mainland companies obtain a trade name different from a registered name?
The trade name is often used for marketing, branding, and day-to-day operations. In contrast, the registered name is used for legal and administrative purposes. Mainland companies in the UAE can obtain a trade name different from their registered name. However, it is common for the trade name to be closely related to the registered name to maintain consistency and branding. The trade name is the name under which the company operates and is known to customers, while the registered name is the legal name registered with the authorities. - Shareholding and management
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11. What is the minimum number of shareholders required to form a mainland company?
The minimum number of shareholders required to form a mainland company in the UAE is typically two individuals or corporate entities. -
12. What is the maximum number of shareholders permitted in a mainland company?
The maximum number of shareholders permitted in an LLC company is 50. Joint stock companies are allowed to have more than 50 shareholders. -
13. Can foreign nationals hold shares in mainland companies?
Yes, foreign nationals can hold shares in mainland companies in the UAE. -
14. Can foreign companies hold shares in mainland companies?
Yes, foreign companies can hold shares in mainland companies in the UAE. -
15. Can I transfer shares of a mainland company?
Shares in a mainland company can be transferred, subject to the provisions outlined in the company's Memorandum of Association (MOA) and relevant regulatory requirements. -
16. Should shareholders of mainland companies be residents of the UAE?
Shareholders of mainland companies in the UAE are not required to be residents of the country. -
17. Should shareholders of mainland companies be present in the UAE during company formation and renewal?
Shareholders of mainland companies need to sign the documents in UAE. However, it can be facilitated through a POA holder or a corporate service provider. - 18. Should managers of mainland companies be residents of the UAE? The manager of a mainland company in the UAE is not required to be a resident of the country. However, it is advisable to obtain residency for the manager as it will be required at many places, such as banks while opening corporate accounts.
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19. How many managers can a mainland company appoint at the same time?
A mainland company in the UAE can appoint multiple managers at the same time. The number of managers can be specified in the company's Memorandum of Association (MOA), and there is no specific restriction on the maximum number of managers. But one needs to carefully plan the rights and powers of each manager and document them to avoid complications. -
20. Can shareholders issue a power of attorney (POA) to authorise someone to act on their behalf for company formation?
Yes, shareholders of a mainland company can issue a Power of Attorney (POA) to authorise someone to act on their behalf for company formation or other company-related matters. The POA allows the appointed person to undertake specific actions or make decisions on behalf of the shareholder, as outlined in the POA document. The POA can be issued through the Country’s Notary or from any other country if attested by the respective UAE embassy and MOFA. - Branches
- 21. Can mainland companies open branches within the same emirate? Yes, mainland companies in the UAE can open branches within the same emirate where they are registered. They can establish multiple branches to expand their operations or cater to different locations within the same emirate.
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22. Can mainland companies open branches in other emirates?
Yes, mainland companies can open branches in other emirates of the UAE. However, opening branches in other emirates may require additional approvals and compliance with the regulations of the respective emirate. -
23. Can mainland companies open branches in other countries?
Mainland companies registered in the UAE can expand their operations and open branches in other countries. However, this would involve complying with the laws and regulations of the target country and establishing the branch according to their respective requirements. -
24. Can mainland companies open branches in free zones?
Mainland companies can open branches in free zones in the UAE, but this requires following the specific regulations and procedures of the respective free zone authority. -
25. Can foreign companies open branches on the mainland?
Foreign companies can establish a presence in the UAE mainland by opening branches or representative offices. However, the branch will not have a separate legal identity. It will be permitted to carry out activities in line with the license of the original company license. - Owning property
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26. Can Dubai mainland companies own real estate property?
Yes, mainland companies registered in Dubai can own real estate property. They can acquire and own real estate properties, including land, buildings, and commercial spaces. -
27. Can mainland companies own property in UAE free zones?
Property ownership in free zones may have specific limitations or requirements set by the respective free zone authority. It is advisable to check with the specific free zone before deciding. -
28. Can mainland companies own property outside the UAE?
Mainland companies registered in the UAE can own property outside the country, subject to the laws and regulations of the specific jurisdiction where the property is located. - Investments in subsidiaries
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29. Can mainland companies invest in subsidiaries in the UAE?
Yes, mainland companies in the UAE can invest in subsidiaries within the country. -
30. Can mainland companies invest in foreign subsidiaries?
Mainland companies in the UAE can invest in foreign subsidiaries outside the country, subject to the laws and regulations of the target jurisdiction. - Sponsors and service agents
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31. What is the difference between a local partner and a local service agent?
A local partner refers to a UAE national or a UAE-owned company that holds a minimum ownership stake (often 51%) in a mainland company. They may or may not actively participate in the business and opt to have decision-making authority. Often the powers are agreed upon by way of a side agreement. On the other hand, a local service agent is a UAE national or UAE-owned company appointed by a foreign investor to act as a representative or sponsor for their mainland company. The local service agent does not have ownership in the company but assists with administrative and government-related tasks. The agreement terms with the service agent have to be documented in a Local Service Agent (LSA) agreement. -
32. Can mainland companies change sponsors or service agents?
Yes, mainland companies in the UAE can change their sponsor (local partner) or local service agent. -
33. Can mainland businesses change their legal form?
Yes, mainland businesses in the UAE can change their legal form, such as from a sole proprietorship to a limited liability company (LLC) or vice versa. However, this can have other implications from a tax and operational standpoint. Contact us for more information. -
34. Can mainland companies change registered offices within the same emirate?
Yes, mainland companies can easily change their registered office within the same emirate in the UAE. -
35. Can mainland companies change their registered office to other emirates?
No, it is not possible to move the registered office to other emirates. However, branches can be formed in other emirates. -
36. What are the types of licenses which require a local service agent?
Professional licenses in the UAE mainland require the appointment of a local service agent. -
37. Can I operate the company through a Power Of Attorney (POA) holder?
A power of attorney (POA) can be used to authorise someone to act on behalf of a company. - Compliances
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38. What are the regulatory compliances required by mainland companies?
Mainland companies in the UAE are required to comply with various regulatory obligations, including but not limited to:
- Renewal of trade licenses and permits
- Maintenance of updated legal documents and records
- Compliance with labour laws, including employee contracts, visa requirements, and salary transfer obligations
- Compliance with tax regulations, including Value Added Tax (VAT), Corporate Tax (CT) and Excise Tax
- Compliance under Economic Substance Regulations (ESR)
- Compliance under Ultimate Beneficial Owner (UBO) reporting
- Compliance under Anti-Money Laundering (AML) Laws, if applicable
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39. Are mainland companies subject to financial audits?
Yes, mainland companies in the UAE are subject to financial audit requirements as per company law. -
40. Are mainland companies subject to VAT?
Mainland companies meeting the specified threshold for VAT registration must comply with VAT regulations. -
41. Are mainland companies subject to income tax?
Yes, mainland companies are subject to corporate tax with effect from 2023. The CT is charged at 9% on annual profits above AED 375,000. -
42 .Can employees of Dubai mainland companies reside in other emirates?
Yes, employees of mainland companies in Dubai can reside in other emirates of the UAE and easily move around without any restrictions. -
43 .What is WPS? Is it mandatory to pay salaries to employees through a bank?
WPS stands for the Wage Protection System. It is a system introduced by the UAE government to ensure that employees' salaries are paid promptly. Every salary transfer should be done through the system, and the Ministry of Labour gets updated on the salary transfer to employees through the system. - Do let us know if you have any questions not covered in this article.