Doing Business in Dubai
Dubai is the leading city of the United Arab Emirates, enjoying a popularity that surpasses even the federal capital Abu Dhabi. Located on the Persian Gulf, the capital of the Emirate of Dubai has more than three million inhabitants. Dubai is also the country’s leading port,
writes Thomas Hughes.
Although not the capital of the United Arab Emirates, Dubai has become the most famous city in the country, and possibly, the region. This fame is due in particular to the media coverage of its tourist projects such as the Burj-al-Arab hotel - the most luxurious hotel in Dubai, to the gigantism of its real estate projects such as the Palm Islands - an artificial peninsula and archipelago in the shape of a palm tree, The World - an artificial archipelago that reproduces the map of the world, the Dubai Marina with its bigger than life architecture, and the tallest building in the world - the Burj Khalifa.
Dubai is incredible! This largest city in the UAE never ceases to innovate and amaze. Even those who visited the emirate only a decade ago, no longer have the full right to say they saw Dubai, because Dubai prepares new surprises for its residents and guests every day. The only things that remain unchanged are the city’s rapid growth toward shining stars and new building heights, incredible architecture and grandiose projects, stunning shopping, a rich nightlife and entertainment, and the desert in which this modern and cosmopolitan centre of attraction has sprouted.
While half a century ago, it was unremarkable at best, today Dubai has become one of the richest cities in the world - a leading tourist, trade, financial and transport point on the map. The emirate is well prepared to offer its guests the most unexpected and thrilling leisure options, such as a ski complex in the middle of an eternal summer, a huge aquarium with tens of thousands of sea creatures, exhibitions of all kinds of world significance, festivals and unforgettable impressions of dizzying skyscrapers erected on man-made islands.
In recent decades, the United Arab Emirates and Dubai in particular, have also emerged as a leading business hub for the Middle East - a centre of innovation, an important investment destination and an ideal place to start a new company. Business in Dubai and the Emirates attracts more and more entrepreneurs every year, welcoming businessmen and investors from all over the world, since there are no taxes on income, personal income and dividends in the UAE.
The UAE and Dubai in particular, give expats the opportunity to enjoy not only the sea and the sun, but also a rich cultural and social life, high-quality service, as well as an excellent healthcare and education system.
According to the UAE Ministry of Economy, more than half a million licenses for doing business have been issued in the Emirates over the past half year. The trend suggests that the number of issued licenses will continue to grow by 3-5% per year, with new arrivals attracted by one of the most diversified economies in the world. In addition, the UAE has a stable economic growth of the state, government attention to innovation and technology, and a very convenient taxation system.
In fact, that convenient tax system is one of the key advantages of the state, letting its residents enjoy no taxation on their income!
UAE’S INCOME TAX (OR THE ABSENCE THEREOF)
Unlike most other countries where employee salaries and other income are highly taxed, Dubai offers working people a tax-free environment, which means that you get exactly what you earn. The United Arab Emirates has signed many double taxation treaties with a number of countries. If your current place of permanent residence is included in this list, it means that working in Dubai or any other emirate of the UAE, you will not pay taxes to the government of your country of origin.
However, if you are a US citizen working in Dubai, please note that a double taxation avoidance agreement between the United States and the UAE has not yet been signed, though there has been a lot of talk about it in the recent years. While, as a general rule, there is no income tax in Dubai for employees of companies operating in the emirate, if you are a US citizen, you will have to file reports and pay income tax to the appropriate taxation authority in the United States of America every year.
With regard to other countries’ citizens and their tax liability in their home countries, here’s what you need to know: if you relocate to work or open your own business in Dubai, you should consult with your local tax advisor to clarify any possible tax liabilities at home. Either way, moving to Dubai can yield amazing opportunities, financial or otherwise, thus it’s worth taking the time to make sure you have everything figured out. The UAE market is still relatively young, so many niches are vacant or there is little competition in them.
At the same time, doing business in the United Arab Emirates has its own particularities, which you need to know before starting a business.
REQUIREMENTS FOR DOING BUSINESS IN DUBAI
Many of us are used to thinking in terms and numbers that are typical for the region where we live and do business. However, it’s important to mention that doing business in the Emirates is nothing like in the United States or in Europe. The same is true for the costs of opening a company and the maintenance that follows. While there are no taxes in the UAE, instead there are annual government fees for a company license, which can amount to a few thousands of dollars. Furthermore, you need to add the cost of visas for employees to that amount, as well as office rent and other costs of running a business, unless you have a virtual enterprise or an offshore company.
If you are planning to open your business in Dubai, then it can only be operational no earlier than in 4 to 5 weeks from the beginning of the process. This is due to the fact that all new entrepreneurs have to be verified through a special foreign control system. And if, in addition, you plan to rent an office and renovate it, or your type of activity involves obtaining additional permits from the Emirati state authorities, then you can expect about 3-6 months. But there is a solution. In the neighbouring emirates of Dubai, you can open a company in 2-3 days. Therefore, if the speed of registration is a priority for you - it is better to choose the Northern Emirates; on the other hand, if you want to enjoy the prestige and / or work only with an address in Dubai - it will inevitably take longer, but your license will mention Dubai.
In most Western countries, people are used to the fact that a bank account can be opened in 2-3 days, and in some cases even without your physical presence. In the Emirates, the situation is a little different. If you decide to open an account for the company on your own, expect a response no earlier than 10 days after submitting the application, and more often, even after all 15. Add to this the activation of Internet banking, the issuance of a debit card and cheque book, and it can go up to a full month. In addition, no bank in the UAE opens accounts by power of attorney and without the personal presence of a company’s shareholder. In the Emirates, everything is very strict in this matter, but it is also this approach that provides the UAE banks with a high level of trust and security at the regional and international levels.
RESIDENCY THROUGH INVESTMENT
For those who have the opportunity to invest, there are two options for obtaining a resident visa: through business and through the purchase of real estate. If we are talking about business, it excludes offshore companies in free trade zones. The company must be located in the Emirates or be an onshore company in a free trade zone. This means that you, as a foreigner, will only be able to own 49% of the business, and 51% of the shares must be owned by a local partner.
This may cause some complications, but it is the requirement of the local law. Therefore, if you decide to open a business, then you must either personally (and extensively) be familiar with local entrepreneurs, or use the services of intermediaries who will select a professional partner from local businesses.
If you decide to buy real estate in the UAE, then prepare a decent amount - from 1 million dirhams (more than 270 thousand US dollars). For this amount, you will buy your house, villa or apartment at your discretion. With the owner’s documents and passport, insurance and photographs, you can then contact the immigration service in order to receive a residence permit. EG