If you look at the statistics from the UAE registration authorities in the past in the year 2018, more than 1,000,000 licenses were issued in the UAE to carry out commercial activities. About 45% of licenses issued are in the emirate of Dubai, 40% in Abu Dhabi. More than 30% of licenses were issued for doing business on the mainland, about 70% for doing business in the free economic zones of Dubai and the Northern Emirates. More than 95% of all issued licenses are commercial and professional licenses.

HOW DO I CHOOSE THE RIGHT FREE TRADE ZONE OF THE 50 EXISTING ONES IN THE UAE? 

This question is asked by all businessmen who view the United Arab Emirates as a new territory to enter the markets of the Middle East. The UAE has been developing its infrastructure for decades to attract foreign investment. The country has about fifty different free trade zones that have the modern infrastructure for the most ambitious business challenges. Most of the world's financial and credit organizations have their branches in the UAE to provide the business with the necessary capital and financial instruments. Therefore, one of the important issues when deploying a business in the UAE is which of the available jurisdictions of the UAE will be the most efficient, optimal, and comfortable? What to choose: mainland, offshore, or free trade zone in the UAE?

FACTORS AFFECTING BUSINESS SET-UP IN THE UAE 2019

Below are the factors that must be considered when choosing what form and what region of the UAE to open an international business:

• Type of activity
• The territory of the provision of services/sale of goods
• The structure of the company
• Confidentiality
• 100% sole control or partnership/society
• Availability of a physical office and staff
• Full or limited liability
• Prospects for changing the business scale

WHAT QUESTIONS NEED TO BE ANSWERED BEFORE STARTING A BUSINESS IN DUBAI AND IN THE UAE?

1. What are you going to do in the UAE?

The answer to this question can really narrow down the options for entering the UAE market. For example, if you plan to provide professional legal services, then the mainland will suit you the most, because this type of business can be owned by 100% of local citizens, according to the provisions of the licensing authority. In this case, you can provide a full range of professional services. If you want to be the sole owner of the business, then you have the opportunity to provide only legal advice that can be registered in the FCC, RAKEZ, UAQ FTZ, and other free-economic zones.

2. Where exactly will the services be provided?

The territory of physical presence is a significant factor. You can provide services remotely from anywhere in the world without the need for a real meeting with a client, and for this, you can use various options in a free trade zone and offshore jurisdictions of the UAE. But if you want to provide services to a specific physical address to which your customers will come, then the options become much smaller. For example, if you want to provide services for organizing and conducting events in the UAE (exhibitions, seminars, training, etc.), then you will need to register a company on the mainland since you will need to interact with customers throughout the UAE.

3. You are going to do business in the UAE alone or with partners?

If you are planning to always be the sole owner of the business, then this is the easiest option that all free trade zones in the UAE can register. If you plan to sell a share of a company in the future or invite a partner to strengthen the business, then you will need to make changes to the company’s structure and determine your stake in it, determine the area of responsibility of the parties, as well as the arbitration jurisdiction. The procedure for transferring ownership usually takes 1 week, but keep in mind that in some cases business and financial due diligence at the preparatory phase may take from 1 month or more.

4. Will you work with the MENA region?

If you are strategically set for a long-term perspective and plan to enter the markets of the UAE, the countries of the Middle East and North Africa, then you should think in advance about the appropriate position of your business, meaning having a real office and staff. For these purposes, both the mainland and FTZ are optimally suited. But it is necessary to take into account that a number of free trade zones (for example, UAQ FTZ or IFZA) do not provide physical offices, which means that you cannot receive clients in your personal space. As well as some of the special economic zones (DAFZA, JAFZA, TECOM, etc.) have exclusive rights to rent offices, which allows them to dictate the price, this may affect the cost of maintaining a business in the UAE.

5. Are you going to attract investments to your business in the future?

If you are interested in receiving loans from banks or from private investors, then you will need to provide appropriate access to personal information. To attract finance will need to be audited and reviewed. For this, you should use the capabilities of reputable from the point of view of banks and financial institutions of the FTZ and the mainland. For example, special economic zones such as DMCC, DIC and DSOA are more credible for bankers and investors.

6. Is this chance to increase the company's staff in the UAE in the future?

At the initial stage of selecting and setting up a company, it is important to assess how many UAE resident visas are needed for employees now and how many visas are required during the first year. The choice of jurisdiction will depend on this, as different FTZs will offer different options and the number of visas will significantly affect the cost of registration. If it is wrong to estimate the number of visas for the company initially, then in the future this may entail additional costs associated with the adjustment.

7. What liability do you prefer?

This is an important issue that affects the choice of the legal form of the future company. In total, there are 7 types of forms in the UAE in which companies can be registered. Also, you can choose 100% responsibility of an individual entrepreneur, or determine the extent of risks acceptable to you in a partnership agreement, or protect your business as a joint-stock company, since claims in the future will be made against the company, not the shareholder. It distinguishes a joint-stock company from business or partnership.

8. You are considering the prospect of selling your business in the UAE

If you are planning to sell your business in the future, then you should take care of the attractiveness of the company for investors. For example, if your business is initially focused on IT projects, then there are a number of free trade zones (DSOA, DTEC, DIC, etc.) that specialize in this. Of course, you can register IT in other free trade zones in the UAE, which includes general areas of business without specifics of one or another direction (for example, RAKEZ, AFZA, SHAMS, etc.), but registration in a specialized jurisdiction focused specifically on your business allows you to increase the liquidity and attractiveness of your company for investors.

CRITERIONS FOR THE BEST UAE JURISDICTION YEAR 2019 FOR YOUR BUSINESS:

1. Allows you to rhythmically operate your business in the UAE for at least 1 year
2. Does not require changes in the license to conduct business in the UAE
3. Ensures the opening of a bank account in the UAE
4. Allows you to change the scale of the business without significant financial investments
5. Provides the necessary and mandatory infrastructure (office, facilities, logistics, etc.)

At Garant Business Consultancy, we help our clients to clarify the mid-term business outlook in the UAE and find the most optimal and effective solutions for implementation. We look at the tasks of business in an impartial manner, in our choice, we rely on the laws and effective practice of the UAE. Our experience and knowledge allow us to offer you options that optimally combine resources and implementation opportunities.

Please contact me for more information and advice on the best jurisdiction for setting up your company in the UAE.

MARSEL SHADMANOV

Head of Corporate Services of Garant Business Consultancy