Breaking 5 Most Common Myths About Setting Up a Business in Dubai

Most people around the world, who have not got a chance to visit Dubai yet, picture the Emirate as a filthy rich city where everyone is rolling in money, roaming decked up with precious jewellery and expensive accessories in Ferrari with petrol brimming to its cram. People enjoy tax-free incomes and cheap rides as the gas and fuel prices are the cheapest. But these are all mere myths! There are Emiratis who survive from pay cheque to pay cheque. Taxes are levied from the general public in various forms such as VAT, myriad municipality taxes, toll taxes and taxes on alcohol, etc. (Do not get me started on the hefty fines for any kind of non-compliance that can happen before you know it). Taxis here can rip you off in a heartbeat. And there is hardly any difference between the fuel prices in your country and any of the seven emirates of the UAE now. Likewise, there are myths associated with expanding or starting a business in Dubai as well. And when you are heading to Dubai with the purpose to establish a company here, it is utterly important to be clear of any myths. Because anything that you believe is true but actually it’s not can severely impact your big small decisions, which create the foundation of your business. Therefore, today we are here to break the most common myths about business formation in Dubai so that you can set off your entrepreneurial journey in Dubai following the tracks of reality.

Myth 1: A free zone business setup is costlier than a mainland business setup in Dubai.

Fact: Not always! It actually depends on the choices and decisions you make during the course of your entrepreneurial journey.

Whether to go for a mainland company formation or free zone company formation?”, is the question that puts almost every entrepreneur in Dubai in a fix. Especially after the amendments in the UAE Commercial Companies Law of late according to which acquiring 100% foreign ownership is possible with a mainland company as well now, just like a free zone company in Dubai. Most free zones in the UAE come with the requirement of minimum share capital. For instance, the minimum share capital requirement for setting up a company in DMCC free zone is AED 50,000 per company and AED 10,000 per shareholder, while that is AED 150,000 in Hamriyah Free Zone in Sharjah. However, you can choose one of the cheapest free zones in Dubai as well for your company setup on a budget. Besides this, there are free zones in Dubai that don’t have a requirement of minimum share capital. For instance, IFZA offers an extensive choice of low-cost company formation packages with no minimum share capital. Plus, you are allowed to pick a maximum of 7 activities under one IFZA licence and set up your office, warehouse, and residential apartment on the same premises. Furthermore, if you are opting for a mainland company formation just because you heard or read somewhere that free zone business setups are expensive, then allow us to tell you that although the minimum share capital that is required to incorporate a company in most free zones in Dubai (not applicable to branches of foreign/UAE companies though!), UAE adds to the overall cost, the decision pays off well later in the wake of myriad benefits such as tax and import/export duty exemptions, permissible full capital/profits repatriation, remarkable yet affordable office solutions, no requirement of annual audits, to name some. Remember, when it comes to business, location is everything! And this is a decision that should not be taken on factual grounds, not mythical ones.

Myth 2: Business formation in Dubai is time-consuming

Fact: It depends on certain factors, such as the type of business activity and legal structure of the business chosen

With tons of paperwork, various external approvals, and so many other formalities for obtaining the trade licence, it’s easy to perceive that setting up a company in Dubai can be anything but swift. It’s just the preparation time that you take and the requirement of special approvals that can delay the process. Otherwise, most licencing authorities in the UAE grant the licence in a matter of 2-3 business days. And you’ll be surprised to know that an SPC Free Zone licence is dispensed just in a couple of hours if all the presented documentation is in order. As long as you have all the required documents in place and your choices don’t need extra work, starting a business shouldn’t take too long. Besides, there are many resources available that can expedite the process even further.

Myth 3: The process of business setup in Dubai is complicated

Fact: With a few steps, setting up a business in Dubai is pretty easy and flexible.

Despite the fact that the UAE has stringent policies to maintain decorum in every nook and cranny of the country, the process of business incorporation in Dubai is flexible and completes in just a few steps. Free zones can be your best bet if you want lesser red flags while registering a company in Dubai, as they are overseen by independent authorities with less rigid licensing rules. You don’t have to take rounds of government departments when it comes to business setup in Dubai free zones. And the joy of joys is that free zones have dedicated customer service executives who will process your applications quickly. If you work with one of the best business setup specialists in Dubai such as Adam Global starting as well as running your company can be an easy breeze.

Myth 4: There are no taxes in Dubai at all!

Fact: Not anymore! Although you don’t have to pay income taxes, there are myriad other taxes you can’t escape from.

Dubai is pictured as a tax haven! But if you read somewhere “Dubai is tax-free”, better you take the statement with a pinch (or a spoonful) of salt as the reality of the UAE tax system paints a different picture altogether now. No emirate of the UAE levies income tax on individuals. However, we can’t ignore the corporate tax imposed on oil companies and foreign banks and the upcoming federal corporate tax which will be applicable (up to 15%) to businesses with taxable income exceeding AED 375,000 UAE, the excise tax on specific goods which negatively impact health or the environment, VAT (Value Added Tax) on a majority of goods and services. Plus, the toll taxes (AED 4) charged from vehicle owners including taxis passing through the toll gates wherever and municipality tax on property which is currently imposed at 2.5% and 5% on annual rental value for commercial properties (paid by property owners) and residential properties (paid by tenants) respectively is all the more reason why Dubai can’t be called a tax haven. And how can we not talk about the entertainment industry when the topic is “taxes in Dubai”! The UAE Government levies taxes on theaters, amusement parks or any other source of entertainment and leisure spending. Hotels in Dubai offering boarding and lodging facilities also have to pay taxes (but the tax burden actually is borne by tourists). On top of that, you’ve gotta cough up your hard-earned money in the name of various service charges, registration fees, fines, penalties, etc. And top of that the sky-scraping inflation! We are not complaining, as common-sense economics dictates that no state can survive without taxes. If you expect lavish perks from Dubai should keep flowing then such incentives have to be financed by an income of some kind. In order to sustain yourself or your business in Dubai, you must have deep pockets. Good luck!

Myth 4: You have to learn how to do everything

Fact: Knowing the process prepares you but you don’t have to be aware of everything to start a business in Dubai.

Just like to become a successful business person, you don’t need an MBA degree, to start a business in Dubai as well you don’t have to know everything up to the hilt regarding the process. Just initially familiarising yourself with the process will do the trick, provided you walk one step at a time. As you move forward with the process, you will know what to do next. And the best part is, when you are in Dubai, you have no dearth of experienced and qualified business formation specialists. Meeting a business setup advisor to know how they can help you set up a company in Dubai from scratch doesn’t harm. And if it’s Adam Global Dubai, you don’t have to pay for your first consultancy with their business setup experts. You might be thinking about the service fee. Well, by choosing an affordable customised business formation package that squarely fits your requirements, you don’t have to pay for the services you don’t want. And it’s always worth it when you work with someone who is hands-on with the business setup process in Dubai and whose business is setting up others’ businesses. Outsourcing the daunting tasks and spadework to experts save you time, money and energy, in a great deal, in your heart of hearts you already know!

Have more doubts? Meet us at Adam Global Dubai!

It is paramount to study a country before setting up a business there. Knowing facts and forgoing myths helps you give your business a strong foundation. We absolutely understand you have so many doubts and queries regarding your business setup in Dubai and are happy to answer all of them. Feel free to meet us at our office in Gold & Diamond Park, Dubai.

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