10 legal options before starting your business

In less than a century, this young nation in the desert has remarkably transformed itself from herding camels to being home to the world’s tallest building and having the most luxurious and modern cars and skyscrapers on the planet, a glimpse of a fascinating future it continues to build and nurture. Here are some laws you must know if you’re considering to set up a business in the UAE.

The United Arab Emirates (UAE) has come a long way since the rulers of its seven emirates – Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Ajman, Fujairah and Umm Al Quwain—agreed to form a union on 2 December 1971.

Within just a few decades, the UAE has managed to build itself as one of the wealthiest nations in the Gulf and the world. This year, it made another global history by becoming the first Arab nation to send a spacecraft around Mars’ orbit on a mission to study the Red Planet’s atmosphere.

The country is highly regarded as a safe and secure place for international business. In 2009, foreign direct investment (FDI) in the UAE exceeded US$13.7 billion which is more than all FDIs combined invested in all other GCC countries.

Known for its business-friendly environment and approach, the UAE is also highly regarded for adopting international best practices in sustainability, promoting smart technologies, contributing to the transfer of knowledge and creating job opportunities for locals and millions of expatriates from more than 200 countries across the world. The UAE was ranked as the 16th best nation in the world for doing business under World Bank Group’s Doing Business 2020 Report. The country also scored high in other global indices such as the World Economic Forum’s Global Competitiveness Index (GCI), the Global Innovation Index, among others.

Strategically connecting the East to the West within just hours by plane, with stable political and macroeconomic conditions apart from having good general, telecoms and IT infrastructure and ever-increasing popularity among international tourists, there’s no doubt the UAE should be one of your preferred business hubs.

Here are the top ten legal laws and conditions you should consider before starting your business in the UAE:

1. The legal system in the UAE is based on both civil code principles and on the Islamic Shari’ah Law. This is ed in the UAE Constitution; Federal laws and regulations; Emirate laws and regulations; Islamic Shari’ah principles; and Free zone regulations (as applicable).

2. In addition, certain free zones, primarily the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Markets (ADGM), have their own body of laws (source: www.pwc.com)

3. You can set up an onshore business in any of the seven Emirates with a reliable local business partner. Previously, the law allows only 49% ownership for foreign investors but this has recently been changed. As amended, UAE Federal Law No. 2 of 2015 on Commercial Companies invalidates the requirement to have a majority Emirati shareholder or agent, thus, foreign companies can now have full ownership.

4. All companies in the UAE are required to be registered, whether onshore or within free zone, and must get a legally issued trade license by licensing authorities.

5. You can choose to set up your business in any of the UAE’s free zones spread across all seven Emirates. Free zone companies are 100% fully owned by foreign investors. There are essentially five options available to foreign investors who are looking to undertake business/commercial activities in the UAE:

a) Fly in fly out and trade from overseas
b) Conduct business through an agent/distributor
c) Set up a local entity (free zone vs. onshore)
d) Establish a joint venture (JV)
e) Acquire an existing local entity

6. UAE provides tax exemptions on personal income, withholding tax and corporate tax

7. All products and services rendered in the UAE are subject to a 5% VAT

8. An employment contract sanctioned by concerned authorities should be executed to be able to hire an expatriate employee and obtain the necessary labour visa. Labour laws vary depending on where the employee is employed, however, Federal Labour Law No. 8 of 1980, is generally considered as the main labour rules governing both onshore and most free-zone companies.

9. The UAE offers long-term residency permits to entrepreneurs, investors and high-earning expats

10. The UAE strictly implements its Cyber Crimes Law (Federal Decree-Law No. 5 of 2012) which regulates the abuse and misuse of electronic information through activities like hacking, identity theft and fraud

The UAE was one of the first countries in the region to diversify its economy and prepare for the post-oil era, relying on its large financial capabilities, abundant oil reserves and advanced infrastructure.

It still has large reserves of oil and gas and its consolidated sovereign fund assets stand at US$1.3 trillion (AED4.76 trillion). With unparalleled economic foresight, the UAE has withstood the challenges of the pandemic, the worst economic disaster in modern day history.