The process of establishing a business in the United Arab Emirates (UAE) can present a formidable challenge to prospective investors. Establishing a business in the nation necessitates meticulous planning and contemplation of diverse elements, despite the stable and prosperous commercial milieu it provides. The establishment of a prosperous business in the region requires investors to overcome various legal and bureaucratic obstacles, cultural disparities, and a fiercely competitive market.

The legal and regulatory framework is a primary consideration for investors embarking on business ventures in the UAE. The nation possesses a legal system that is firmly established, however, the laws and regulations that oversee commercial enterprises can be intricate and necessitate a comprehensive comprehension. Prior to establishing a business in the country, investors must take into account the business entity type, licencing prerequisites, and registration protocols.

In accordance with the Federal Decree-Law no. (32) of 2021 on Commercial Companies, promulgated by the government of the UAE, investors are lawfully empowered to establish and register their own company both domestically and internationally. The aforementioned legislation outlines the parameters and directives pertaining to the integration of diverse corporate entities, encompassing but not restricted to entities with limited liability, publicly traded joint-stock corporations, and privately held joint-stock corporations. It is noteworthy that this legislation delineates the protocols and prerequisites for acquiring essential licences and permits to establish a business entity in the UAE. The consideration of location is a crucial factor for investors seeking to establish a company in the UAE, as there exist two options for company establishment:

1. the Mainland; and
2. the Free zone area.

In order to establish a company in the mainland of the UAE, for some activities it is necessary to have a local national of the UAE who possesses a majority ownership stake of 51% in the company, while the foreign investors maintain a minority ownership stake of 49%. While, in the free zone region, foreign investors are able to maintain complete ownership of their company without requiring the involvement of a local UAE individual.

In this article, we will discuss: (1) what are the processes and procedures to establish the company on the mainland and in the Freezone; and (2) what is the list of documents that are required to set up a company in the UAE; (3) taxation in the UAE; and (4) renewal of the trade license.

Prior to commencing the process of establishing a company on the mainland, the investor must take into account the subsequent steps and procedures to be undertaken before proceeding with the aforementioned process.

In the Mainland of the UAE, there are six categories of business licenses available to enable investors to conduct business operations in the region. These categories include occupational, tourism, industrial, commercial, agricultural, and professional licenses. Each license category corresponds to specific business activities and investors are advised to choose the one that aligns with their business goals and objectives.

Once the investor has determined the type of business, he wants to setup that aligns with their business goals and objective, then the next step is to choose the suitable legal structure for the company. In the UAE’s mainland following type of legal structures are allowed:

1. Sole establishment;
2. Civil company;
3. General Partnership;
4. Limited Partnership;
5. Limited Liability Company (LLC);
6. Public Trust Joint Stock Company;
7. Private Trust Joint Stock Company;
8. Branch of GCC Company;
9. Branch of Local Company;
10. Holding Company;
11. Representative office of Foreign Company.

Once the investor has determined the legal structure of the company, the subsequent task is to select a trade name for the business and initiate the process of registering the chosen name. There exist certain stipulations pertaining to the selection of a trade name for a company, including but not restricted to the following: the name must feature an abbreviation of the legal structure, must not incorporate any inappropriate language, and must be distinct and not already registered or similar to any other name of a registered company. It is imperative to consider these conditions prior to submitting an application for trade name registration in order to prevent any potential delays or rejections.

The investors can apply for the trade name search and reserve the trade name of the company for a specific time period by paying the fees to the chosen emirate’s Department of Economic Development (“DED”) either on its website or smart application i.e., or in person.

Once the trade name is being registered then the investor can apply for initial approval from the DED. An initial approval is the UAE Government’s 'no objection' towards a particular business being established in the country. This approval also allows the investor to proceed with the next steps to set up a business and for the authorities to issue the license. However, it does not grant the investor permission to run the business or practice the business activity in the UAE. Furthermore, it is important to note that the foreign investors must have to obtain the approval of the General Directorate of Residency and Foreigners’ Affairs before getting the initial approval from the DED.

After receiving a no-objection certificate from the DED for the proposed business, the investor is required to draft a Memorandum of Association (MOA) for the company. This MOA is mandatory to specify the legal structures of the company such as civil companies, limited liability companies, public shareholding companies, or private shareholding companies. On the other hand, if the legal form of the company is a sole proprietorship, a Local Service Agent Agreement (LSA) must be prepared.

Once the preparation of the MOA or LSA is completed, the investor must select a business location in which he wishes to establish their company. In the UAE' mainland, it is mandatory for all businesses to possess a physical location that serves as the operational base for the company. The adherence to the guidelines set forth by the emirate's DED, along with the zoning policies and regulations established by local municipalities or other competent authorities, is imperative for the company's premises and location. It is noteworthy that within the Dubai emirates, registration of the tenancy contract for office or warehouse space is mandatory through the Ejari portal of the Dubai Land Department.

Moreover, certain business operations necessitate the acquisition of supplementary authorization from government entities in the process of establishing a mainland company such as:

1. from Ministry of Interior for general transport, driving schools, fire equipment, alarm and safety systems, used-car dealers, used auto-parts, car rental;
2. from Ministry of justice for all the legal activities and legal consultancy;
3. from local municipal department for architectural and engineering affairs;
4. from Telecommunications and Digital Government Regulatory Authority (TDRA) for Telecommunication activities;
5. from Executive Council for travel and tourism, general services, charter trading, ship and maritime agencies, car clubs, charter air transport and foreign company branches;
6. from Ministry of Economy for insurance activities and insurance consultancy;
7. from local health departments regarding health-related activities;
8. from Supreme Petroleum Council for onshore and offshore gas and oil-field services and onshore and offshore oil drilling operations.

Upon obtaining approval from the aforementioned department, investors are required to submit all approved documents and pay the applicable licence fees, which are subject to variation depending on the type of business activity licence. This can be done by visiting the following location:

1. Government service centres;
2. Tasheel offices;
3. On Time offices for government services;
4. Legal services offices;
5. Customer happiness centres affiliated to the departments of economic development in all emirates of the country; or
6. through DED website.

Once the licence fees are paid the investor have to register the company with the Chamber of Commerce and Industry. However, it must be taken into the consideration that the registration of the company must be in the same emirate where it has been incorporated.

In addition to establishing a company in mainland, investors have the option to establish their business in one of the more than 40 free zones located in the UAE. Nevertheless, it is important to note that each free zone has distinct costs, a varying list of permissible business activities, diverse location and facility options, and specific share capital requirements. Thus, it is imperative for investors to carefully assess the suitability of each free zone for their business needs before making a decision.

Now we will highlight the steps and information which are taken into the consideration before initiating the process of company establishment in the UAE free zone.

UAE free zones offer several types of business licenses to investors and entrepreneurs based on the nature of business. Some of them are:

• 1.1. Commercial Trade
• 1.2. Consultancy Services
• 1.3. Industrial
• 1.4. Educational
• 1.5. Media
• 1.6. eCommerce
• 1.7. Offshore
• 1.8. Freelancer
• 1.9. Warehousing
• 1.10.Manufacturing 
• 1.11.Innovation
• 1.12.Others

As soon as the investor decided the nature of business the investor have to decide the legal structure of a company depends on the nature and requirements of the business. In the UAE free zone there are 4 legal forms of businesses that the investor can opt for:

1. Free Zone Limited Liability Company (FZ LLC)
2. Free Zone Company (FZ Co.)
3. Free Zone Establishment (FZE)
4. Branch Office

Likewise, the Mainland, the next step after deciding the legal entity for the business activities is registering the trade name of the company. Once the trade name is registered the investor have to select business space and location. To set up a new company, the investor can choose one free zone that matches the nature of the investor business activity.

Free zones in the UAE gives the investor several options to own or rent an office or buy land to set up investor factory or office building. Further if the investor wants to obtain an independent/professional license, investor can rent an office or register with a virtual office. The office space will depend on the number of employees and the type of commercial activity of investor company. Moreover, office spaces in free zones come either fully equipped or partially furnished and can be rented or purchased after a commercial license is issued. Furthermore, in most cases, it is the free zone authority that issues rental contracts for the investors company.

After the investor select the business space and location like, which freezone he wants to setup his company, investor have to apply for obtaining the initial approval by submitting the necessary documents to the relevant authorities to obtain the initial approval to open a new company. Moreover, some activities such as tourism, travel and health will require additional government approvals that must be obtained from the relevant government authorities.

The following are the list of necessary documents which are commonly required for companies’ setup:

1. Completed application form
2. Business plan
3. Copy of existing trade license/registration certificate (if applicable)
4. Passport copies of the company’s shareholders and appointed manager
5. Registry Identification Code Form (RIC) for appointed manager (original and notarized)
6. Specimen signatures of the company’s shareholders and appointed manager
7. Title deeds (if applicable)
8. A brief letter clarifying the investment idea and the investor's plan (Letter of Intent)
9. 2 years audited financial reports or certificate of reference from a bank (as required)

Documents commonly required for freelancers/professionals

1. Application for registration
2. Curriculum vitae or profile
3. Reference letter from a bank
4. Registry Identification Form (RIC) for Director (original and notarized document)

Once the above-mentioned documents are submitted for initial approval and initial approval is granted to the investor, the investor must do the registration and payment of fees at the freezone authority, either in person or through an online portal. Such fees include the pay and secure company licence fees and the company licence issuance fee, which may be vary from different activity depends on the type of licence.

For the registration at the Freezone Authorities the following documents most commonly required:

1. Completed application form for registration
2. Board Resolution appointing Manager/Director (notarised and attested)
3. Power of Attorney given to Manager/Director (notarised and attested)
4. Memorandum and Articles of Association (notarised and attested)
5. Specimen signature of Manager/Director (notarised and attested)
6. Passport-size photos of Manager/Director
7. Share capital information (if required)

Nevertheless, it is imperative to acknowledge that the UAE provides a tax-free atmosphere, thereby exempting companies from corporate or personal income tax. However, the implementation of a new corporate tax law is scheduled to take place in the UAE by June 2023. The aforementioned statement implies that businesses whose taxable earnings surpass AED 375,000 will be subjected to a corporate tax rate of 9%, which is considered to be among the most minimal globally. The imposition of tax is limited to the profits that are subject to taxation and does not encompass the entirety of the organisation's revenue. In addition, businesses that produce revenue below this threshold will maintain a tax rate of 0%.

It is important to note that the trade license issued by the UAE government is valid for the period of minimum one (1) year. Before the expiry of the trade license, the company must renew it to continue operating legally. The renewal process typically involves submitting updated documents and paying the required fees. Failure to renew the trade license can result in penalties or fines on the investor.