Dubai has emerged as a global hub for entrepreneurs and investors, offering a strategic location, world-class infrastructure, and a pro-business environment. Historically, foreign nationals faced restrictions, requiring them to have a local Emirati partner hold a 51% stake in mainland companies. However, recent legal reforms have transformed the landscape, allowing expatriates to own 100% of their businesses in many sectors. This article explores how expatriates can utilise these changes to establish a business in Dubai without requiring a local sponsor. Discover our Dubai company formation services to learn how we assist expats in establishing a strong foundation with full foreign ownership.
Understanding the Local Sponsor Requirement: Then vs. Now
The Traditional Model
Previously, foreign entrepreneurs aiming to set up a mainland business in Dubai were mandated to partner with a UAE national, who would hold a 51% ownership stake. This arrangement often limited the autonomy of expatriate business owners.
The Legal Shift
In 2020, the UAE government enacted Federal Decree-Law No. 26, amending the Commercial Companies Law. This pivotal change abolished the requirement for a local sponsor in many business activities, allowing foreign investors to own 100% of their mainland companies.
Business Structures Allowing 100% Foreign Ownership
Mainland Companies
Under the revised law, expatriates can fully own mainland companies in numerous sectors. However, specific strategic industries, such as oil and gas, security, and defense, may still require local participation. It’s essential to consult the Department of Economic Development (DED) to verify if your intended business activity qualifies for full foreign ownership.
Free Zone Entities
Dubai hosts over 30 free zones, each catering to specific industries. Businesses established in these zones benefit from:
- 100% foreign ownership
- Tax exemptions
- Full repatriation of profits and capital
- Streamlined licensing processes
However, free zone companies are generally restricted to operating within their respective zones or internationally. To trade directly within the UAE mainland, additional licensing or partnerships may be necessary.
Free Zones: A Preferred Route for Expats
Free zones offer a conducive environment for expatriate entrepreneurs. Some prominent free zones include:
- Dubai Multi Commodities Centre (DMCC): Ideal for commodities trading and related services.
- Dubai Internet City: Caters to IT and tech companies.
- Dubai South Focuses on the logistics and aviation industries.
- Ras Al Khaimah (RAK) Free Zone: Known for cost-effective solutions for SMEs.
Each free zone has its own set of regulations and benefits, so it’s crucial to choose one that aligns with your business objectives.
Mainland Business Setup Without a Local Partner
Eligibility and Process
To establish a mainland company with 100% foreign ownership:
- Determine Business Activity:
Ensure your intended activity is among those permitted for full foreign ownership. You can check this against the Dubai DED activity list provided by the UAE government.
- Choose Legal Structure:
Options include Limited Liability Company (LLC) or Sole Establishment, depending on the nature of the business.
- Apply for License:
Apply for the DED, along with the required documents.
- Office Space:
Secure a physical office space, as mandated for mainland businesses.
- Local Service Agent (LSA):
For specific professional activities, an LSA may be required. Unlike traditional sponsors, LSAs have no ownership stake or decision-making authority.
Step-by-Step Guide for Expats to Start a Business Without a Local Sponsor
- Choose Jurisdiction:
Decide between mainland and free zone based on your business model and target market.
- Define Business Activity:
Clearly outline your business operations to determine licensing requirements.
- Select Legal Structure:
Options include LLC, Sole Establishment, or Free Zone Company.
- Reserve Trade Name:
Choose a unique name and register it with the relevant authority.
- Initial Approvals:
Obtain preliminary approvals from authorities like the DED or the free zone authority.
- Lease Office Space:
Secure a physical address, as required by the jurisdiction.
- Finalize Documentation:
Prepare and submit all necessary documents, including Memorandum of Association (MOA) and lease agreements.
- Obtain License:
Receive your business license upon approval. You can also review guidelines from the UAE Digital Government’s official setup guide for reference.
- Open a Bank Account:
Set up a corporate bank account to manage business finances.
- Visa Processing:
Submit applications for residency visas for yourself and any employees.
Costs Involved in Setting Up Without a Local Partner
The cost of establishing a business in Dubai varies based on several factors:
- License Fees: Depending on the business activity and jurisdiction, fees can range from AED 10,000 to AED 50,000.
- Office Space: Costs vary based on location and size.
- Visa Fees: Residency visa processing can cost between AED 3,000 and AED 7,000 per person.
- Banking: Initial deposits and maintenance fees differ among banks.
- Professional Services: Legal, accounting, and consultancy fees should also be considered.
Common Challenges and How to Overcome Them
- Navigating Regulations:
Understanding the nuances of local laws can be a complex process. Engaging with business setup consultants can provide clarity.
- Banking Hurdles:
Opening a corporate bank account may require thorough documentation and due diligence.
- Cultural Differences:
Being aware of local business etiquette and practices is essential for smooth operations.
- Visa Quotas:
Free zones may have limitations on the number of visas per company. Planning accordingly is crucial.
How Can Our Experts Help?
Navigating the business setup landscape in Dubai can be daunting. Our team offers comprehensive services to streamline the process:
- Consultation: Personalized advice to choose the proper jurisdiction and business structure.
- Documentation: Assistance with preparing and submitting all necessary paperwork.
- Licensing: Guidance through the licensing process to ensure compliance.
- Banking Support: Facilitation in opening corporate bank accounts.
- Ongoing Services: Support with visa processing, renewals, and other administrative tasks.
Conclusion
The UAE’s progressive reforms have opened doors for expatriates to own and operate businesses in Dubai with complete autonomy. By understanding the available structures and processes, and with the proper guidance, setting up a business without a local partner is not only feasible but also advantageous. Embark on your entrepreneurial journey in Dubai with confidence and clarity.
