Benefits and disadvantages of doing business in the UAE

Advantages of doing business in UAE

• With one of the lowest standard corporate tax rates globally at 9%, the UAE might appeal to businesses as a low-tax jurisdiction. This is complemented by a low Value-Added Tax (VAT) rate of 5% and the exemption of personal income taxes for all UAE residents. Thus, our Clients can legally enhance their profits through a UAE company while minimising their tax liabilities
• 100% foreign ownership is allowed in all free zones in the UAE
• Mainland-registered companies can establish a 100% foreign-owned Dubai mainland Limited Liability Company (LLC) without a local partner or registered agent
• The UAE is the leading trading hub in the Middle East. Due to its strategically favourable location, establishing a company in the UAE enables businesses to easily access the Gulf Cooperation Council (GCC) countries as well as the African, European, and Asian markets
• Resident businesses also benefit from the city’s network of over 140 double taxation agreements that help lower the withholding tax on foreign remittances
• Setting up a UAE business offers our Clients easy access to the local currency as the country imposes no exchange controls and has no restrictions on repatriation
• The UAE has a significant presence of enormous international banks, with a total of 50 domestic and foreign banks having head offices located throughout the region
• The UAE had enforced laws against piracy and maintains protection of intellectual property rights, including trademarks. Amid an increase in trademark registrations, the Ministry of Economy has introduced a new Intellectual Property (IP) Ecosystem in 2024 to protect businesses
• The UAE provides the most progressive and developed infrastructural facilities in all sectors
• Many UAE mainland and free zone entities do not require paid-up share capital, reducing the costs of setting up a business in the region
• The UAE cabinet implemented five- and ten-year residency visas for expats, investors, and businesspeople. Investors will be eligible for a five- or ten-year residency visa depending on the size of their investment in the UAE
• There is no public disclosure of the company’s shareholders and directors in the UAE. Therefore, international entrepreneurs can enjoy full confidentiality
• Our Clients may benefit from the large numbers of multinational professionals from around the globe available in the region
• The UAE was removed from the Financial Action Task Force (FATF) grey list in 2024. This reflects the improvements in its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework. With the delisting, foreign currency transactions may become more straightforward and less subject to intensive scrutiny
• The UAE has around 45 Free Trade Zones (FTZs) where goods exported to these zones are exempt from duties. Through its various multilateral and bilateral trade agreements, including those within the GCC, the UAE also maintains strong economic connections with Saudi Arabia, Kuwait, Bahrain, and Oman. This partnership within the GCC framework includes a shared common market and customs unions
• Expanding to the UAE allows businesses to operate throughout the country without the need for local registered branches, allowing for increased market presence at reduced costs. This is especially beneficial for increasing the scope of mainland-based businesses

Disadvantages of doing business in UAE

• The decision-making process for business incorporation in the UAE can seem overwhelming due to the range of options available, such as free zone companies, offshore companies, and resident LLCs. This may be a disadvantage for newcomers as it will require an understanding of the regulatory differences and benefits of each entity. Some business activities in UAE mainland still require the appointment of a 51% local shareholder or a local service agent
• Each Emirate has its own regulations. A company registered in the UAE must comply with the federal laws and the Emirate’s laws. If it is a free zone company, it must comply with the free zone laws
• In 2020, the UAE introduced new regulations requiring all UAE companies to maintain and submit registers of their UBOs or Real Beneficiaries, shareholders, and directors. Information contained within company registers is kept confidential by the authorities
• Effective 2019, locally incorporated Dubai entities engaging in i) holding company activities ii) banking business iii) distribution and service centre business iv) finance and leasing v) fund management vi) headquarters business vii) insurance viii) intellectual property holding and ix) shipping are required to employ local staff and lease a physical office.
• It may be expensive to carry out company registration in the UAE due to i) costly government fees ii) translation, notarisation and legalisation requirements and iii) mandatory office space rentals
• In Mercer’s Cost of Living Survey which evaluates 227 cities across five continents, Dubai and Abu Dhabi are among the more expensive locations for international employees to live in, ranked 18^th and 43^rd respectively. Businesses may need to adjust their salary structures to ensure they can attract and retain the talent working in these costlier environments in the UAE In sectors identified as having “strategic impact” such as banking and telecommunications, foreign investors will need to gain approval from the relevant regulatory authority
• Dubai gas and oil companies are subject to a 55% tax rate applied to the company’s profits.
• All foreign banks in the emirate, except those situated in the Dubai International Finance Centre, are required to pay a 20% tax rate on their annual taxable income
• Post-dated cheques are commonly used in the UAE for rental payments

Success tips when doing business in the UAE

• In business meetings, Arab professionals often begin with general discussions before delving into business matters. This gradual approach helps build comfort and trust. It is considered impolite to insist on discussing business matters immediately and such directness should be avoided
• Foreign entrepreneurs need to be aware of how they must treat woman in the workplace. Examples include:
  • Not all UAE woman are comfortable shaking hands with foreign men. You need to wait for a woman to put her hand out first before putting forth your own hand
  • It is also not acceptable to touch a woman even in a friendly manner on the shoulder or other places at any time in the office
  • It is common for men and woman to occupy separate areas within the office. As such, it is advisable to allocate distinct sections of your office space for male and female employees respectively
• If an Arab invites you to their home, it is polite to accept the invitation and take the chance to connect with locals. Your host is likely to be generous and genuinely interested in learning more about you. However, you should avoid debating politics and religion as your opinions might be regarded as ill-informed or even offensive, even if they seem acceptable to you from a western perspective
• Mastering simple Arabic phrases for greetings and everyday interactions can enhance your experience as locals typically respond warmly to such efforts. However, remember to use the language respectfully
• Arabs are hospitable and place a great deal of emphasis on an outward expression of politeness and quiet demeanour. They often avoid directly refusing proposals, which requires you to pay more attention to how they say things. If the response is ‘leave it with me’ or ‘I’ll think about it’, it is likely an indication that the project may not progress further.
• When interacting with Arabs, avoid situations that could cause them to feel embarrassed in front of their peers. Being mindful of this will be appreciated if the individual recognises your consideration
• While Dubai is considered a cosmopolitan city, it is still an Islamic state and follows the Islamic culture. It is important for foreign companies to respect this and be informed of the Islamic traditions in business.

Interesting facts about the UAE

• The UAE became a member of the United Nations and the Arab league in 1971
• It is a member of the International Monetary Fund, the Organisation of Petroleum Exporting Countries, World Trade Organisation, and other international and Arab organisations
• Among the seven emirates, Dubai is the most populous. As of 2024, Dubai has a population of 3.68 million, with expatriates accounting for around 75% of Dubai’s demographic. Arabic is the official language, but English is the language most commonly used in business environments
• Since 1833, the reigning Al Maktoum family ruled Dubai. Since oil was discovered in 1966, the city has prospered. Today, oil revenue contributes a mere 20% of the economy’s income. The majority of emirates income is from the financial sector, tourism, real estate, and ports. Dubai is the world’s third-largest import and export hub after Hong Kong and Singapore
• The UAE has been named the top place in the world to start a business for the third year running, according to the 2023/2024 Global Entrepreneurship (GEM) survey. The country’s leading position is largely driven by the government’s goal to diversify from an oil-dependent economy
• As the capital and largest Emirate of the UAE, Abu Dhabi makes up around 84% of the total area of the UAE. On the other hand, Ajman is the smallest Emirate, representing 0.3% of the UAE’s mainland area
• His Highness Sheikh Mohamad bin Zayed Al Nahyan serves as the President of the UAE and the Ruler of Abu Dhabi. He was elected on 14 May 2022.
• Cigarettes incur a 100% customs tax while alcohol is subject to 50% customs tax
• With over 300 skyscrapers, the UAE demonstrates its continuous development into a modern nation
• As the world’s tallest skyscraper at 828 metres, the Burj Khalifa took six years to build at a cost of US$1.5 billion. Burj Khalifa comprises 163 floors, 900 apartments, 304 hotel rooms, 35 office floors, 9,000 parking lots, and 57 elevators