Dubai is one of the most popular business destinations in the world.
It offers a highly favorable business environment, strategic location, and attractive incentives for entrepreneurs.
Setting up a company in Dubai is relatively easy.
By keeping in mind some crucial factors this process can be made smooth and successful.
In this article, we’ll discuss seven things to check when forming a company in Dubai.
1. Tax Rates in Freezone vs Mainland in UAE
Sometime back, there was no tax at all in the UAE.
From June 2023, however, Mainland entities will have to pay a 9% Corporate Tax on profits over 3,75,000 UAE Dirhams (INR 75 Lakhs). This tax is only paid by people or businesses on Mainland, not in Freezone areas. (Refer: Corporate Taxation in UAE)
In addition to this 9% Corporate Tax, Mainland Companies that sell in the UAE also have to pay VAT. Most things have a VAT rate of 5%.
But this only applies to sales made in the Gulf.
It doesn’t apply to sales made to clients in other places outside of the Gulf.
We recommend starting a business in a Freezone instead of on the Mainland to avoid these kinds of taxes.
2. Documents are needed to start a business in Dubai
Setting up a company in a Dubai Freezone is easy.
The name of the company you want to register and the passports and photos of the company’s directors is only required.
For registering a company in Dubai, you don’t need any other paperwork.
An LLC Company can be set up in Dubai by just one person; you don’t need two people to set up a company.
But if you want to register a subsidiary or branch in Dubai, you will need to send in more paperwork, such as a Company MoA, Company AoA, Board Resolution, etc.
3. Starting a business in Dubai
LLC formation in Dubai takes about 2-3 weeks. It can be done from anywhere in the world.
You can also open a digital bank account from outside of Dubai without having to go there.
But if you want an account in a physical bank with branches, you would have to go to UAE.
Opening a bank account will give you access to Internet banking. This will enable you to use your account from anywhere, even outside the UAE.
4. Costs to set up a business in Dubai
Costs vary from free zone to free zone for company registration in Dubai. The total cost of starting a business in a free zone is Rs. 2.75 lakhs per year. The cost is higher for free zones in better locations. This cost includes the cost of your license, your virtual office space, your VISA, and some other charges.
The license fee to start a business in the mainland is higher than starting a business in a free zone.
This means that you should only set up a business in the mainland if you plan to sell or provide services to customers in the UAE.
But the 9% Corporate Tax that is charged on the mainland is a drawback, so all exporters prefer to set up their businesses in the free zone. Mainland companies are only useful if you want to sell something on the Mainland, like in a store, restaurant, or other business. If most of your customers are outside of UAE, it makes sense to set up your business in a free zone. The cost of a license varies from free zone to free zone, and some charge much more than others.
The only problem with setting up a business in a free zone is that it can’t sell to retail customers in the UAE. It can work with both retail and business customers outside of the UAE, as well as registered businesses in UAE. However, it can’t work with retail customers in UAE.
5. Managing the Dubai Company
In a free zone, there are no compliances that need to be done, so it’s easy to run the business.
You only have to pay the renewal fees, which are about Rs. 1.75 lakhs per year. Other than that, you don’t have to send in any forms or balance sheets.
For Dubai company registration and choosing the right entity structure, you only need a good consultant.
But some free zones do require an entity to follow certain rules and make a profit and loss account and a balance sheet, which must be sent to the free zone.
Mainland entities have to follow a number of rules because they have to pay VAT and corporate tax. Freezone entities, on the other hand, don’t have to do any of these things. Because of this, most people who export goods or services prefer to set up a business in a Dubai Free Zone.
Netbanking makes it easy for the Dubai company to handle the money in its bank account, and it can also be used to make transactions in other countries.
The banks also let us have accounts in more than one currency without having to convert them to the local currency. In short, it’s easy to run a business.
Conclusion
In conclusion, setting up a company in Dubai requires careful planning, research, and attention to detail.
If you need help in setting up a business in Dubai, consult Xcel Accounting Services.
Xcel Accounting is a Dubai-based financial consulting firm with over two decades of experience helping businesses.
To schedule a free consultation call us today at +971 (0)55 101 0691
