Question and Answers on Opening a Company in Dubai

The cost and requirements for establishing a business in Dubai vary, depending on the type of company you are registering. However, it will cost approximately AED 15,000 to start a company in the free-zone area and approximately AED 24,000 to register a limited liability company on the mainland.

Offshore companies are cheaper to establish as they will cost between AED 7,000 to AED 15,000, and this cost highly depends on the agent you choose. The registered agents help in speeding up the process and ensuring that everything is done correctly.

To register your company in the UAE Mainland, you must show adequate capital to establish your business. There is a minimum amount for each type of business, and it depends on the type of business you want to set up.

For example, an LLC requires AED 300,000, although this might be subject to change after a sufficient capital test carried out by the Department of Economic Development in Dubai. For offshore companies in Dubai, there is no minimum capital requirement, but shares must be allotted and fully paid.

You need to provide standard documentation that verifies the identity of all shareholders, officers, and directors of your business. If any of those people are not citizens of Dubai, you will need to provide proof of residency and guarantee that they have been granted permission to live and work in Dubai by the government.

While some of the required documents are general for all businesses, some will depend on the type of business and where it will be established — mainland or free-zone area.

You need to provide standard documentation that verifies the identity of all shareholders, officers, and directors of your business. If any of those people are not citizens of Dubai, you will need to provide proof of residency and guarantee that they have been granted permission to live and work in Dubai by the government.

While some of the required documents are general for all businesses, some will depend on the type of business and where it will be established — mainland or free-zone area.

To keep your business registered in the UAE Mainland, you must pay around AED 8,000 for professional businesses, AED 12,000 for commercial businesses, and AED 15,000 for industrial businesses every year.

The cost may vary each year depending on the changes your business may have undergone in its operations. All trade license renewals are paid to the relevant free trade zones or to the Department of Economic Development accordingly.

Dubai has for a long time been recognized as a tax-free business hub, which attracts many investors worldwide. However, they plan to introduce corporate tax from June 1, 2023. Businesses will have to pay 9% if they make above 375,000 UAE dirhams.

Every company in Dubai is free from corporate tax, apart from banks and oil companies. It is because the government of Dubai wants to foster a business-friendly environment that attracts entrepreneurs and investors from around the world.

The oil companies are subject to a maximum of 55 percent corporate tax on incomes earned in UAE, while foreign banks in Dubai pay a flat tax rate of 20 percent.

There is a value-added tax (VAT) of 5% on specific goods and services in Dubai. It was introduced by the International Monetary Fund (IMF) and local financial authorities in the UAE. The VAT applies to healthcare and education commodities as well as basic foodstuff. For non-essential goods subject to excise taxes, the rates range from 50% to 100%.

Depending on your company’s turnover, you may be required to file a monthly or yearly return on VAT and Tax. Usually, you will have to file your first return within 28 days of the end of the tax period. However, if you have no VAT taxable supplies or imports, you can apply for an exemption.

Although Dubai has a zero corporate tax rate, the bad news is that all the other fees are high because they don’t get money from taxes.

You will have to pay a “license fee” on the amount of capital your company injects into the country, which is calculated according to the size of your business and the type of business you run (e.g., manufacturing and trading companies have higher fees than service companies).

Apart from providing the relevant documents, you will have to pay a liquidation fee of about AED 1,500 to 10,000 if you want to close your business. Some of the documents required include a dully-filled liquidation form and a board and shareholder resolution to de-register the company.

If your company has a manager, you need to provide their resignation letter as well, and finally, all the original incorporation documents must be given back to the registration authority.

You do not have to pay tax on dividends when running a company in Dubai. There is no withholding tax on dividends, whether received from or by a local or foreigner. Note that for the companies paying dividends, this payment is not treated as tax-deductible when it comes to the calculation of corporate taxes.

If your company in Dubai is a branch and needs to pay dividends to an abroad parent company, it might benefit from double treaties signed between UAE and other countries.

The fee for creating a bank account depends on the type of account you want to open and the bank itself. For example, opening a personal cheque account at Dubai Islamic Bank costs AED 100, but opening one at Emirates NBD costs AED 250.

To create a corporate bank account, you have to submit some documents to the UAE Central Bank (which vary depending on whether you are setting up an LLC or a free zone company) and other documents required by the specific bank. The fee also varies between banks.

There are no annual filing fees for companies operating in Dubai as long as they have cleared all their taxes and have no outstanding debts. Registering a company for VAT if it qualifies for the voluntary or mandatory threshold is also free. However, if you need your VAT registration certificate attested, a fee of Dhs500 applies.

Here are some penalties related to profit and VAT tax violations:

• Failure to register: Dhs20,000
• Late VAT filing: Dhs1,000 for the first time and Dhs2,000 if the offense is repeated within 24 months
• Non-disclosure of import tax: 50 percent of the outstanding tax (plus you must clear the unpaid tax)
• Declaring the wrong returns: Dhs3,000 for the first time and Dhs5,000 if the offense is repeated
• Not maintaining proper records: Dsh10,000 for the first time and Dhs50,000 if the offense is repeated
• Failing to disclose any error on the records: Dhs5,000 for the first time and Dhs15,000 if the offense is repeated.

It is mandatory for all companies in Dubai to have their accounts audited every year by a regulated statutory auditor. The cost of auditing depends on the size, type of your company, and the complexity of its accounts. It could be as low as AED50,000 or as high as AED1,200,000. Carry out your due diligence and choose a reliable auditor.

There are no tax filing fees in Dubai as long as you have paid all your taxes and don’t owe any money to the government or other agencies in Dubai.

It’s not necessary to have a partner in Dubai if you’re from a different country. However, whether or not you will need one depends on factors such type of the business and its location (mainland or free-zone). If you are aiming for the free-zone area, you can own 100 percent of your business.

If you plan to establish a limited liability company (LLC), then you need a local sponsor who will own at least 51 percent of the business. This sponsor will only receive an annual fee and not a share of the profit. Finally, to get a license to provide professional services, you are free to obtain 100 percent ownership of your business, even if it’s on the mainland.

Founders are required to be present for the initial business registration process and for opening a bank account and obtaining a license. After that point, physical presence is not necessary for ongoing operations. A registered agent would be the best option to help you navigate and complete the entire process swiftly and flawlessly.

To file tax returns in Dubai, you need to register with the Federal Tax Authority (FTA), the government body that regulates VAT in the UAE. You can register through their e-services portal on their website. You need to file your taxes according to the dates and duration specified on your VAT Application or VAT Certificate. You only have 28 days to file your return at the end of each tax period.

Fees for opening a bank account in Dubai vary widely depending on the type of account you want to open, the bank you choose, and the terms you agree to. The fees are typically charged monthly or yearly, but some banks offer free accounts for a limited time.

Some banks charge no monthly management fees if you default on your checking account and don’t maintain a minimum balance. You can typically avoid these fees by using an online banking platform or using a debit card to withdraw cash from an ATM.

If your company sells to businesses in other countries, you must pay VAT. This is an input tax on exports since they are considered taxable supplies. However, this tax is set at zero percent. The good thing is that you can still recover input tax on exports to reduce your VAT tax liability.

It is required for all businesses to declare VAT regardless of the location of their transactions. You are also required to maintain records of all your exports for tax purposes after the end of the period in which the invoice relates. Therefore, despite that transactions are carried out in Dubai or exports are zero-rated, a declaration is a must.