So, your daily 9 to 5 drudge has stolen all your mojo and talent? Now, you are toying with starting a business and living your dream? That’s fantastic. Launching a venture is as exciting as challenging, especially if you are planning to do it in a foreign land. Nonetheless, if you are all supercharged for your aim, everything can be sorted out. Surely, besides talent and aim, you need the right knowledge and more which you shall know here.
The perks of launching a business in the UAE (United Arab Emirates) are no secret. The country offers galore opportunities for global trade thanks to its strategic location in the Middle East. Furthermore, with no currency restrictions, full exemption from customs tax, and liberty to repatriate the profits and capital, the UAE makes the opportunity of starting a business in the UAE even more enticing.
On top of this, the country’s business setup process is immensely straightforward, given that you are aware of the culture and ways of carrying out business operations here. The incredibly supportive and welcoming business environment of the UAE is why more than 532,000 new businesses were registered in the emirates of Dubai and Abu Dhabi.
Again this also explains the prominent rank of the country, which was 17, in the Ease of Doing Business Index issued by the Doing Business. The positions are conferred to countries by measuring several factors that play a part in starting a business, such as getting credit, tax payments, managing permits, getting electricity, across-the-border trading, and more.
As you are bouncing off the walls with energy with your business idea, you need to know certain things about starting a venture in the UAE. It takes in-depth planning, budgeting, conceptualizing, decision-making, research, etc., to make an idea a covetable reality. You would need help and guidance on several matters like legal obligations, requirements, and processes that you need to consider.
For instance, you must know how to choose the right trade license for your venture, among other steps, to start a business in the UAE. Fret not; we have got everything covered for you!
The UAE is a renowned and appreciative location among entrepreneurs, businesspeople, and investors due to its business-enabling environment. On top of this, its low tax policies have contributed tremendously to taking the Ease of Doing Business (EODB) score so high and bolstering its standing as a business haven in the Middle East.
To institute a business in the UAE, besides conceiving a great business idea, you need to follow other steps. For instance, you will need to prepare a comprehensive business plan, register the business, choose the jurisdiction, select a company structure, apply for a trade license, get external approvals, prepare an MoA (Memorandum of Association), and more to count.
No doubt, the procedure to start a business in the UAE seems so overwhelming. However, the process and staff are supportive, too, so you won’t be confronting much hassle.
Process of setting up a business in UAE
To launch a business in the user-friendly country of the UAE, you need to apprise yourself of the legal obligations, procedures, requirements, time, and formalities. Although it may stagger you a bit, locating a business in such a prime location is worth it. Here is a thorough guide to familiarize you with the steps you need to follow to start a business in the UAE (United Arab Emirates). Read on!
- Pick a business activity: Whatever business idea you have conceived, you need to check its profitability in the AE market. Thus, it is important to conduct in-depth research on the marketability and feasibility of the idea. Once done with this part, you may move on to other steps.
- Pick the jurisdiction: The UAE market is separated into diverse economic zones, namely, Free Zon, Offshore, and Mainland. Each jurisdiction has its own set of legal obligations and rules for setting up a business. Your business activity and requirements determine the jurisdiction you need to choose.
- Choose the company structure: The business structure you choose will directly impact your dealings with profits and losses and assets and resources organization. Before you pick a legal structure for your business, take the pain to research different company structures in the UAE. You need to choose a legal company structure for getting your business license.
- Get your company name approved: Before you can proceed with other steps of establishing a venture in the UAE, you need approval for your business name from the Department of Economic Development (DED). AT this step, the chosen business activity also receives approval besides the business name. As soon as you get the approval, you must submit the documents for procuring a trade license.
- Procure a trade license: In the UAE, there are four kinds of trade licenses, namely, Commercial License, Industrial License, Tourism License, and Professional License. If you plan to launch a business in the UAE, you must apply for one of these licenses. The licensing structure relies on the activity your business undertakes.
- Register your business: Licensing and business registration in the UAE are accomplished simultaneously. Nonetheless, there are several stages involved in the approval and documentation process. To get your business registered, the business owner has to procure approvals from appropriate authorities in government as asked by the DED (Department of Economic Development). The requirements differ according to business activity and type.
- Get all the external approvals: DED may solicit further approvals from other non-government and government agencies depending on the activities of your business. The approvals your business needs differ from the kind of business you hold, such as you might need it from specific banks, municipalities, embassies, etc.
- Craft a Memorandum of Association: To launch a business in the UAE, you must peruse the Memorandum of Association (MoA). It is a complicated document and procedure, so it is recommended to seek the help of an expert.
- Procure tenancy contact & ejari: To kick off a business in UAE, you will have to rent an office or shared workspace. Ejari refers to an electronic system supervised by RERA (real estate regulatory agency). The body exists to ascertain transparency and fairness between the parties engaged in the tenancy contract. Ejari is also required for visa renewals of employees and family members.
- Secure the initial approval: The initial approval from DED is necessary if you want to start your business in Dubai, an emirate of UAE. The approval indicates that the UAE government has no objection to your launching a business there. In case the application is rejected, you cannot progress to further steps.
Hiring Employees in UAE
You won’t be handling all things alone with your partners in a business. As you accomplish the procedures of starting a business in Dubai UAE and are ready to operate, you will need to hire employees. However, you need to be familiar with certain legal regulations and formalities for recruiting people. This is where the expert team at Zimyo comes to your aid with the latest technological solutions to handle all your HR requirements.
Here we have elaborated on matters related to employee hiring,
such as maternity leave, trial period, leaves, vacations, and so forth. Knowing these would facilitate becoming a responsible employer and compliance with the UAE Laws.
- Trial Period/Probation Period: According to Article 37 of the UAE Labor Laws, an employee in the UAE cannot be kept on probation for more than 6 months. And during this period, the employer is entitled to terminate the worker without severance pay or notice. No employee can be put on probation more than once under the same employer. If the employee completes the probation period, this period would be added as a period of service.
- Leave and Holidays: Article 21 of the UAE Labor Law clarifies that every employee in the private sector is entitled to at least paid rest every week. The company has the liberty to increase the number of rest days per week. Furthermore, employees also get paid leave on public holidays. If an employee continues the job on leave days or public holidays, he shall receive compensation with another leave day or get paid for that day.
An employee in the UAE is entitled to a paid annual leave of at least 30 days a year, where he/ she serves for more than one year. The employer has the liberty to set the starting date of annual leave or may even divide the leave into a maximum of 2 periods. As per Article 80 of the Labour Law of the UAE, the employer must pay the full wage plus the prescribed annual leave pay to the worker. There is no provision for sick leave during the probationary period. Furthermore, if
- Termination of Services: The indefinite employment contract can be terminated on valid grounds by the employer and the employee. However, the other party should be notified in writing at least 30 days before termination.
However, an employer has the liberty to dismiss the person instantly if: –
- He/ she takes a fake identity and submits counterfeit documents or certificates.
- Violates safety instructions at the workplace.
- Discloses sensitive information concerning the employer.
- Harasses employer, employees, or manager in charge during the working hours.
- Bears conviction by the court for being dishonest, impudence, and not caring about public morals.
- Gets absent from the job for over 20 non-consecutive days or 7 consecutive days without any solid reason.
- Commits a blunder that results in a considerable material loss to the employer.
- Found working under the effect of drugs or in a state of drunkenness during work hours.
Article 113 of the UAE Labor Law clarifies the condition of termination of services as follows:
- Completion of the employment term unless extended further according to law’s provisions.
- By mutual consent of the parties involved, given that the employee has agreed in writing.
- To allow convenience to the parties involved, provided that the grounds of termination are valid and provisions of this law are abided by.
- Must be at least 50 years old.
- Must have completed 20 years of service.
Every year after the 20 years of service, the pension amount augments by 2 percent until the service years reach the limit of 35. As 35 years of service are completed, the employee shall receive a pension equal to the pay for every year. However, if the person is not eligible for a pension, he/ she shall receive an end-of-service gratuity. If a person resigns voluntarily, the eligibility duration of the gratuity period is 19 years plus 11 months.
- Work Hour Norms: Article 65 of UAE Labor Law makes it customary for employees to not work for more than 8 hours in a day and 48 hours per week. However, the service hours might be nine hours for establishments like cafeterias, hotels, restaurants, security services, and other businesses.The daily work hours are regulated such that the employees do not work for more than five hours in a row.
They should be allowed a break for rest, prayer, and meals which shouldn’t be less than an hour. Employees who need to work overtime between 9 PM and 4 AM should receive the corresponding wage and a supplement of 50% of the basic wage. Except for the daily paid employees, Friday has been declared the weekly rest day.
An employee working Friday should be compensated with another rest day or paid a basic wage along with 50% of that wage. No employer can make daily paid workers work on more than 2 consecutive Fridays.
How easy is it to conduct business in the UAE?
So now you know how to start a business in the UAE; the next thing is to get familiar with the ease it provides in instituting a business. Starting a business in Dubai is easier, thanks to the business’s conducive environment, strategic location, and stable economy.
The country waltzed off with a 17th position in the Ease of Doing business conducted by the Doing Business, which compares several factors like getting credit, managing permits, getting electricity, etc., to grasp the ease offered by the country for starting a new business. Here we have elaborated some of the critical elements considered to confer an over EODB rank to an economy with their scores and ranks.
- Starting a Business: The Doing Business report ranks the UAE 17 in the sub index of Starting a Business. To measure this factor, the project looks at the number of procedures, costs, and time it takes to launch a business. The country made it easier for people to start a business by making the process less expensive and through online registrations. Furthermore, the UAE also simplified documentation requirements and abolished the minimum capital requirements.
- Managing Permits: Permits are licenses required to operate a business legally and, thus, with authority. To gauge this factor to measure EODB rank, the Doing Business considers the number of processes, costs, and time to construct a warehouse or a company. It includes submitting needed documents, getting essential permits and licenses, acquiring utility connections, and soliciting and getting crucial inspections therein. The Doing Business index ranks the UAE 3 among 189 other countries, which is remarkable.
- Getting Electricity: The UAE has topped in the Getting Electricity subindex as indicated by the Doing Business project. To assign a position for this factor, the Doing Business weighs up matters like the number of procedures, time, and cost required to get the business connected to the electrical grid. Furthermore, it also regards the reliability and price of electricity supply and transparency of tariffs. Thus, getting a power connection in the country is easy, so your business goes on like a breeze.
- Getting Credit: To assess the Getting Credit subindex, the Doing Business considers the efficiency of the credit reporting systems to allow funding to new businesses. The UAE in this regard, bagged the 48th position. The newly established private credit bureau that gathers the loan information and guarantees borrowers’ rights to verify their own credit data has optimized access to credit information. Furthermore, this access has been further enhanced by providing consumer credit scores to financial institutions and banks.
- Managing Payroll: Watching your business grow is one of the most spectacular feelings a business aspirant can have. However, this growth increases a load of responsibilities on your shoulders where payroll management is one. You can avail yourself of efficient and reliable services to do the job. This would assist you in backtracking the expenses and payments of your employees and keep you compliant with the legal obligations.
- Paying Taxes: The Doing Business measured the factors like the number of procedures involved in tax payment, costs, and time involved in the same to rank UAE. The country waltzed off with the 30th position and a score of 85.3. It is easy to pay taxes in the UAE through bling payment and filing systems for social security contributions. The country also started to levy Value Added Tax (VAT). Businesses do not have to reimburse any profit tax, while labor tax and contributions in the UAE are just 14.1% and other taxes amount to a total of 1.8% of the profit.
- Enforcing Contracts: The Doing Business Estimates Enforcing Contracts rank a particular economy by considering the number of procedures, outcomes, time, and costs involved to settle a legal dispute. Furthermore, it also regards the quality and efficiency of a court system. The UAE was ranked 9 and scored 75.9 out of 100 in the Enforcing Contracts category. Enforcing contracts has been streamlined by enabling online filing for court documents. Moreover, there is a special court division to address commercial disputes cases.
- Resolving Insolvency: To evaluate this factor, the Doing Business project looks at the recovery rate, outcome, cost, and time involved in the insolvency proceedings. Furthermore, the strength and efficiency of the legal structure for insolvency are also assessed deeply. The UAE ranked at the 80th position in resolving insolvency while it scored 49.3 out of 100. The insolvency resolution procedure was streamlined by introducing an insolvency law that supports business continuity even during insolvency proceedings. On top of that, it also adopted a reorganization procedure.
In the UAE, by now, you must have grokked the opportunities it offers to entrepreneurs and investors. With an incredible EODB rank of 17, the UAE has become a great hub for businesses like Beauty Salon, Health Sector, Real Estate Agency, E-commerce Solutions, Travel and Tourism, Consultancy Services, and more. It is easy for natives to launch their dream business in UAE and for foreigners as well.
Zimyo has emerged as a leading HR solutions provider in the UAE, offering businesses a one-stop solution for all the HR requirements, be it acquiring and training new employees or managing advances against payroll. With multiple years of experience, the team at Zimyo is equipped to take on every challenge that you may encounter.