Procedures and licenses for company establishment in the United Arab Emirates (UAE)

The United Arab Emirates has been and is one of the top countries in the world attracting foreign investment.

The UAE is located on the Arabian Peninsula and is a federal state consisting of seven emirates: Abu Dhabi, Dubai, Sharjah, Fujairah, Umm al Qaiwian, Ajman, and Ra's al Khaimah.

According to the International Monetary Fund (IMF), the UAE's GDP will continue to increase in the coming years and is expected to reach 1.740 billion dirhams (473,7 billion USD) in 2018.

In addition, with many preferential policies for foreign investors along with diverse types of companies, suitable for the investment and business needs of each individual and enterprise, establishing a company in the United Arab Emirates (UAE) has received much attention from investors around the world - including Vietnam.

The following article by GLA will clarify the location of opening a company and the licenses needed when opening a company. Open a company in UAE.

1. Where to set up a company in UAE?

In the UAE, businesses can establish companies in free zones (free economic zones/special economic zones) and outside free zones depending on the advantages and disadvantages of each form and the business purposes of the entrepreneurs and businesses. However, no matter which type of investment is chosen in the UAE, foreign businesses will have to meet certain requirements and related licenses.
According to the laws of the United Arab Emirates (UAE), there are five forms of business for foreign organizations when they want to establish a company in the UAE:

1. Business through permanent establishment.
2. Establish a branch office or representative office.
3. Establish a company in a free zone (Entity in a UAE free zone).
4. Civil company formation (currently only available in Sharjah and Dubai).
5. A commercial agency agreement.

Among these forms of business, establishing a company in a free zone is chosen by many businesses – especially Vietnamese businesses. One of the main reasons is:

1. Simple company establishment procedures.
2. 100% company ownership.
3. Tax rate 0%.
4. No foreign exchange controls and no capital transfer barriers
5. One-stop information mechanism for handling all immigration documents, registration, licensing
6. Completely confidential information
7. Open a bank account in Dubai.
8. Can be discontinued at any time.
9. Real estate ownership.

2. Choose the right free zones to open a company

The UAE currently has more than 30 free zones spread across 7 emirates and each free zone in the UAE is operated by a separate regulatory body with its own policies and regulations. When establishing a company in a free zone, a business needs to apply for a number of related licenses, depending on the business line of the business itself and also depending on the regulations of each free zone.

Among the more than 30 free zones in the UAE, Fujairah Free Zone, Ajman Free Zone and DMCC (JLT) Free Zone are considered to be among the most dynamic, advantageous and competitive free zones. Currently, these free zones rank first in attracting foreign investment in the UAE.

2.1. Fujairah Free Zone

Setting up a company in Fujairah Free Zone is easy and flexible with the fastest establishment time and the simplest paperwork and procedures compared to other free zones. In addition, Fujairah is also considered one of the free zones with the cheapest establishment and operating costs.

However, not all businesses should be established here. Fujairah is suitable for international consulting activities such as business consulting, management consulting and life skills consulting,... or businesses in computer networks, designers, music and entertainment, e-commerce, event management, writers, publishers, online marketing, advertisers, online lecturers...

For manufacturing companies not established in Fujairah Free Zone.

2.2. Ajman Free Zone

Ajman is located at the entrance to the Arabian Gulf, making it a good location to serve the eastern and western markets. Ajman is also very close to Dubai, providing access to two international airports and a major seaport. This free zone is therefore ideal for manufacturing, trading or commercial transactions.

Ajman is also one of the free zones with low establishment costs and the establishment is also easy and quick with simplified paperwork. In addition, Ajman does not require the company shareholders or authorized representatives to come to the free zones office.

2.3. Dubai Multi Commodities Center Free Zone (JLT Free Zone)

Businesses established in the two free zones mentioned above are usually used for small businesses. When a business really needs or rents an office and hires employees, it should be established in DMCC.

DMCC is also known as Jumeirah Lakes Towers (JLT). Here, businesses can easily rent an office in a luxurious, professional building with many different areas, suitable for business needs.

DMCC has metro and tram connections to Dubai. This free zone is very innovative and most services like visa applications or company formation can be done online through a web portal.

3. Types of licenses

3.1. Types of licenses you need to know

There are generally three types of licenses: 

• Commercial licenses: for all commercial, import and export business activities
• Professional license: includes service business activities such as market research, providing marketing solutions, technology solutions or handicrafts.
• Industrial licenses: licenses for activities related to industry and manufacturing.

There are also several other types of licenses:

• E-commerce License: trading and providing goods and services over the Internet.
• Service License: Companies granted this license from the respective government authorities in the UAE can provide banking services, contract services, etc. but must comply with the specific regulations of the governing authority.
• Agricultural Licence: for agricultural farm owners, or businesses that produce animal products or process seafood.
• Occupational License: a license for individuals to practice crafts or professions based on their mental and intellectual abilities and talents (for example, consultants, writers, lawyers, auditors, etc.).
• Tourism Licence: for hotel businesses, travel companies, boat rental companies, and tourist camps.

These licenses can be renewed annually, as long as the lease between the business and the Free Zones remains in effect.

3.2. Licensing process 

Before applying for a business license, businesses need to follow the steps below to meet the legal requirements of relevant government agencies and at the same time protect their own rights:

1. Determine the type of business to apply for the appropriate license (commercial, industrial or professional) and determine the type of company to establish.
2. Identify the relevant business activities of the enterprise (because each license is limited to a maximum of 10 activities).
3. Make decisions about the legal status of the company (nature of business, desired business activities, number and nationality of business owners...).
4. Understand all the requirements and conditions of the type of license you need to apply for.
5. Choose a trade name for your business.
6. Submit application for initial approval, can be submitted in person or online.
7. Register a trading name (after initial approval).
8. Sign a lease agreement for the business premises (in free zones) with the free zones management agency.
9. Prepare the necessary documents (memorandum of understanding, approval decision, etc.) from the relevant government agencies and this is mandatory in all cases. For example, when establishing a media company, it is necessary to apply for a license from the Ministry of Information and Culture. These documents can be sent by email and the fees are paid 100% online.
10. Pay the necessary fees and receive your license

Note: Each free zone will have its own governing body with its own requirements, so this procedure is only a general one and can be modified to suit each free zone.

3.3. Documents required

After registering a company in the free zone with the relevant government agency, to obtain a license, the business needs to complete the application forms and submit the following documents:

1. Application for license.
2. Parent company charter.
3. Decision to open a company branch/representative office by the Board of Directors of the parent company.
4. Letter of financial commitment from the parent company to the company's branch/representative office.
5. Power of attorney signed by the general director.
6. Copy of passport of the appointed General Director.
7. Audit appointment letter.
8. Documents and records of domestic enterprises that the company cooperates with (National Service Agent).

3.4. Licensing period

Approval usually takes 15-25 days from the date the business submits all relevant documents and information. Depending on the policy of each free zone, this time can vary from 60-75 working days.

Note: In fact, compared to setting up a company in European countries or the US, setting up a company in the UAE is extremely convenient, although the time to set up may be slow. However, this is a country with many preferential policies for businesses with many great advantages, and is also the only country that keeps the owner's information confidential because it does not sign treaties with any country.

4. How will GLA support Enterprises to establish companies in the UAE?

As a consulting partner with more than XNUMX years of experience helping entrepreneurs open a company overseas and manage sustainably, GLA can help you with the following services:

• Consult and support for UAE company formation
• Advise on choosing the right Emirate
• Recommend the right company type based on your business model.
• Prepare necessary documents for company formation
• Advise on tax, tailored to the specific business activities of the company in the UAE.
• Assit in registering various types of business licenses in the UAE.
• Open physical bank accounts and set up online banking services in the UAE.
• Preparing financial and tax reports that meet UAE accounting standards

5. Frequently asked questions when opening a company in UAE and registering a license

Highlights

• UAE is an economic hub with strong GDP growth and attractive incentive policies for investors.
• More than 30 Freezones offer 100% ownership, tax exemption, easy capital transfer and fast establishment procedures.
• Common business forms in the UAE include permanent establishments, branches, companies in free zones, civil companies, and commercial agencies.
• Required licenses include Commercial, Professional, Industrial Licenses and other specific licenses depending on the industry.