Dubai Fact-File Part 1:
Business Formation for Individuals

1.2 Dubai Individual Business Registration

The procedures necessary for an individual to commence business activity: A number of steps are required to establish a business in Dubai and they differ depending on the structure of the business. Initial approval must be obtained from the Department of Economic Development, reserving a trade name, and obtaining the initial go-ahead for the business. A list of the documentation required to obtain this initial approval can be found here: http://www.dubaided.gov.ae/English/reglcening/busreg/RegTrdNme/default.aspx.

A trade licence is also required; this will usually be issued and overseen by the Department of Economic Development, but this is not always the case (for example medical professionals are licensed by the Ministry of Health, and legal professionals by the Rulers Office).

Dubai has strict laws about the use of company names, with the general rule being that the trading name must be indicative of the type of business being run and should normally include some reference to the type of business in the title (eg John Smith Tax Consultants).

A residence permit and subsequently a work permit is likely to be required – in the case of a worker coming over to fill a particular position, this will need to be sponsored by their prospective employer; in the case of an individual coming over to establish a business (in partnership with a local, as previously discussed), the permit will need to be sponsored by a government department.

A Sole Establishment (sole proprietor) must firstly obtain approval from the government for the type of business it is proposing to operate; the department needing to be contacted will vary according to the activity that the applicant is seeking to undertake; the government provides an online search facility to determine this: http://www.dubaided.gov.ae/English/eServices/pages/mossRD.aspx?PID=10104&LID=1&sname=Search+Business+Activities. Freelance licences are available for certain professions from various of the free zones (for example Dubai Media City), but this can be a somewhat expensive option.

The Dubai government distinguishes between commercial and professional activities and depending on the classification of a new venture, there will be limitations as to which individuals the authorities may permit to run a business. The establishment of a business engaging in commercial activities is reserved for UAE citizens, whereas a foreigner may be allowed to establish a new business engaged in professional activities – typically this covers service-oriented businesses or those requiring special skill and knowledge. Ultimately, the Dubai government will determine the classification of a new business and whether or not it can be run as a sole establishment.

A foreigner can be the only (sole) person in the business but will require a local sponsor to act as a service agent – an agreement should be signed between the two parties and notarised by the Dubai courts. How much the local sponsor will charge for this will vary, but the costs can be high. In general, the sponsoring company or organisation will have no obligations to the business beyond acting as its local ‘face’ in dealings with the government over permits, trade licences and the like, and signing official forms.

Before the Dubai government will issue a licence the applicant is required to comply with certain conditions. The government will have to be satisfied that a person is competent (experience and/or qualifications) to run the proposed new business. There are also rules that restrict where an office can be established – an office cannot be registered at a person’s residence or someone else’s business address.

A licence will be issued when all of these procedures and conditions have been complied with and payment of the licence fee will mean a person can commence in business.

Documents initially required to establish a sole proprietorship (after the initial approval has been obtained from the Department of Economic Development), will include:

Registration and licensing application, and proof of reserved trade name;
A photocopy of the appliancant’s passport;
A non-objection letter provided by the local sponsor;
Approval from the appropriate government department.
A Limited Liability Company may be incorporated subject to following these procedures:
The company name (which must relate either to the purpose of the business, or to its partners, of whom there must be more than two, but less than fifty) is approved by the Licensing Department;
The Memorandum of Association is notarized in the Dubai courts;
The company name is entered into the Commercial Register;
The company is registered with the Dubai Chamber of Commerce and Industry;
Limited Liability Companies are not generally permitted to undertake banking, financial or investment activity; these activities are reserved for public shareholding companies.

Need for Tax Residency in Business: Though there is no personal income tax in Dubai (and no corporate income tax) for a foreign person to avoid liability for tax in their home country, or country of origin, they must work in Dubai under a contract, ideally for a period of at least two years, otherwise they may still be liable for taxation in their own country.

A company does not need to be resident in Dubai for tax purposes – as previously mentioned, a branch office or representative office of a foreign company may be established in Dubai and ownership can be 100% foreign. However, a local agent must be appointed.

Registration Requirements for an Individual to Begin in Business: In addition to a sole proprietor having to find a sponsor/local partner, obtain a residence visa and work permit, and obtain a trade licence, it is also mandatory to register any UAE nationals who will be employed by the proprietor with the Ministry of Labour. Similarly, any such employees must also be registered with the General Authority for Pensions and Social Security. An establishment card may also be required (from the Ministry of Labour).

A company must go through the following steps to register a new incorporated business structure:

Submit application for registration and company name;
Notarize the company’s Memorandum of Association;
File company documents and obtain trade licence;
Register with the Dubai Chamber of Commerce and Industry;
Make a new name board (it must be in English and Arabic);
Apply for establishment card from the Ministry of Labour;
Register employees who are UAE nationals with the Ministry of Labour;
Register employees who are UAE nationals with the General Authority for Pensions and Social Security.