Dubai has been gaining more and more attention in recent years and has gradually won the hearts of holidaymakers and business people. The kilometer-long skyline and the ancient buildings of a bygone era combine to form an irresistible mixture of innovation and tradition and make it clear that nothing is impossible in the Arabian metropolis.
Life in Dubai seems very attractive, especially for entrepreneurs. Living where others vacation is a dream that not everyone can fulfill. In addition, the city offers unbelievable opportunities for development, which is convincing more and more business people. In addition to a low VAT of only 5 percent, there are other arguments in favor of founding a company in Dubai.
Why incorporate a company in Dubai?
Dubai is a very attractive business location that has worked strategically to attract start-ups in recent years. This is possible through commercial transparency, dynamic regulations and a diversity of sectors.
The emirate’s strategy seems to be working, as in recent years more and more people have dared to take the decisive step and set up a company in Dubai. In addition to national business people, many German start-ups are also settling in the Arab metropolis. It is also interesting that around 90 percent of the companies based in Dubai are SMEs, which support the labor market and give the economy a strong boost.
Advantages & Disadvantages of incorporating a company in Dubai
Starting a business is a very big step that involves a lot of responsibility and high risks. As a German, you should weigh up the advantages and disadvantages of founding a company in the United Arab Emirates so as not to endanger your own existence:
Dubai Media Cita, Dubai Internet City and Dubai Silicon Oasis are not casinos or hotels, but so-called free zones. Founder-friendly conditions exist within their borders, which attracts investors from abroad in particular. There are special conditions for taxation, property and work. Because while in the remaining areas of Dubai an incorporation is only possible if the personal property is at least 51 percent in the United Arab Emirates, a company with 100 percent foreign ownership can be launched in the free zones.
Furthermore, the geographical location of Dubai proves to be a big plus. Easily accessible from the western and eastern world, the city has two commercial ports, two international airports and very good land transport links.
As mentioned above, Dubai has a keen interest in attracting overseas companies. For this reason, the government offers countless state funding offers to facilitate entry into the Arab business world. A visa entitlement can be applied for with little effort and the tax advantages of starting a business in Dubai cannot be dismissed out of hand.
The local Chamber of Commerce and Industry is helping technology start-ups and other SMEs with a cloud platform. The interdisciplinary Dubai 100 program provides in-depth insights into the industry and a comprehensive range of educational opportunities for everything to do with starting a business. The city is offering the Dubai Future Accelerator Start-up Program as a pilot project to prepare young entrepreneurs for international challenges.
What tax savings are there for a company in Dubai?
Dubai is considered a tax haven that is excellent for building capital:
- The GCC region – which includes Saudi Arabia, Bahrain, Oman, the United Arab Emirates, Qatar and Kuwait – has adopted a uniform VAT rate of 5 percent since 2018
In Dubai, VAT is waived on healthcare, education, social services and certain food items
- The capital of the Emirate of Dubai exempts companies from income tax
- Direct taxation for personal income or corporate profits does not apply with some exceptions (foreign banks and oil companies)
- Customs duties of 4 percent and waivers from Dubai customs duty
- 100% repatriation of capital and profit possible
- Trade quotas do not exist in Dubai. As a result, there are no trading restrictions or exchange controls.
Some countries have a double tax treaty, which means that the location of the company can be chosen at will. There is no agreement between Germany and Dubai, which is why the actual place of business must be in Dubai. This means that the company incorporation cannot be formally processed in Dubai. A local business address, premises and staff are a prerequisite to becoming an entrepreneur in Dubai. Emigration is therefore absolutely necessary.
Another obstacle is the bureaucracy. Apart from the visa, contracts have to be concluded with the Dubai government. The entrepreneur must also ensure that the local code of conduct is respected. Some companies have specialized in initial advice for start-ups and provide helpful tips on immigration, founding and buying real estate.
If you decide to set up a business in Dubai, you leave the European Union behind. As a result, the entrepreneur waives pluses that only apply within the European Economic Area:
- single currency
- social security system
- Free internal market
- Free trade across national borders
- Various forms of company formation in Dubai
In Dubai there is not only one company form, but three options:
Offshore company: Again and again there is an agency within Dubai that refers to the possibility of an offshore company. The problem with this type of company is that no bank account can be opened.
Freezone company: If you want to save taxes, but the actual target group of the company is outside the United Arab Emirates, the establishment of a freezone company is a good idea.
Mainland company: The so-called Mainland LLC, Limited Liability Company, comes closest to a German GmbH. Authorized shareholders are private individuals and companies from abroad. A manager or director must be appointed.
How to incorporate a company in Dubai?
Establishing a company is always associated with a fixed procedure. This is also the case in Dubai. It is therefore important to first find out about the requirements and bureaucratic hurdles. Because if you commit a faux pas, the supposed blunder can not only jeopardize the planned project, but also cost the culprit dearly.
There are a few conditions that must be met to set up a business in Dubai. The demands on business people are very similar for the individual business forms, but differ in one important point:
While a physical place of business, a minimum capital contribution and a memorandum of association are mandatory for all forms of business, the Freezone company does not require a local contact person.
In Dubai, too, there is no avoiding the tiresome paperwork. There are some documents required by the authorities to start the company formation:
- Copies of the identity documents of shareholders and directors
- business plan
- Sample signatures for comparing the signatures of shareholders and managing directors
letter of intent
- Letters of recommendation from the bank or audited financial reports for companies for the last two years
- Proof of address of the shareholders and managing directors, for example through utility bills
Some company owners would like to take advantage of the tax advantages of Dubai, but still remain resident in Germany. This is possible with the Freezone company. No visa is required to start the company. If you still want to secure the residence permit, this can be initiated by the company.
Mainland LLC owners are required to have a visa. Here, too, the managing directors and shareholders are able to obtain the residence visas through the company.
How much does it cost to set up a company in Dubai?
It is difficult to determine an exact amount for company formation in Dubai. Because the expenses depend on various factors. The object of the company, the legal form and the location play a decisive role. Furthermore, the rental costs, the expenses for legalization and translation as well as the license fees for the incorporation documents are also included in the total costs. Shareholders are advised to compare prices and not settle for the first offer. Here is a brief overview of the potential expenses:
- Office rent: approx. 300 euros
- Flights to the emirate: around 400 euros
- License fee: from 2580 euros per year
- Registration costs: from 900 euros
- Notary bill: up to approx. 80 euros
Visa: maximum 1550 euros per person for 1 – 3 years
Those who do not want to deal with the bureaucracy in Dubai can turn to an agency for help. The experts take care of the formalities and ask for a commission on the income in return. With longer contracts, the agencies’ percentage of profits decreases over time. But beware! Visa and license fees are not included in the price, these must be purchased separately.
Free zone company
According to estimates, the costs for founding a Freezone company are between 10,000 and 15,000 euros. Depending on which free zone the company is located in, the bill can be lower or higher. In some areas, no share capital is required. Furthermore, it is possible to deduct the costs of setting up a business in Dubai from taxes in Germany. It is advisable to seek the help of a professional to familiarize yourself with the intricacies of the laws and possibilities.
If you decide to open a mainland company, you have to cooperate with a local partner. This receives 51 percent of the company shares. It is essential to specify in the contracts that the shares relate exclusively to the trade license. The partner has no voting or co-determination rights and is not given access to the internals. At the end of the year he will be paid pro rata. The founding costs around 10,000 euros; Share capital is not required.
There are other options as well. How to work with a Local Service Agent. But in contrast to the cooperation with the local partner, the founder is also liable in this case, since the company remains 100 percent owned by the shareholder. The third possibility revolves around the white list. However, if you do not want to start a company worth millions, this option is out of the question.
Can you set up a company in Dubai but work in Germany?
In Germany there is a high standard of living that many people would not want to miss. For this reason, more and more entrepreneurs are deciding to set up a company abroad and pull the strings from our beautiful Federal Republic. Although permanent residency in Dubai is one of the requirements for setting up a business in the emirate, there is a loophole.
As the owner of a Freezone company, it is quite possible to maintain the usual life in Germany. The managing director only has to travel to the United Arab Emirates every six months in order to remain eligible for the visa.
As a managing director, you should still think about whether working in Germany really makes sense. Finally, the German legislator requires proof that the sales are generated abroad. If you are not able to do this, the company in Dubai is classified as a mailbox company and the German foreign tax law applies: taxation takes place domestically.
Are there any risks in setting up a company in Dubai?
As already indicated, a substance must be present in Dubai in order to benefit from the favorable taxes in the emirate. Building a team of managing directors ensures that taxation is based on local law. If the turnover is mainly generated in Germany, the tax advantages of Dubai must be forgone and the German tax laws apply.
Furthermore, the culture in the Arab countries is not comparable to the German customs. As a shareholder, care must be taken to ensure that local customs, customs and behavior are observed.
Should one set up the company in Dubai or in another Emirate of the UAE?
Dubai is the first choice for many entrepreneurs. In fact, there are countless places in the United Arab Emirates that are suitable as a company location. Opening your own business outside of the Emirate of Dubai can result in financial and business advantages.
Frequently asked questions about company formation in Dubai
Do you need residency in Dubai?
Whether you need a permanent residence in Dubai depends on the legal form.
How much time does it take to set up a company in Dubai?
If all the necessary documents are available, the company can be founded within 3 to 5 working days.
Is Dubai a tax haven?
Dubai is considered a paradise for businesses worldwide due to the very low level of taxes levied.
The conclusion – lucrative company formation opportunities in Dubai
The United Arab Emirates have created the perfect conditions for founding a company. Germans benefit from tax advantages, state subsidies and the attractive geographical location of the Emirates.