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Dubai is one of the leading hubs for international business and trade. Dubai, with its mature economy and established financial market, is also a fantastic place for overseas businesses to establish subsidiaries and holding companies.

Dubai has taken its place alongside other major financial powerhouses as not just one of the leading global hubs but the de facto financial centre in the MEASA region. Strategically positioned between East and West, Dubai has consistently developed its offering to ensure its competitiveness with the other leading financial centres. Dubai will continue to be the one of the best global locations for setting up businesses.

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Types of Dubai entity

There are several options available to overseas companies seeking to create a presence in Dubai. The type of entity that is ultimately chosen will depend upon a number of factors including, for example:

  • the expected nature and scale of the business activities;
  • the levels of risk anticipated in the initial stages;
  • the intended duration of the business activities;
  • accounting and taxation considerations;
  • Dubai statutory compliance and reporting obligations; and
  • commercial considerations

The most commonly encountered corporate structure for overseas companies looking to enter the Dubai market is a Company (incl. Free Zone Companies).

For some types of business, an alternative corporate structure, such as a Branch Office, may be more appropriate.

  • Company: Businesses can open a company within the Emirate or in one of its free zones. Dubai has more than 30 fully operational free zones. An advantage of the Dubai limited liability company is that it can be registered for any commercial purpose.
  • Branch Office: Businesses wanting to retain 100% ownership over their business can open a branch or a representative office in Dubai. Dubai branch offices are more convenient because they can engage in commercial activities and make profits compared to representative offices. The branch office must also obtain a trade license for the same activities its parent company carries out.
  • Partnership: Partnerships are divided into general, simple limited partnerships and partnerships-en-comandite, but there is also the notion of a partnership company. Partnership companies, however, are usually limited to Dubai citizens.

Dubai taxation

Which taxes should you be aware of, what rates should you pay and what are your obligations?

  • Corporate Income Tax: For most businesses, currently there is no corporate income tax in Dubai. However, from June 2023, there will be two different rates of corporate income tax rates applicable for companies who are not registered in the free zones: 1) 0% rate on taxable income up to AED 375,000 and 2) 9% rate on taxable income above AED 375,000.
  • Personal Income Tax: There is no personal income tax in Dubai.
  • Social Security: A payment of 12.5 percent by the employer (15 percent if the employer is a public entity) and 5 percent by the employee are due for UAE nationals to the General Pension and Social Security Authority (GPSSA). The employers of an expatriate or an expatriate employee are not required to make any social security contributions in the UAE.

Value Added Tax (VAT)

It’s a consumption tax on goods and services in Dubai.

  • What is the VAT rate in Dubai: VAT was introduced in the United Arab Emirates in 2018. The general VAT rate is 5% and applies to most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT.
  • Who needs to pay VAT: For UAE resident businesses, the mandatory VAT registration threshold is AED 375,000, and the voluntary registration threshold is AED 187,500. No registration threshold applies to non-resident businesses making supplies on which the UAE VAT is required to be charged.
  • Further information: You should seek expert advice to make sure that you are paying the correct rate of VAT and if your supplies will be treated as taxable supplies of goods or services. Furthermore, penalties can be levied for not registering at the correct time, for claiming VAT incorrectly or not accounting for VAT correctly on sales.

Setting up the office

The “perfect” office is different for everyone. A start-up might benefit from being in a collaborative co-working environment, whereas a well-established brand may feel more at home in their own space. The good news is, with plenty of flexible workspace in Dubai and counting, there’s a match out there for every business.

Which office type should I choose?

All flexible workspaces have one thing in common: licence agreements. Unlike a lease, a licence agreement allows you to rent an office for shorter periods of time and there’s room for negotiation. Also, monthly all-inclusive billing makes it easier to keep track of cash flow.

  • Co-working: If you’re a solopreneur or manage a small team, you might decide to rent desks in a co-working space. Many run events for members, enabling you to network and grow.
  • Private office: If you want your own space, you can rent a private office in a flexible workspace. Shared amenities mean you’ll still pay a competitive price and get to meet other businesses.
  • Managed office: Designed with medium to large businesses in mind, a managed solution provides a self-contained, customisable workspace solution on flexible contractual terms.

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