UAE: Unbundling how much money goes into launching a business in Dubai
An all-you-need-to-know expenses guide when it comes to establishing a business in Dubai
Dubai: The costs that go into establishing and registering a business in Dubai vary a lot depending on the type of company, what business it is, where it's located and the needs of the business.
We take a look at the costs involved in setting up a Limited Liability Company (LLC) and a company in the one of the government-designated free trade zones.
A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares or the stakes in the company's capital.
Costs involved to start a Limited Liability Company (LLC) in Dubai
Up until late last year foreign investment in the company cannot exceed 49 per cent, meaning you will need a local partner who has a majority share in the company.
Under the new legislation, the UAE will allow 100 per cent ownership of businesses for foreign nationals from December 1, 2020. Previously, all businesses were required to have a UAE citizen sponsor.
How much does it cost to get an instant licence and a trade name?
You can start by getting an instant licence from the Department of Economic Development (DED).
The initial approval or instant licence from Department of Economic Development (DED) is a one-time cost of approximately Dh110. It allows you to start business operations right away, with 120 days to complete all your other documentation.
You will need to get approval for the name you have chosen for your company. The cost might change slightly based on the name. There are several fees to be paid for this, including reservation fees, commercial name fees, foreign company name fees, etc.
To get the trade or business name approved involves a one-time cost of approximately Dh700 to Dh900. However, for non-Arabic names it costs much higher – between Dh2,000 to Dh3,000.
Understanding the costs that goes into renting office space
It is mandatory to have an office space to set up your business. This is simply to ensure that it's a legitimate business since it allows the authorities to do inspections, monitor operations and verify that immigration laws are followed.
So if you are thinking of a company set up in Dubai and planning to rent an office space, the cost is around Dh160 per square foot or roughly about Dh239,673 annually, according to surveys.
Cost for document relating to Memorandum of Association (MOA) attestation
A Memorandum of Association (MOA) is a legal document prepared in the formation and registration process of a limited liability company to define its relationship with shareholders.
This MOA involves a one-time cost of approximately Dh400. This is done between the partners of the company. The attestation fee can be different depending on the share capital.
The MOA is accessible to the public and describes the company’s name, physical address of registered office, names of shareholders and the distribution of shares. The MOA and the Articles of Association serve as the constitution of the company.
How much does it cost to draft the company’s LLC contract?
Drafting the LLC contract and a Court Agreement Attestation (CAA) document involves a one-time cost of approximately between Dh1,000 to Dh2,000 for CAA, and an additional Dh300 for typing.
You will also be charged a fee of Dh3,000 to register your company, which is the Ministry of Economy fee.
When it comes to getting a trade licence there is a one-time cost of about Dh15,000, in addition to renewal fees of Dh3,000 renewal for a general trading licence.
Depending on the type of your business, the trade licence fee can vary. You might also be asked to show proof of a security deposit.
Other fees involved
Tejari: A commercial licence fee (otherwise known as Tejari) has a yearly cost of about Dh700. This fee needs to be paid annually to be able to conduct commercial activities.
Chamber of Commerce fee: The cost for a general trading company will differ from an industrial or manufacturing company, but the yearly cost amounts to about Dh1,200.
Commercial services improvement fee: This fee, which goes towards the improvement works that governmental departments do, comes to about Dh400 in a year.
Administrative services fee and public waste municipality fee: This comprises of a one-time cost of about Dh50, apart from Dh1,000 which is required for waste disposal.
Market fees: This is a percentage paid to the government on the total amount of rent. An office or shop pays 5 per cent while a warehouse pays 20 per cent.
For this there is a yearly or per-term cost that comes to approximately Dh1,250. However, these are fees that can vary a lot.
Costs involved to start a Free Zone Company in Dubai
Setting up a company in a Free Zone has many benefits, including exemption from all import duties. There are many different Free Zones and the costs and benefits vary depending on the location and type of business.
Some of the major ones in the Dubai emirate fall under the Dubai Creative Clusters Authority (DCCA) and the Dubai Multi Commodities Centre Authority (DMCC). There are also others such as Jebel Ali Free Zone, Dubai Airport Free Zone, and Dubai Silicon Oasis Free Zone.
Cheaper options are usually outside of the emirate, such as Sharjah Airport International Free Zone, RAK Free Trade Zone, Fujairah Free Zone, and Ajman Free Zone.
Keep in mind that you will likely require a minimum share capital to open the company and this can also vary tremendously.
How much does office rent and licence expenses come to in the Free Zones?
The cost of rent will vary based on the Free Zone your business is based in. The place you rent will dictate the number of visas that your business can obtain.
Your options include having a Smart Desk (for freelancers or if no office space is needed), an office unit (small and self-sufficient) and a permanent office (full-fledged office space). There is also a service charge that’s calculated as a percentage of your rent.
The yearly or termly cost for office rent starts at about Dh15,000 and above. A Free Zone licence has a yearly cost of about Dh10,000 to Dh50,000.
This fee applies to trading companies, services companies, and industrial companies. The chosen Free Zone is the one that does the licensing.
Free Zone registration has a one-time registration cost, which ranges widely between Dh5,000 to Dh45,000.
This fee is paid to the Free Zone authority to allow you to register your company. The cost will be different depending on the Free Zone and the company type, such as Free Zone Establishment (FZE).
Yearly cost for a Free Zone visa with renewal fees comes to about Dh3,000 to Dh5,000 each. Free Zone companies have a limited number of visas allowed according to the office space. The visa fees are different if it’s an employee from outside or inside the UAE.
Other fees involved
Bank Guarantee cost: This is a yearly cost. Every Free Zone company has to show a certain amount of bank guarantee for each of its employees. For instance, this can be 45 days salary plus a one-way ticket to their home country.
Registered agent fee: This comprises of a one-time cost with renewal fees. In any Free Zone, you’ll need a UAE local agent to mandate all the governmental procedures.
Therefore, you will need to pay for his help. You will need this agent to set up the company but also once it’s time to renew your licence.
While getting a trade name costs between Dh500 to Dh1,000, a Memorandum of Association (MOA) costs between Dh1,000 to Dh2,000. Other costs also include initial approval, postal services and also health insurance premiums for employees