Choose a business location and set up with a purpose. A low-cost license package may not be the right fit.
Dubai is one of the best places in the world to do business due to the ease of setting up, operations, availability of talent and proximity to global markets, among many other reasons. One of the first choices any entrepreneur has to make is deciding where to set up the business. While many factors drive this critical decision, the cost is often given undue importance. Here is an insightful analysis that helps entrepreneurs put the elements into perspective and conclude systematically.
From our experience assisting tens of large and small customers, the first thing we learned to list is the purpose. The purpose drives all other factors. The purpose here would mean the organic advantage that location would contribute to the success. It is a strategic call with financial or non-financial characteristics. But it contributes to the success of the business or the group in the long run. It requires a wise and systematic thought process.
We recommend considering the below terms and even converting them into numbers before concluding.
To begin with, list all options you would like to consider; probably you can consider a list of all licensing options in Dubai given below. Caution, Dubai is a fast-paced and proactive environment; you may need to validate the list.
- Dubai Economic Department- Dubai Mainland
- Dubai Airport Free Zone (DAFZA)
- Dubai Design District, Free Zone
- Dubai Healthcare City, Free Zone
- Dubai International Academic City, Free Zone
- Dubai International Financial Centre, Free Zone
- Dubai International Humanitarian City, Free Zone
- Dubai Internet City, Free Zone
- Dubai Knowledge Park, Free Zone
- Dubai Media City, Free Zone
- Dubai Multi Commodities Centre, Free Zone
- Dubai Outsource City, Free Zone
- Dubai Production City, Free Zone
- Dubai Science Park, Free Zone
- Dubai Silicon Oasis, Free Zone
- Dubai South, Free Zone
- Dubai Studio City, Free Zone
- Dubai World Trade Centre, Free Zone
- Jebel Ali Free Zone,
- Meydan Free Zone
Licensing and shareholding
The first set of things to consider during the decision-making process are the basic and structural thing.
Activity
Look at the business activity your company is planning to engage in. Which licensing authorities in Dubai offer this activity, and what are the associated conditions? Eliminate the ones not feasible.
When selecting more than one activity, select the most critical activity as the primary activity and then add-on activities. Many licensing authorities insist that the primary activity name shall suffix the business name. When more than three (five in the case of some free zones) activities are selected, licensers nominal extra cost.
Also, it is important to select activities from the same activity group. For example, one cannot get a license with a “holding company” activity and “fruits and vegetables trading” as the add-on activity.
When selecting more than one activity, select the most critical activity as the primary activity and then add-on activities. Many licensing authorities insist that the primary activity name shall suffix the business name. When more than three (five in the case of some free zones) activities are selected, licensers nominal extra cost.
Also, it is important to select activities from the same activity group. For example, one cannot get a license with a “holding company” activity and “fruits and vegetables trading” as the add-on activity.
Additional approvals
Some activities require additional approvals from authorities that regulate the sector. Therefore, you need to observe the requirements of each activity. For example, an insurance-related business requires approval from the insurance regulator. A real estate-related business may require approval from Real Estate Regulatory Authority, RERA. Academic institutions, banking or money exchanges, healthcare etc. are the most common sectors that require approvals.
Shareholding
The second important step is to decide the shareholding. What will be the shareholding structure? Are you open to letting an Emirati national join you as a shareholder or sponsor in the company? It has its advantages and limitations. Review the activity you are undertaking and how you can build a partnership in growth in Dubai. Unlike earlier, only some activities require a national to be a shareholder, generally holding 51%. Eliminate the licensing authorities that do not meet your objectives.
Type of company
Based on the shareholding, you may need to select the type of license and the liability of the shareholders you have to choose. A limited liability license, in whatever form, is recommended.
Operational efficiency
At this stage, look at the elements of your proposed business below and try to find some meaning.
Location of your customers
Whatever the kind of business, one of the objectives of any business is faster deliveries to your customers. It results in an edge in competition. So locating close to your customers will be an advantage in terms of faster deliveries and lower delivery costs. If your end product or services are delivered remotely over the internet, then you have an advantage.
Access of your suppliers and customers to your premises is also worth considering. For example, some licensing authorities require an entry permit (gate pass) for external parties to visit your office.
An important thing to remember is that almost every licensing authority permits operations within the jurisdiction only, and it can be challenging, especially in fenced-free zones.
Access of your suppliers and customers to your premises is also worth considering. For example, some licensing authorities require an entry permit (gate pass) for external parties to visit your office.
An important thing to remember is that almost every licensing authority permits operations within the jurisdiction only, and it can be challenging, especially in fenced-free zones.
Nature of business
If your nature of business demands a warehouse to store inventory, obviously, you need to look for an option with warehousing options. You can think about two locations on the same license but within the licensing authority’s jurisdiction. If your activity is as a real estate agent, you may need to locate yourself in a premium business locality. So the nature of business means a lot.
Access to infrastructure
If the business requires access to the port, it is always a good idea to consider Jebel Ali as the port is nearby. Likewise, access to the airport, metro, and other infrastructure will be crucial. One needs to be aware of changing landscape and features, such as the development of the GCC Rail network etc., if the business correlates with these factors.
Staffing requirements
If your industry is workforce oriented, you may need to locate a place they can easily commute to. In addition, the visa cost can be a consideration in this case.
Recent game changers
Dubai is witnessing many legal and regulatory reforms. Below are the considerations, that has huge bearing on the bottom line and operations.
Tax and customs duty
The latest decision criterion is the corporate tax in UAE. It offers tax incentives to companies operating from a free zone by way of 0% corporate tax. But this comes with conditions. It is advised to discuss the business model with a tax consultant before you finalise the decision. Free zones doing business with the mainland may end up paying taxes at the rate of 9% on all their income, including what has been earned inside the free zone.
Others
Before deciding the location and type of facility to go for, one also needs to consider other support functions such as bank account opening, safety and security requirements, the municipality and labour department requirements, etc. These can be challenging at times.
Licensing and set up cost is not an element to be ignored, but it needs to be considered along with other factors that can drive revenue, costs and margins in the long run,
A thorough review of all factors, including the important ones listed above, can be converted into financial terms to maximise the economic benefit. For example, if your company needs to make only a few deliveries, you may not need proximity to customers. A business set-up consultant can help you visualise the consolidated impact of all factors worth considering.
Further, one needs to be prospective and visualise the business over time and consider the impact of government policies and important developments in relevant sectors among others. For example, Dubai’s cargo movement is getting shifted to Maktoum Airport; a business with considerable air movement of goods can choose an area towards the south of Dubai. A long-term vision will bring a cutting-edge advantage in the long run.
Selecting a business location and licensing authority is a one-time decision, but it has a bearing for a more extended period. Switching from one licensing authority to the other would mean liquidating the first company and setting up a new license from scratch. The resulting impact could extend to microelements such as banking and customer relationships, master updates, credit and business relations, loss of employees due to inconvenience and beyond. An ideal location could even be with two licensing authorities considering regulatory, tax and operational points. Therefore, it is a wise call to discuss your case with a knowledgeable consultant before you take your first step.
Licensing and set up cost is not an element to be ignored, but it needs to be considered along with other factors that can drive revenue, costs and margins in the long run,
A thorough review of all factors, including the important ones listed above, can be converted into financial terms to maximise the economic benefit. For example, if your company needs to make only a few deliveries, you may not need proximity to customers. A business set-up consultant can help you visualise the consolidated impact of all factors worth considering.
Further, one needs to be prospective and visualise the business over time and consider the impact of government policies and important developments in relevant sectors among others. For example, Dubai’s cargo movement is getting shifted to Maktoum Airport; a business with considerable air movement of goods can choose an area towards the south of Dubai. A long-term vision will bring a cutting-edge advantage in the long run.
Selecting a business location and licensing authority is a one-time decision, but it has a bearing for a more extended period. Switching from one licensing authority to the other would mean liquidating the first company and setting up a new license from scratch. The resulting impact could extend to microelements such as banking and customer relationships, master updates, credit and business relations, loss of employees due to inconvenience and beyond. An ideal location could even be with two licensing authorities considering regulatory, tax and operational points. Therefore, it is a wise call to discuss your case with a knowledgeable consultant before you take your first step.
