Doing Business in UAE: Key Laws and Regulations

The United Arab Emirates (UAE) is an attractive destination for entrepreneurs. According to the World Bank’s Doing Business Report for 2020, the country ranks 16th globally for ease of doing business. However, before starting a business in Dubai or another city in the UAE, it’s crucial to familiarize yourself with the key laws and regulations governing commercial activities.

Key Commercial Laws in the UAE:

• Federal Law No. 2 of 2015 on Commercial Companies (Commercial Companies Law): This is the primary law for all types of commercial companies in the UAE. It governs their formation, structure, management, profit distribution, and other essential aspects.
  
• Federal Law No. 18 of 1981 on Commercial Agencies (Commercial Agency Law): This law outlines the rules for cooperation between foreign companies and local agents and distributors. Notably, the law allows working with multiple agents simultaneously, providing foreign companies with more flexibility.
  
• Federal Decree-Law No. 19 of 2018 on Foreign Direct Investment (FDI Law): This law regulates foreign direct investment in the UAE, defining sectors open to foreign investors and outlining the terms and benefits for them. In some cases, the law allows foreign investors to own 100% of a company’s shares.
  

Import Licenses and Customs Duties:

To import goods into the UAE, a Ministry of Economy import license is required. Customs duties are regulated by the Gulf Cooperation Council’s (GCC) unified customs tariff. Most goods are subject to a 5% duty, although certain goods, such as food and medicine, may be exempt.

Choosing a Local Partner:

When entering the UAE market, it’s essential to choose a suitable local partner—an agent or distributor. The Commercial Agency Law grants agents certain rights, making contract termination a complex and costly process. In some cases, foreign companies prefer to establish their own branches or joint ventures with local partners.

Business Structures in the UAE:

Entrepreneurs can choose from 10 different business structures under UAE commercial law. The most popular structures among foreign companies are as follows:

• Limited Liability Company (LLC): Similar to a limited liability company in other jurisdictions, it is suitable for most business activities. A minimum of one and a maximum of 50 shareholders are required. The minimum authorized capital requirement was abolished in 2009, but it must be sufficient to achieve the company’s objectives.
  
• Free Zone Establishment: A company registered in one of the UAE’s free economic zones. It offers foreign investors 100% ownership and numerous tax benefits.
  
• Branch Office: Unlike an LLC, this is not a separate legal entity but a part of the parent company. Opening a branch office requires a license from the Ministry of Economy and a local sponsor—a “service agent” who must be a UAE citizen and guarantee that the branch’s activities comply with local regulations and the issued license.
  
• Representation Office: An easier form of business to establish than a branch office but without the right to engage in commercial activities.
  

Key Changes Since December 1, 2020:

Foreign investors can now establish LLCs on the UAE mainland with 100% foreign ownership. However, there are restrictions on activities in sectors such as energy, transport, and security.

Marketing in the UAE:

In the UAE, marketing and communication have their own characteristics that should be considered for successful business promotion. We recommend presenting advertising materials and product labels in both English and Arabic. Arabic is the official state language, and its use demonstrates respect for local culture and traditions. Additionally, it is crucial to steer clear of themes and images that could potentially offend or disrespect Islamic culture.

We are ready to assist you in navigating the legal and accounting complexities of doing business in the UAE. We offer services such as company registration, licensing, and tax consulting. Contact us, and we will help you successfully start and grow your business in the UAE.

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