Accountants and company formation in the UAE

Setting up a company in the UAE

To set up a company in the UAE from abroad, you first choose where the company will sit: on the mainland, in one of the free zones, or with a registry such as RAK ICC or JAFZA for activity outside the UAE. Then you follow the licensing steps of that authority, register for tax, and open a bank account. Foreign founders can now own most mainland companies outright, which was not the case a few years ago.

The short version, in order:

1. Choose the jurisdiction: mainland, free zone, or a registry for activity outside the UAE.
2. Define the business activity and the legal form.
3. Register the trade name and get initial approval.
4. Sign the memorandum or service agent agreement and secure a business location.
5. Collect the licence and register with the chamber of commerce where required.
6. Register for corporate tax, and for VAT once you cross the threshold.
7. File the beneficial owners, open a bank account and apply for residence visas.

Each step is covered below, with the official rules and the points where a foreign owner usually needs a local adviser.

Choose where to set up a company in the UAE

The UAE has seven emirates, and each runs its own economic department for mainland companies. On top of that sit the free zones, each with its own authority and rulebook. The Ministry of Economy & Tourism counts more than 40 free zones and more than 2,000 economic activities. Your choice of jurisdiction decides who licenses you, where you can trade and which office you need.

Mainland company

A mainland company is licensed by the economic department of the emirate where it operates, and it can trade directly with customers anywhere in the UAE. Since the reform of the companies law, foreign investors can fully own onshore (mainland) companies. The change came with Federal Decree-Law No. 26 of 2020 and is now part of Federal Decree-Law No. 32 of 2021 on Commercial Companies. Activities classed as having “strategic impact” can still carry limits on foreign ownership, so check your activity before you commit.

Mainland is the usual choice if you will sell to UAE consumers, bid for government work or need a shop or branch network in the country.

Free zone company

A free zone company is licensed by the free zone authority, not by the emirate’s economic department. Free zones suit businesses that trade internationally, hold assets, or serve clients in one sector that the zone is built around. The Ministry lists three free zone forms: the Free Zone Limited Liability Company (FZ LLC), the Free Zone Company (FZ Co.) and the Free Zone Establishment (FZE). In JAFZA, for example, an FZE has a single shareholder and an FZCO has several.

If you also plan to sell to customers on the mainland, ask the free zone authority, before you sign a lease, whether your licence allows it and which extra permit or local partner you would need.

Companies registered with RAK ICC or JAFZA for activity outside the UAE

Some founders do not need to trade in the UAE at all. They want a UAE company to hold shares, property or intellectual property, or to trade with clients abroad. For this, companies registered with RAK ICC and JAFZA-registered companies for activity outside the UAE are the common routes. They are formed through a registered agent, and JAFZA states that such a company may conduct lawful business activities as permitted by its Registrar. These companies do not give you a trade licence for the local market, and what they may do inside the UAE is set by the registry’s own regulations. Your registered agent should confirm the limits in writing.

Step 1: Define the business activity

Start with the activity, because it decides the licence type, the authority and sometimes the jurisdiction. Mainland licences fall into six main types: occupational, tourism, industrial, commercial, agricultural and professional. Pick the activity from the authority’s list in its exact wording. A trading company, a consultancy and a clinic need different licences, and some activities need approval from a sector regulator as well.

Step 2: Choose the legal form

On the mainland the Ministry of Economy & Tourism lists nine forms, including the limited liability company, the sole establishment, the civil company, the holding company and the branch or representative office of a foreign company. A limited liability company fits most trading and service businesses owned from abroad. A foreign parent that wants a local presence without a new company can open a branch or representative office instead. In a free zone you pick one of the three free zone forms.

Step 3: Register the trade name and get initial approval

Reserve the trade name with the licensing authority, then apply for initial approval. Names must follow the authority’s naming rules, so have two or three options ready. Initial approval confirms that the authority has no objection to you starting this activity. In Abu Dhabi, the Department of Economic Development sets out the same sequence on its establishing your business page: activity, legal form, trade name, initial approval, contracts, location, additional approvals, then the licence.

Step 4: Sign the memorandum and secure a business location

A mainland company signs a memorandum of association (MOA) or, for some forms, a local service agent agreement (LSA). Free zones use their own constitutional documents. You also need a business location that meets the authority’s rules: an office, a shared desk or a warehouse, depending on the activity. Ask early how many residence visas the space will support, since you will need one for each owner or employee who moves to the UAE.

Step 5: Collect the licence and register with the chamber

Submit the documents, pay the fees and collect the trade licence. On the mainland, the Ministry’s steps end with registering the company with the Chamber of Commerce and Industry. Keep certified copies of the licence and the MOA: banks, landlords and the tax authority will all ask for them.

Step 6: Register for corporate tax and VAT

UAE corporate tax applies to financial years beginning on or after 1 June 2023. Taxable income up to AED 375,000 is taxed at 0%, and the part above AED 375,000 is taxed at 9%, under Cabinet Decision No. 116 of 2022. According to the Ministry of Finance, all taxable persons, including free zone persons, must register for corporate tax and obtain a registration number. A Qualifying Free Zone Person can apply a 0% rate to its Qualifying Income, but only if it meets the conditions, and it still registers and files.

VAT has applied since 1 January 2018 at a standard rate of 5%. A business must register once its taxable supplies and imports exceed the mandatory threshold of AED 375,000 over the previous 12 months, or are expected to within the next 30 days. It may register voluntarily above AED 187,500. The Federal Tax Authority notes that the mandatory threshold does not apply to foreign businesses, so a foreign company making taxable supplies in the UAE should check its position from day one. Our VAT and tax compliance pages list firms that handle these registrations.

Step 7: File beneficial owners, open a bank account and apply for visas

A UAE company keeps a register of its beneficial owners and a register of its partners or shareholders. Under Cabinet Decision No. 109 of 2023, a beneficial owner is a person who owns or controls 25% or more of the capital or voting rights. The company must submit the register to the registrar within 60 days of licensing.

Opening a corporate bank account can take longer than the licence. Banks ask for the licence, the MOA, passports of shareholders and managers, proof of address and a clear account of where the money comes from and goes. Firms listed under bank account assistance prepare these files.

With the licence in place, the company can sponsor residence visas for owners and staff. Investors can also apply for the Golden visa: for investors in public investments it runs for 10 years, and the main requirements listed include a minimum capital of AED 2 million. See residency and visas for firms that file these applications.

Keep the company compliant after set-up

Getting the licence is the start, not the end, of the paperwork. The corporate tax law requires you to keep records and documents for seven years after the end of the tax period. The corporate tax return is due within 9 months of the end of the period. The same law lets the Minister require some categories of company to keep audited financial statements, and licensing authorities set their own rules on audits. Ask your authority what applies to you, and see the accounting and audit pages.

Common mistakes foreign founders make

• Choosing the jurisdiction on price alone. A free zone licence that does not let you sell to your real customers costs more in the long run.
• Describing the activity too loosely. The licence covers only the activities named on it.
• Treating a 0% rate as no paperwork. Qualifying free zone companies and companies under the AED 375,000 band still register and file.
• Forgetting the beneficial owner register. The 60-day deadline runs from licensing.
• Leaving the bank account to the end. Start collecting the documents while the licence is being issued.

Getting local help to set up a company in the UAE

The UAE listing holds 377 firms, and 370 of them offer company formation. Many foreign founders hire one to handle the approvals, the bank file and the first tax registrations. The company formation page explains how to choose a provider and what a quote should cover. You can also browse firms by city, starting with Dubai, Abu Dhabi, Sharjah and Ras Al Khaimah.

If you know your activity and the market you will sell to, you are ready to set up a company in the UAE. Describe your plan once through a free quote request, and Accountanty forwards it to firms that fit.