Nestled at the crossroads of East and West, Dubai’s strategic position has made this Emirate a thriving hub of international trade. From technology startups to manufacturing firms and everything in between, a business of any kind has the potential to thrive in Dubai.
This blog seeks to narrow down the ins and outs of setting up a trading business in Dubai. From an initial business plan to the necessary paperwork and all the licenses that you may have to acquire, consider this as a perfect starting point to get your business up and running in this promising region.
SETTING UP YOUR TRADING BUSINESS
Dubai offers various business setup options for aspiring entrepreneurs. Each of them caters to different needs and objectives so it is wise to make a choice based on which model is a perfect fit for your business.
Free Zones
The many free zones of Dubai are usually the first choice if you want your business to be fully foreign-owned. In addition, businesses that operate inside free zones can obtain tax benefits and simpler legal procedures. If your business will be import and export-oriented, free zones are an ideal choice.
Mainland
To set up a business in mainland Dubai, you will require a local partner who must hold a minimum share of 51% of the business. Mainland businesses are entitled to trade directly within the UAE market.
Offshore
If you have an international business that requires a holding company, this may be the right choice for you. Offshore businesses do not need to maintain a physical presence in Dubai, coupled with varying tax exemptions.
Legal Requirements and Licenses
To be legally compliant when operating your trading business in Dubai, there are certain requirements and necessary licenses that need to be adhered to and obtained.
Firstly, you must determine your business activities as this will determine the type of trade license required. Dubai offers many trade licenses for various business types. For example, a general trading license suits most businesses.
The next step is to obtain a trade license. The process of applying for a trade license involves chasing a trade name and submitting your application to the Department of Economic Development (DED) and other relevant authorities.
Key Considerations When Establishing a Trading Company
Before you launch a trading business in Dubai, consider the following factors that will help you plan and strategize carefully:
Market Research: You must understand the dynamics of the local market. To identify if your products have a demand in Dubai, market research is essential.
Legal Compliance: Dubai has stringent laws and regulations that protect its industries. Ideally, you should speak to legal experts to protect your interests in this regard.
Financial Planning: A clear financial plan that outlines your initial investment, costs, and revenue projections will give you a clear picture of the financial feasibility of your business.
Logistics and Supply Chain: Just because Dubai’s location makes it perfect for the trading of goods, that does not mean that logistics and supply chain systems must be overlooked.
Local Partnerships: Local suppliers and distributors are a key component of your business’s success in the region. Build these relationships right from the inception.
NAVIGATING DUBAI’S BUSINESS ENVIRONMENT
Dubai has a strong regulatory framework regarding taxation and financial considerations. Therefore, you must be familiar and compliant with this framework to thrive.
Understanding the Regulatory Framework
Dubai’s Department of Economic Development (DED) and other authorities oversee business registration, licensing, and compliance. SetHub, with its expertise in Dubai’s regulatory landscape, can provide valuable guidance and ensure your business operates within the legal framework.
Taxation and Financial Considerations
It’s essential to stay informed about recent changes in the taxation landscape of Dubai that may affect your trading business.
As of June 1st, 2023, the UAE introduced a new corporate tax. This tax applies at a rate of 9% on the profits of businesses generating over 375,000 AED (approximately USD 100,000). It’s important to note that businesses with revenues below this threshold will continue to enjoy a 0% tax rate.
Free zone companies will still be able to benefit from the advantages provided by their own specific free zone’s pre-agreed incentives. Even though free zone companies may not have a tax liability, they are still required to register and file a corporate tax return to remain compliant with regulatory requirements.
The UAE also levies Value Added Tax (VAT) on goods and services. VAT is applied at various stages of the value chain, and businesses must register for VAT if their taxable supplies and imports exceed AED 375,000 annually. Registration is optional for businesses with supplies and imports surpassing AED 187,500 per annum.
Support and Resources for Traders in Dubai
Businesses operating in Dubai can benefit from an array of support services and resources that are in place to support business owners:
Dubai Chamber of Commerce and Industry – For networking opportunities and business support services.
Free zones – For specialized services tailored to specific industries, streamlining business operations.
Overall, Dubai’s Government has committed to fostering innovation and entrepreneurship, leading to the establishment of innovation hubs and accelerators.
Additional benefits include access to business associations, industry-specific forums, and market intelligence.
In Conclusion,
From growing your business in the thriving free zones, mainland Dubai, or as an offshore entity, Dubai is one the most sought-after places in the world to set up a trading business. Before you do so, you must be thorough with all regulatory and legal compliances to get your business up and running. If you have any questions or if you are seeking guidance on the same, reach out to SetHub’s experts who will provide you with valuable insights and assist in the business setup process.
