Challenges of the company set up in the UAE

Challenges of the company set up in the UAE

The United Arab Emirates (UAE) is undoubtedly an enticing business centre attracting entrepreneurs worldwide. The liberal policies and market-driven strategies by the government of UAE are quickly turning the country into a hot business hub. If you want to take your business to the Middle East and extend to North and East Africa, UAE is the right place to establish your company. Due to stringent verification policies, company set up in UAE comes with its challenges.

Mainland company set up

If you want to set up offshore company as a Limited Liability Company (LLC) in mainland UAE, you need a local sponsor who owns 51% of your company. The local partner has the largest stake in your company, which can be challenging for entrepreneurs. You have to find a trustworthy and reliable local partner to conduct your legal business in UAE.

Free zone setup

Instead of going through the hassle of creating a mainland company, you can set up a 100% foreign-owned company in one of the UAE free zones. The tax-free zone provides many tax exemption benefits for your company, but it comes with another challenge. When you set up your company in the free zone, you can trade between free zones or outside the UAE, and you can’t do business inside UAE as a free zone company.

Documentation challenges

As with any country, the company set up in UAE requires you to complete and submit numerous documents to get an appropriate business license. These documents are almost always in Arabic, and they have to be filled in correctly. You need a professional partner to understand the document requirements and fill out forms in Arabic without any ambiguity.

Understanding VAT implications

Since January 2018, a 5% value-added tax (VAT) has been applied to almost all services and goods, with exemptions for food items, healthcare, and education. You have to register for VAT for your company to start trading in and around UAE, and you have to go through a whole different set of documents for VAT registration, which will again be in Arabic for the most part.

Obtaining business funds

The financial institutions in UAE are welcoming, encouraging new business owners to set up offshore companies. However, finding the right financial partner is not easy, especially if you need funds to establish business capital. Most financial institutions offer business loans for established businesses that can show proof of positive numbers and growth indicators for the past three audited years. Finding funding for a company you are about to set up is difficult, but it can be achieved with the right firm that can help you.

Understanding visa requirements

You must obtain a residency UAE visa to establish your company and travel easily as a foreign investor. UAE residence visa issue is a major hassle for entrepreneurs, but you can seek help from companies that can provide comprehensive services to set up your company.