Challenges in Establishing a Business in Dubai and How to Overcome Them

When it comes to establishing a business, Dubai is the prime choice for many business owners. This is because the city’s status as a trade, commercial, and tourism hub makes it a feasible location to help companies in many industries succeed.

Plus, reforms in corporate policies in the United Arab Emirates make it easier even for foreigners to set up shop in the city. However, this does not necessarily mean everything will be a piece of cake.

You must overcome certain challenges to set your company apart from the countless others who also want to try their luck there.

If you really wish to bring your business to greater heights, you must go beyond the basics. Plan not only for the company’s launch but also for its continued growth. A significant part of that lies in how well you manage the business risks you will face from here on out.

This article will teach you how to do just that using some strategies business setup consultants in Dubai recommend.

Also Read: How to Get Business Trade License in Dubai: Everything You Need to Know

Setting Up Your Company

In the beginning, you will need to deal with challenges in establishing a business in Dubai.

You must decide what kind of legal entity you should set up. There are two primary options in Dubai: a free trade zone entity or an onshore jurisdiction entity.

A free zone entity is the most popular choice for foreigners as it allows complete ownership of the company even without a UAE sponsor or partner. On the other hand, onshore jurisdiction entities need at least one UAE national shareholder with the majority share (at least 51%) of the company’s total stocks.

Aside from business ownership, the two options also differ in the location of their operation. Onshore entities can operate anywhere in the country, whereas free zone entities are only allowed within the free zone they are registered in, other free zones, or internationally.

Both have their own advantages. The choice depends on your plans for your business and how you intend to achieve your business goals.

Also Read: Augmented Reality in Dubai: What Businesses Need to Know

Looking for an Office

To complete your business setup, you will need a physical address for your company. This also applies to firms with transactions done offshore or online.

Remember that setting up an entity in the UAE always requires three things: legal entity, license, and facility.

Given that the country has a real estate-driven economy, it is only natural for its policies governing business set up to involve the use of a physical office.

Take note that the minimum size and other requirements for the office space may vary for different jurisdictions. The office floor area may also be linked to the company’s visa allowance or visa quota.

Fortunately, there are plenty of commercial properties in the prime business spots in Dubai you can choose from.

When picking out an office, you should also consider location risks, such as storms, fires, floods, earthquakes, and other natural disasters. Some firms choose to acquire property, liability, or casualty insurance to transfer the financial burden from these risks to an insurance company or a third-party provider.

Also Read: 6 Ways to Use Technology to Grow Your Business in Dubai

Establishing Your Network

Dubai is filled with business people looking to make it big in the corporate world. This isn’t surprising considering that, in the City of Gold, zero can become a hundred in just a blink of an eye.

However, this is only possible with the right strategy (and a bit of luck).

If you are new in business – especially in doing business in Dubai – your first goal should be to establish your network. Be it, locals or foreigners, the people there want to know you on a personal level before they open up to a business relationship. This is the culture you will be growing your company in, so you need to put yourself out there.

The key is to be in the right places.

You don’t have to spend all your time trying to get someone’s approval or have them buy into your idea. Instead, you should immerse yourself in the business culture and listen to advise from veterans. Also, you need to think about what your company can offer them, not just what they can give you.

Also Read: 4 Tips for Diversifying Your Business in Dubai

Getting Used to the Tax Environment

While the country is known as a tax haven for businesses, the UAE has already introduced the value-added tax (VAT) in 2018. At 5 percent, the country’s VAT rate is quite low compared to what’s required in others. It has not even made a significant dent in the revenue of businesses already operating in the country.

Despite this, you need to make sure that you understand the tax environment in Dubai. The Federal Tax Authority (FTA) promised to be stricter in implementing VAT registration, warning companies of the Dh20,000 late registration penalty and other fines they will be facing for conducting business without VAT registration.

Also Checkout: How VAT has changed the way businesses are managed in Dubai

Recruitment

Recruitment matters can be a challenge that is common even in businesses outside Dubai, though there are certain factors that are unique to the city. One of the most notable is the diverse workforce within the emirate.

Once you begin setting up your business here, you’ll get first-hand experience dealing with people from different cultural backgrounds. This means you need to make sure that your human resources policies are paying special attention to cultural awareness and sensitivity.

Cultural matters aside, your first task in human resources is to hire the right people and help them acquire resident or work permits to live in the UAE while working for your company.

For this, you must pay close attention to your firm’s compliance with the rules set by the Ministry of Human Resources and Emiratisation as well as the General Directorate of Residency and Foreigners Affairs.

Of course, this is just the beginning. After your new employees are onboarded, you must take time in knowing them both on a personal and professional level. Keep engagement high, determine their strengths, and figure out their best fit in the company.

Also Checkout: Top 10 Best Recruitment Agencies in Dubai

Dealing with Competition and Comfort Risk

Once you’ve established the legalities and framework of your company, the next thing you need to plan for is how to do better business and overtake your competitors.

This is something you’ve probably thought of from the very beginning. However, the challenge lies not only in overtaking the competition but also in keeping the lead, which means you must continue to innovate.

You see, many company leaders become too comfortable with their success so they no longer take risks or try new things. Thinking that they’ve reached the pinnacle of the business, they stop looking for ways to improve.

However, the “why fix something that isn’t broken” mentality – along with the increasing competition – could result in a loss of customers. Your company should have an enterprise risk management team that will continually assess and refine your strategy to ensure you remain on the lead.

Also Read: 4 Tips for Diversifying Your Business in Dubai

Your Road to Success

Paving the way for your company’s success may not be simple, but the effort you put into it will determine how quickly you can reach the top.

Prepare for the challenges listed here to make your journey as smooth as it can be.

Also Read: 5 Main Difference between Company Setup in Dubai and Sharjah

AUTHOR BIO
Naresh Manchanda is a Partner at MBG Corporate Services, an international organization supporting clients across Asia, Europe and the Middle East and providing sustainable solutions and strategies that drive business transformation. Established in 2002 and headquartered in Singapore, MBG is a 450-strong member team that operates out of Europe, the Middle East and Asia, providing Legal, Risk, M&A, Tax, Strategy, Technology and Audit Services.