UAE is one of the perfect destination to set up any kind of business. It attracts a large number of entrepreneurs from across the globe to set up business yearly. Business setup in the UAE is a gateway to success. With its state-of-art infrastructure, rich technologically forward resources, and various company registration choices, it is a perfect location for starting a business. Although before choosing a company set up in the UAE, it is vital to view the pros and cons (below). 

The country provides great ambience, geographical benefits, and skilled human resources. These benefits make this place favourable for any type of business setup. UAE offers you more than one choice to register your business, you can choose to register in a Mainland area, free zone area or offshore area. 

Pros:
1.  Growing economy
UAE hosts the healthy, developing economy; as such, it offers several chances for businesses to thrive, develop and grow. In the Arab world, UAE has one of the largest economies and GDP, which is a testament to its status as a perfect location for business set up. Along with this, UAE provides a comprehensive and honest business process, which makes the whole procedure of setting up and operating business or company direct and transparent. 

2. Numerous set up choices 
In the UAE, you have numerous choices, e.g. business set up in the mainland, offshore or free zone. Each and every kind of business set up has its own properties and advantages. Understanding the functions and advantages will assist you in deciding the perfect destination for your business set up.

3. Robust infrastructure 
UAE with its quick economic progress has offered huge entrance to the construction of residential and commercial projects all over the country. When it comes to infrastructure, UAE offers world-class infrastructure and facilities. The Government of the UAE has proceeded to ensure that foreign trades face no trouble in setting up and running their business. 

4. 100% foreign ownership
The implementation of the amendments made to the Commercial Companies Law (CCL) from 1 June 2021 allows for 100% foreign ownership in the UAE, allowing natural and legal person to register companies in the UAE mainland without the need for a local partner. 

Cons
1. Trade limitations in free zone
The free zone companies in UAE provide advantages such as no income tax, smooth registration and relaxed rules. Investors and traders choosing to set up in the free zone are not permitted to trade within jurisdictions unless the free zone companies in UAE have an agreement with a distributor (otherwise they are not permitted to conduct business in UAE mainland). 

2. Prohibited business activities
In the UAE, some business activities are prohibited. To set up any business activity in UAE, it is recommended that Clients consult with Sidney Advisory to understand the possibilities of your business activity and the legalities involved. 

The most commonly adopted legal structures in mainland UAE is a limited liability company (LLC) and a branch office (Branch). In addition, it is also possible to establish a representative office (also known as a liaison office) which is a legal structure identical to that of a Branch, however its activities are limited to serving as an administrative and marketing center for the parent company (Rep Office). It is also possible to establish an entity in one of the free zones in the UAE. The free zone entity can take the form of a free zone limited liability company (FZ-LLC) or a free zone branch office (FZ-Branch).

LLC
■ Separate and distinct legal entity with limited liability.

■ Business activities open to 100% foreign ownership – refer to Green List under Resources section below. 

Foreign shareholders of an existing onshore company may consider restructuring their company's capital to increase the level of foreign ownership if their company's licenced business activities are listed in the Green List of the Emirate in which the company was incorporated.

As part of this restructuring process, foreign shareholders will need to commercially negotiate with their local UAE partners to reach an agreement with respect to the transfer of the UAE partners' shares. Often there are shareholder arrangements in place and/or provisions in a company's Memorandum of Association that entitle foreign shareholders to call upon the local partners to sell their shares should there be a change in law.   

Branch 
■ A branch is not regarded as a separate entity but treated as an extension of its parent company.

■ Permitted to conduct activities as specified in its license but is prohibited from conducting activities relating to trading in tangible goods. 

■ Legally regarded as part of its parent company (no separate legal identity). Activities limited to those of its parents, as stated in its parent's objects articles of association/bylaws.

■ Managed by a sole manager who will operate pursuant to a power of attorney issued by the parent company

■ Required to be registered with the UAE Ministry of Economy (MOE) and to provide a bank guarantee in the amount of AED 50,000 that is payable in favor of the MOE.

■ No requirement to appoint UAE national agent with effect from 30 March 2021.

Representative office
■ Used by foreign companies seeking to establish business presence in the UAE.

■ Activities limited to gathering information and soliciting orders and projects to be performed by the parent company's head office. 

■ Serves as an administrative and marketing center for the parent company.

■ Identical in all respects to a branch office except that it is not permitted to perform contracts or any other activities other than marketing of the parent company's products and services and not allowed to issue invoices in its name.

■ Required to be registered with the MOE and to provide a bank guarantee in the amount of AED 50,000 that is payable in favour of the MOE. 

FZ-LLC
■ Separate and distinct legal entity with limited liability.

■ No restriction on the nationality of shareholders.

■ Activities restricted to the free zone in which the company is incorporated and those the company is licensed to carry out.

■ No corporate or income tax for a guaranteed 50-year period; 100 percent repatriation of capital possible.

■ Activities cannot be carried out directly in mainland UAE.

■ An FZ-LLC wishing to carry out business in mainland UAE should appoint a mainland UAE registered company to act as its distributor. Alternatively, it may set up a branch office in the respective Emirate.

■ Exemption from customs duty for goods entering the free zone. Customs duties will apply to goods leaving the free zone into the mainland UAE market.

FZ-Branch
■ A branch is not regarded as a separate entity but treated as an extension of its parent company.

■ Used by foreign companies seeking to establish business presence in the UAE and to operate onshore.

■ It is only an option in certain free zones (such as Dubai International Financial Centre, Dubai Airport Free Zone and in all of the Abu Dhabi free zones). 

■ No requirement to appoint UAE national agent as in the case of a Branch.

■ Permitted to conduct activities as specified in its licence but is prohibited from conducting activities relating to trading in tangible goods.

■ Legally regarded as part of its parent company (no separate legal identity). Activities limited to those of its parents, as stated in its parent's articles of association/bylaws.

■ Managed by a sole manager who will operate pursuant to a power of attorney issued by the parent company.

■ Can operate out of the same office as its parent company located in the free zone.

Dual Licence Branch
■ A Dual Licence Branch is a branch of an FZ-LLC established in mainland UAE. It is not treated as a separate entity but treated as an extension of its parent company.

■ Used by foreign companies seeking to establish a business presence in the UAE and to operate onshore.

■ Establishing a dual licence branch is possible in certain free zones only. It may operate from the same office as its parent company.

LLC
No personal income tax or corporate taxes payable, save for companies engaged in oil, gas, hospitality and petrochemical activities, etc. There are some municipality taxes paid on rent and certain land transfer charges paid when transferring real estate.

Effective January 1, 2018, the UAE has implemented a value added tax (VAT) at a rate of 5 percent, as recommended by the World Bank and the International Monetary Fund.

Branch
Same as LLC.

FZ-LLC
No personal income tax or corporate taxes payable. Certain designated free zones in the UAE have been exempt from payment of VAT but, in all other non-designated free zones, VAT is applicable.

The designated free zones which are exempt from VAT are set out below:
■ Abu Dhabi
Abu Dhabi Global Market
Twofour54
Masdar City Free Zone
Free Trade Zone of Khalifa Port
Abu Dhabi Airport Free Zone
Khalifa Industrial Zone

■ Dubai
Dubai International Financial Centre
Dubai Development Authority
Dubai Multi Commodities Centre
Dubai Healthcare City
Dubai Silicon Oasis
Dubai World Trade Centre
Jebel Ali Free Zone (North-South)
Dubai Cars and Automotive Zone (DUCAMZ)
Dubai Textile City
Free Zone Area in Al Quoz
Free Zone Area in Al Qusais
Dubai Aviation City
Dubai Airport Free Zone

■ Sharjah
Hamriyah Free Zone
Sharjah Airport International Free Zone

■ Ajman
Ajman Free Zone

■ Umm Al Quwain
Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
Umm Al Quwain Free Trade Zone on Sheikh Mohammed Bin Zayed Road

■ Ras Al Khaimah
RAK Economic Zone (RAKEZ)
RAK Maritime City Free Zone
RAK Airport Free Zone

■ Fujairah
Fujairah Free Zone
Fujairah Oil Industry Zone (FOIZ)

FZ-Branch
Same as FZ-LLC.

Dual Licence Branch
Same as Branch.

LLC
The licensing procedure involves the following macro steps:
■ Reservation with the licensing authority of the trade name of the entity.
■ Obtaining initial approval from the licensing authority.
■ In the case of an entity that will be conducting industrial or contracting activities, it will be necessary to obtain special approvals from the relevant Municipality, the MOE and possibly other competent authorities.
■ Execution of the memorandum of association of the entity before a notary public in the UAE.
■ Signing of office lease agreement and its registration with the relevant authority and
■ Final registration with the licensing authority and issuance of license.

Additional approvals may be required by other government departments depending on the nature of the LLC's activities.

Various documents required to be submitted to the Department of Economic Development (DED), including the application form for reservation of the trade name of the company and the application form for initial license approval, the board resolutions and corporate documents of the corporate shareholder, passport copies of the individual shareholders and the officers (directors/manager and general manager).

Branch
The registration procedure involves the following macro steps:
■ Reservation with the licensing authority of the trade name of the branch.
■ Obtaining initial approval from the licensing authority.
■ Execution of the national agent agreement of the branch before a notary public in the UAE, but for circumstances where the New Law mitigates this requirement.
■ Obtaining initial approval from the MOE. 
■ Signing of office lease agreement and its registration with the relevant authority.
■ Final registration with the licensing authority and issuance of license and
■ Submission of bank guarantee to the MOE and issuance of the final commercial registration certificate.

Additional approvals may be required by other government departments depending on the nature of the LLC's activities.

Various documents required to be submitted to the DED, including the application form for reservation of the trade name of the branch and the application form for initial license approval, the board resolutions and corporate documents of the parent company, and the passport copies of the general manager together with a copy of his/her last UAE visa.

FZ-LLC
The licensing procedure involves the following macro steps:
■ Submission of initial application to the relevant free zone and obtaining its initial approval.
■ Execution of the memorandum and articles of association of the entity before the concerned free zone official.
■ Signing of office lease agreement and its registration with the relevant free zone.
■ Opening of bank account and depositing relevant share capital (varies from 1 free zone to another) and
■ Final registration with the registration and licensing authority of the free zone and issuance of license.

Additional approvals may be required by other government departments depending on the nature of the FZ-LLC's activities.

Various documents required to be submitted to the relevant free zone authority, including a business plan, applications for registration and license, the board resolutions and corporate documents of the corporate shareholder, passport copies of the individual shareholders and the officers (directors and manager) and the specimen signatures of the officers.

FZ-Branch
The registration procedure involves the following macro steps:
■ Submission of initial application to the relevant free zone and obtaining its initial approval.
■ Signing of office lease agreement and its registration with the relevant free zone and
■ Final registration with the registration and licensing authority of the free zone and issuance of license.

Additional approvals may be required by other government departments depending on the nature of the FZ-branch's activities.

Various documents required to be submitted to the relevant free zone authority, including a business plan, applications for registration and license, the board resolutions and corporate documents of the parent company, passport copies of the individual shareholders and the general manager and the specimen signatures of the general manager. Dual Licence Branch Various documents required to be submitted to the DED, including the no-objection letter obtained from the relevant free zone, the application form for initial license approval, the board resolutions and corporate documents of the parent company, and a passport copy of the general manager together with a copy of their last UAE visa.

Dual Licence Branch
The licensing procedure involves the following macro steps:
■ Obtaining a no-objection letter from the free zone in which the parent company is registered.
■ Submission of initial application to the licensing authority.
■ Signing of office lease agreement and its registration with the relevant authority (optional) and
■ Final registration with the licensing authority and issuance of licence.

Additional approvals may be required by other government departments depending on the nature of the FZ-LLC's activities.

LLC
License required from the DED.

Additional approvals may be required from other competent authorities depending on the nature of activities.

Branch
Same as LLC.

FZ-LLC
License required to carry on a business in the relevant free zone.

Additional approvals may be required from other competent authorities depending on the nature of activities.

FZ-Branch
Same as LLC.

Dual Licence Branch
Same as branch.