Demystifying doing business in Dubai

Dani van Vuuren

Dubai, the bustling urban hub within the United Arab Emirates (UAE), has become a beacon attracting local and global entrepreneurs, with over 2,400 South African-affiliated or -registered companies with the Dubai Chambers of Commerce. This translates to an investment of R10 billion in the UAE, creating more than 2,000 jobs in the petroleum, healthcare and financial services sectors, and speaks to the ease of doing business in the region.

Dani van Vuuren, Business Development Consultant at Sovereign Group, which provides advisory services to high net-worth South Africans who wish to do business or invest offshore, or gain residency in another country, says that Dubai remains a sought-after jurisdiction. “As the economic lynchpin of the Middle East, the UAE is a key operational hub for international investors. It boasts a broadly diversified economy and, in order to attract international business, has invested heavily in its transport, telecommunications, energy and industrial infrastructure. Further, it is well established as a tax-efficient base from which to serve high-growth markets in the Middle East, Africa and South Asia.”

South Africans wishing to start a business in Dubai can choose to operate as joint stock companies, limited liability companies, unincorporated joint ventures, and branch offices of foreign companies, as provided for by the UAE Commercial Companies Law (CCL). The CCL applies to entities that practice any kind of economic activity on the mainland. A 2021 amendment to the CCL removed the requirement for a local partner to own 51% of UAE mainland companies, paving the way for 100% foreign ownership.

New companies can also operate from one of more than 40 Free Zones in the region, which are designated, self-regulated areas set up with the aim of encouraging economic activity.

Van Vuuren says that establishing a company in the UAE can be done within a few days, but cautions that investors should fully understand the options before committing to a corporate structure.

“Considerations include aspects like the nature and expansion plans of your business, the capital amount available for investment and whether there’s a need for foreign investment into your venture, auditing and accounting requirements, and your appetite for personal liability compared to company risk.”

The tax residency status of the shareholders and the tax implications of the business structure also bear scrutiny. “While it’s relatively easy to set up a business in Dubai, understanding the tax regime can be a little tricky,” says Van Vuuren. “No inheritance or capital gains tax is levied in the UAE and, apart from Bahrain, the UAE has the lowest corporate tax rate in the Gulf Cooperation Council (GCC).

Other legislation to be aware of includes the Economic Substance Regulation (ECR), which requires that all companies must report on their economic substances in the UAE. To help prevent money laundering, all companies are required to comply with Ultimate Beneficiary Ownership (UBO) registration guidelines and report suspicious transactions to the authorities using the Go Anti Money Laundering (GoAML) platform.

Van Vuuren notes that the UAE also has a number of residency options: “Most significantly, the UAE Residence by Investment, also known as the UAE Golden Visa, enables foreign investors, entrepreneurs, and individuals who make a significant investment in the country to reside there for up to 10 years.”

Real estate investors can obtain a Golden Visa by purchasing a property worth AED2 million, a property worth AED2 million with a loan from a local bank, or an off-plan property worth AED2 million from an approved local real estate company.

As with all foreign residency visas and investments, there are ins and outs to be aware of. “We advise everyone who wishes to start a company in Dubai, or to gain residency in the UAE, to consult with a professional who is best placed to advise on the available company structuring and visa options, as well as on tax structures and legislation.”