Relocating a business to the UAE: what an entrepreneur should consider

The United Arab Emirates (UAE) has long attracted businesses from all over the world due to its tax incentives, stable economy and favourable location. As of 2022, the UAE was ranked in the top 10 countries in the world for attracting foreign direct investment. But before deciding to relocate your business to this country, it is important to understand the pros and cons of such a move.

Pros of relocating a business to the UAE

1. Tax benefits. One of the main reasons for choosing the UAE for relocation is tax privileges. In free economic zones, companies are exempt from corporate tax for a long period of time (up to 50 years), which makes this jurisdiction particularly attractive. In addition, there is no personal income tax or dividend tax in the UAE.
2. Global Hub. The UAE is located at the crossroads of trade routes between Europe, Asia and Africa, making the country ideal for international trade. Businesses have access to the largest markets and can build supply chains at minimal cost.
3. Lack of currency restrictions. There are no currency restrictions in the UAE, allowing cross-border payments and financing to flow freely.
4. Asset protection and privacy. The UAE does not participate in the automatic exchange of tax information, ensuring a high level of privacy for business owners.
5. Prestige and credibility of the jurisdiction. A company incorporated in the UAE is perceived as a trusted partner. This improves access to credit and also helps in gaining the trust of investors.

Cons of relocating a business to the UAE

1. High start-up costs. Despite the tax advantages, the start-up costs of relocation can be high. This includes office rent, licence fees and employee legalisation costs.
2. Restrictions on Mainland operations. Companies registered in free economic zones may face restrictions on doing business in the UAE mainland. In some cases, partnerships with local agents are required to sell goods or provide services.
3. Physical office requirement. In most free zones, there is a requirement for a physical office, even if it is not critical for business operations.
4. Cultural and legal sensitivities. Doing business in the UAE requires knowledge of local laws and cultural sensitivity. It is important to understand the specifics of Arab business etiquette, as well as to follow strict legal regulations, which may be more complex for some industries (e.g. the financial sector).

Key nuances of relocation in the UAE

Types of licences. All companies in the UAE are required to obtain a licence to operate. There are three main types of licences:

• Commercial - for companies engaged in trading.
• Professional - for the provision of services.
• Industrial - for manufacturing companies.

Free Zones vs Mainland. The UAE offers several options for registering a business: in free zones and in the mainland (Mainland). Companies in free zones have a number of advantages, including no corporate tax and no restrictions on foreign ownership. However, their activities are limited to cooperation with the Mainland, and additional licences may be required to operate in the domestic market.

Obtaining a resident visa. The UAE offers business owners and their employees the opportunity to obtain a resident visa. The process is relatively simple and is available through various free zones and investment programmes.

Leasing office space. Having a physical office is a prerequisite for obtaining a licence in the UAE. However, virtual offices are available in some free zones, which reduces the rental costs.

How to choose the right jurisdiction in the UAE?

• Free Zones. There are over 40 free zones in the UAE, each designed for different sectors of the economy. For example, Dubai Internet City is suitable for IT companies, and Jebel Ali Free Zone is for logistics and trading companies.
• Tax advantages. Each zone offers different taxation conditions and it is important to consider the long-term benefits when choosing a jurisdiction for business.
• Visa quotas. Each zone has different quotas for the number of resident visas, which may affect your choice of zone if you have a large workforce.

Interesting facts about business relocation in the UAE

1. In 2023, the UAE was ranked in the top 15 countries in the world for ease of doing business, which confirms its attractiveness to investors.
2. More than 80% of the UAE's population is made up of foreigners, making the country one of the most international in the world.
3. The UAE attracts over $20 billion in foreign direct investment annually, confirming its status as a business hub.

Relocating a business to the UAE provides unique opportunities for growth, development and tax optimisation. Thanks to its favourable location, stable economy and favourable tax regime, the UAE has become one of the most popular jurisdictions for international business. However, it is important to consider all the nuances and complexities associated with relocation in order to make an informed choice and take advantage of all the benefits of this promising country.