Dubai, Abu Dhabi, Sharjah, Fujairah, Ras Al-Khaimah, Umm Al-Quwain and Ajman are a federation of seven emirates in the United Arab Emirates (UAE). They also have their own laws and legislation, which means it may also be challenging to do business. The UAE is well-known for its numerous foreign corporations, a climate that is business-friendly, a competitive tax system and a clear legal process. Each nation has its own processes and collection of obstacles to tackle as challenges for every organization to invest in. Although one of the largest economies in the Middle East is Abu Dhabi, there are still hurdles and obstacles to doing business in the region.
Challenges that Businessmen Face While Doing Business in Abu Dhabi
Despite the tremendous amount of expenditure and the speed of growth, Abu Dhabi has not fulfilled its potential yet. But it’s still growing, so it’s perfect for companies seeking to start up or develop, but before you set up your own company in Abu Dhabi, it’s crucial that you do your homework. Here are 8 main challenges you would definitely face while doing business in Abu Dhabi:
Getting Set Up
Companies looking to operate in or from Abu Dhabi, or have employees based there, are required to register a legal entity. Every company active in the country requires a company license, which is linked to the registered activity of the entity. In general, there are two options when setting up an operational entity:
Free Trade Zone – No UAE national shareholder or divided ownership is expected by free zone entities; a foreign company or person can have 100 percent business ownership. Each free zone has laws and regulations of its own. With their own regulators and judicial processes, there are also several Civil Law Free Zone territories. Companies in the Free Zone are restricted to conducting business inside their Free Zone, with other Free Areas, or abroad, with what they can do within the mainland of Abu Dhabi.
Onshore Jurisdiction – Onshore jurisdictions apply to any region not under a defined Free Zone and are subject to federal laws and regulations under the Ministry of Economy in Abu Dhabi with regulatory bodies and authorities. The representative office, branch office and Limited Liability Corporation (LLC) are the most prominent categories of corporations within the onshore jurisdiction. A 51 percent local UAE shareholder is required by an LLC. A local service agent is required by a branch or representative office to be their point of communication with the local authorities. You can do business everywhere in the UAE by being located onshore.
Company Ownership
The foreigner has to affiliate with a national for mainland business ownership. The largest share is allocated to the local supporter. It is quite a difficult endeavour to establish confidence, continuity, and partnerships with local supporters and expand the company. International investment is strongly facilitated by the Free Zones of Abu Dhabi and the UAE because of 100 percent foreign company control, zero taxation regimes, and a number of other investor advantages. However, relative to the mainland, Free Zone businesses have set visa limits and limited office spaces.
Finding a Suitable Office Space
In Abu Dhabi, an agency set up is often a mixture of a license, a legal entity and a facility. The UAE is an economy powered by real estate and it is regulation that a business authorization is often connected with actual office accommodation. Many of the free zones offer portable desk solutions or business centres that provide accessible office space choices for enterprises. The minimum office space requirements vary from one jurisdiction to another, and the amount of office space is related to the company’s visa requirement/visa allocation.
Finding a Local Sponsor
Another difficulty for an investor is to find a fine, trustworthy sponsor dealing with the legal business. Therefore, having one in Abu Dhabi owns the company’s main stake and offers you the right to comply with the terms of your market.
Understanding the Tax Environment
The UAE is recognized as a predominantly tax-free nation, but in January 2018, it launched VAT for the first time. At just 5 per cent, the VAT rate is low and has not greatly influenced the cost of doing business in the region. The Federal Tax Authority (FTA) has confirmed that enterprises that are expected to apply for VAT but do not do so would be difficult. Penalties include Dh20,000 for late registration and other fees without a VAT registration for late payment and performing business.
Hiring Workers
Businesses also hire staff from overseas to take advantage of their excellent schooling and home base in Abu Dhabi. There are several places around the world where you can find professional workers in need of a career, but Abu Dhabi is one of the locations where it’s really hard to find those workers, so people are in high demand. The potential should be forced to flee from some low-quality employment to high-quality jobs. They’re going to do it for the money, so for any chance you have, you’re going to have to outbid the competition.
Understanding the Market
If you are not an Emirati, it is important to bear in mind that the Abu Dhabi market is not like the one in your hometown. People in the UAE and Abu Dhabi come from various backgrounds and nations, and when it comes to almost any product, whether it be food, clothes or fashion, everybody has a different style. In order to pitch goods to the consumer and excel in generating sales, you would have to consider the variety.
Obtaining Approvals and Permits
In the establishment of Abu Dhabi, entrepreneurs also fear market setup because they are not well conscious of the procedures and are unable to navigate from one department to another for various approvals. But Riz and Mona Consultancy, which has consultants in Abu Dhabi and around the UAE who will assist in company registration as well as any other matters relevant to it, will solve this dilemma. The company’s experts will provide you with details on the procedures and permits you require for doing business in the UAE. Riz and Mona Consultancy will also include support services including corporate bank account opening and product registration.
Talk to Us
Riz and Mona Consultancy provides a one-stop solution for all your compliance needs in the UAE. From recommending the most appropriate type of entity and jurisdictions for your setup to ongoing management accounting, corporate governance, and even your payroll. Whether you want to set up a new venture in the UAE or streamline your existing operations. Get in touch with us today.
