Dubai Business Climate
In the UAE, economic activity is regulated by individual emirates as well as the Federal Government. In Dubai, the authorities have deliberately sought to create an environment which is well ordered without being unduly restrictive. As a result, Dubai offers businessmen operating conditions that are among the most liberal and attractive in the region.

Licensing
The basic requirement for all business activity in Dubai is one of the following three categories of licences:

1. Commercial licences covering all kinds of trading activity;
2. Professional licences covering professions, services, craftsmen and artisans;
3. Industrial licences for establishing industrial or manufacturing activity.

Ownership Requirements
Fifty-one per cent participation by UAE nationals is the general requirement for all UAE established companies except:

• Where the law requires 100% local ownership
• In the Jebel Ali and Airport Free Zones
• In activities open to 100% AGCC ownership
• Where wholly owned AGCC companies enter into partnership with UAE nationals
• In respect of foreign companies registering branches or a representative office in Dubai
• In professional or artisan companies where 100% foreign ownership is permitted.

Legal structures of Business
Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the Commercial Companies Law - and its by-laws govern the operations of foreign business. In broad terms the provisions of these regulations are as follows:

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies. The seven categories of business organisation defined by the Law are:

Partnerships
General partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnership-en-commendam and share partnership companies.

Joint Venture Companies
A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who (unless the agreement is publicised) bears all liability. In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.

Public and Private Shareholding Companies
The Law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.

Limited Liability Companies
A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long term relationship in the local market.

Branches and Representative Offices of Foreign Companies
The Commercial Companies Law covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed.

Professional Firms
In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as local service agent, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licences, visas, labour cards, etc.

Business Regulations
Listed below are some selected business regulations for Dubai:

AGCC Customs Exemption

According to the AGCC Unified Economic Agreement drawn up on 8 June 1981, products originating in any AGCC state are exempted from customs duty (and other charges having an equivalent effect) in any other AGCC state.

However, to qualify as national products, the value added ensuing from their production in member states must not be less than 40% of their final value and the factory must be licensed by the Ministry of Finance and Industry. In addition, the share of the member state citizens in the ownership of the producing plant must not be less than 51% unless the ownership is 100% AGCC. Every item for which exemption is claimed must be accompanied by a certificate of origin duly authenticated by the appropriate government agency.

Read More

Tenders

In Dubai, government projects and orders are generally put out to tender. The required qualifications, specializations and other terms and conditions for participation vary according to the project and the authority concerned. Certain tenders are offered internationally but where local tenders are involved only those companies licensed and registered with the department concerned are eligible to bid. In order to qualify to participate in a tender one or more of the following may apply:

• The tenderer shall be a firm wholly owned by UAE nationals. In the case of a partnership, at least 51% of the equity must be owned by UAE nationals. A foreign party may only tender if it has a UAE representative or agent with the necessary documents
• The tenderer should hold a valid licence from the Economic Development Department
• The tenderer must be a member of the Dubai Chamber of Commerce and Industry.

Taxation

There is no corporate tax in Dubai. The only exceptions to this are oil producing companies and branches of foreign banks. Likewise, there are no personal taxes. Direct taxation is against the traditions of the UAE and it is highly unlikely that it will be introduced in the near future.

Trade Regulations and Practices

Imports into Dubai can only be undertaken by those importers who have the appropriate trade licence. Import duties have been largely standardized at 5%, but there are many exemptions, including food, building materials, medical products and any item destined for the Jebel Ali and Airport Free Zones. Food products must carry dates of manufacture and expiry and meat for the local market must have a certificate to prove compliance with Islamic law.

Trade practices in Dubai are in line with normal international standards. All correspondence should be in Arabic or English. As a sophisticated market, full technical specifications should be provided with CIF Dubai prices and Middle East references. Payments are normally effected by letter of credit.

The UAE is a member of the World Trade Organisation.

Exchange Control

There are no exchange controls in the UAE and its currency, the UAE dirham, is freely convertible. The dirham is linked to the US dollar, the currency by which oil prices are measured. The exchange rate has remained at Dh 3.675 = US$ 1 since 1977.

Banking and Finance

The regulatory authority since 1980 has been the UAE Central Bank. Some 47 commercial banks operate, with a total of around 370 branches, of which about 27 are foreign banks with a combined total of more than 200 branches. Federal law restricts foreign banks to no more than eight branches each.

Federal law requires that every commercial bank must have a paid-up capital of at least Dh 40 million. There are few investment or merchant banks at present. For medium-term or long-term industrial finance, local companies can approach the Emirates Industrial Bank, set up by the UAE government with an initial capital of Dh 500 million. Its main objective is to help develop the private sector.

Bill discounting can be arranged with the commercial banks, either foreign or locally owned. Leasing and hire purchase are available from local finance companies specialising this business. Factoring is not practised in the UAE.

Import and export financing can be arranged through the commercial banks. Margins are often required by the banks. Such margins and the facilities offered by the banks will mainly depend on their relationships with their customers.

Accountancy

The registration of accountants and auditors in the UAE is governed by Federal Law No. 22 of 1995. There is no local professional body of accountants but many of the large international accountancy firms have offices in Dubai. Under Federal Law No. 13 of 1988, all commercial companies are required to keep financial records, while Federal Law No. 18 of 1993 specifies the books and records that are required to be kept by traders.

Land Ownership

The Land Department applicable regulations stipulate that UAE nationals and GCC nationals can possess lands and buildings in Dubai. Non-GCC nationals can purchase lands through various Freehold companies including Emaar, Nakheel and Jumeirah Projects amongst others.

Trade Marks and Patents

Three UAE Federal Laws cover the protection of industrial and intellectual property. They are: Federal Law No. 37 of 1992 on Trademarks, Federal Law No. 40 of 1992 on Protection of Intellectual Property and Copyright, and Federal Law No. 44 of 1992 on Protection of Industrial Property.

Legal System

There is a comprehensive framework of legislation to ensure that business in the UAE is conducted in a fair and orderly manner. There are laws dealing with commercial transactions, intellectual property, labour and other aspects of business life.

Dubai has many local and international law firms willing to advise foreign business organisations on legal matters.

There are Federal Courts in all emirates except Dubai and Ras Al Khaimah, which have retained their local courts. Dubai has civil, criminal and Shariah (Islamic) Courts of first instance. All court decisions may be brought to the Dubai Court of Appeal. Thereafter, a final appeal may be made to the Dubai Court of Cassation.

The Civil Court (as opposed to the Shariah court) has jurisdiction over labour, civil and commercial transactions, as well as personal matters (e.g. wills, divorces etc) relating to non-Muslims. The language of the Courts is Arabic and advocates admitted to plead are Arab nationals.

Visas

For updated information on Visas go to the visa section or Dubai’s Naturalisation and Residency Department’s website: http://www.dnrd.gov.ae

Health Requirements

For updated information on health certificates etc kindly visit the Ministry of Health website at: http://www.moh.gov.ae

Company Closure

Employees who face the unlucky situation of company bankruptcy or company closure are entitled under UAE Labour law to receive their gratuity payments and holiday pay, but you will need to speak to the labour department for the proper process as it is rather complex. An employee of a firm that has been closed is allowed to transfer sponsorship to a new employer if they are able to find a new job, but if not their visa will be cancelled and they will have to leave the country. To transfer the visa they’ll need an attested certificate of closure, issued by the court and submitted to the Ministry of Labour & Social Affairs (04 269 1666). Consult the appropriate government offices to get your paperwork right, or consider investing in the services of a lawyer that specialises in labour issues.