Opening deconstructing HR - A license story in Dubai
Updated: May 4, 2019
"deconstructing HR now has a trade license." was music to our ears after weeks worth of navigating around the world of company setup procedures. Let's get one thing clear, the actual process of obtaining a license in Dubai is relatively straightforward once all the decisions at the beginning have been made. For us the first two weeks of the process were about investigating the different types of licenses and the different type of agencies that deal with company setups, after that it was a week's journey.
This is a time where doing your research is of paramount importance, as most agencies will advocate either to obtain a license in the sector they are attached to, as in the case for freezones, or ones that are easier for them to process. In this it is first good to know what type of licenses there are in Dubai. At the time of writing this article there are two types of licenses that can be obtained, the mainland types and freezone ones. Please note that any advice written from this point onward is subject to any changes by the ministries.
Starting with the mainland licenses, the advantage points here include that you are able to operate your services, or the sell your product, deploy staff on sites outside your offices, opening branches of your services and less general restrictions across all the UAE. However, there are a number of conditions when holding these type of licenses that include, requiring to partner with a UAE National Partner as a co-owner, and a visa quota system with various nationlisation requirements attached. Going into the detail, there are currently three options to the mainland license.
1. LLC License
The LLC Company License where the minimum 51% of the ownership is required to be with the UAE National Partner, with the other 49% being able to be split up as required between non-UAE National Partners. It is also required, on paper at least, for the UAE National to be designated at least 20% of the profits of the company. Knowing in a lot of cases UAE National Partners will wavier this part for an agreed yearly amount, as long as you have an internal agreement document in place.
2. Sole Establishment License
The second of the mainland options is the Sole Establishment Company License where you take the full 100% ownership of the company with no other partners. In this case a UAE National Partner is replaced by what is called an UAE National Agent, whom you are required to have attached to your license an UAE National for a yearly fee in exchange for providing you Government Relation Officer (GRO) services. In reality the UAE National Agent's involvement and support is normally dependent upon the agreed amount on the yearly payment.
3. Civil Company License
This is also the case for the third option of the mainland license called a Civil Company License, where you can have multiple partners setup on the license with the ownership percentage distributed as you require with the option to have a UAE National Partner or where they are a UAE National Agent.
Mainland License Costing
Overall, the investment in a UAE National Sponsor or Agent in your mainland license normally boils down to a yearly cost which can be variable to a number of things. Such as, what industry type you are setting up, the value of the collateral of the company, whether they are included in the profit share, how proactive they will be in their support such as acting as a GRO, and how well you know them. Also, the cost of the license and the processing fees can vary greatly upon some of the same reasons, so the research is always advised before proceeding. Good business setup agents are ones that would be able to break down the entire costs for you, including their service charges, so you are able to see the full estimation of costing before moving forward.
Mainland License Type Decision
It is worth noting that which of the three mainland licenses you go through is also dependent on the industry category you select, as there are some restrictions in which license is available to you depending on your business type. Now the exact variations are dependent upon the category and sub category of the license you have applied for and the conditions and restrictions can be different, so it is always worth checking these before committing.
Mainland Application Process
In terms of service for mainland options you can either go straight through the Department of Economic Development (DED), either by their website http://www.dubaided.ae/English/pages/default.aspx, or at their offices in Deira. Otherwise you can go through a number of agencies that can support you through this process. However, always do your research in terms of the costing and how much of the process they will support you on. For instance will not support you on the immigration / visa process side, however, with the amount of typing centers now opening doing this part yourself is getting easier.
This brings us to the alternative license types, the Freezones licenses. These are sections all over Dubai that allow business to setup in such away allowing them certain advantages, but with conditions. Each zone will normally be associated with an industry type limiting you to a certain set of activities that your company will be enabled to do, such as knowledge village with education, and Internet City with software companies.
Normally you select an office / location space that you wish to rent or build in the designated zone, and pending on the size would be the cost allocated to that License. With that you will get a quota of employment visas based on meter squared measurements of your total space acquired. Knowing there are no nationalisation quotas to be adhered to there is, however, once you have reached your total quota then that is it unless you rent more space from your provider.
The general advantages are that the investment can be entirely be from foreign investment, be it as a group, branch of an international business, or as an individual. That all your services are within one portal connected to your Freezone provider that will liaise with the ministries. Some freezones will have special conditions as some will have no VAT imposed, or some will have changes to the financial laws compared to the rest of Dubai. However, the disadvantages are that the portal services tend to be slower processes as you are using a middle man, each of their processes tend to cost more compared to main license versions. That your employees can only legally operate within your offices in the freezone itself and not do site work.
For more information on the all the different freezones around the UAE that looks at the overal requirements and conditions can be found at the Government website https://www.government.ae/en/information-and-services/business/starting-a-business-in-a-free-zone
This also contains links to all the individual freezone websites where you can investigate further the ones that service more to your company requirements.
After much research we went with the mainland Civil Company License as it allows us greater flexibility in working with our clients and providing our services anywhere in the UAE without restrictions. For us the whole process was smooth and obtained the full trade license and memorandum agreement within a week of the application. Knowing this is not true of all companies as each application require to go through several steps of evaluation including the pre-approval stage by a ministry committee which can look into the following:
Background checks on all the partners
Qualifications of the Partners matching catergorisation requirements
Whether the Company meet other requirements in place to meet their categorisation conditions including amount of investment, location secured and suitable, right amount of qualified staff named on the license (if applicable), and
What is the need level of the type of business in the country.
Once the pre-approval has been gained, then the process from this point is just a matter of administration processes through the DED notary services to legalise all the documentation and agreements between the partners. This, if everything is in place, can be done within a day.
After obtaining the Trade License then it is to the next stage of the required visa process, obtaining the companies establishment card, immigration card, and your own company visa (if you require it), but that is for another time to go through those processes.
It is to note that this blog posting is talking about the license setups in the Dubai Emirate of the UAE and there does not indicate the differences that can occur in the other Emirates. For those looking into the license setup process then it is something that deconstructing HR can help advice you on, looking which mainland or which freezone options are most suitable to your company.