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UAE Market Entry: 5 Things to Consider When Establishing a Business in the UAE

Writer's picture: Alison HubbardAlison Hubbard

It’s been a busy few months settling into my new role at Support Legal.  One of the best bits has been getting into the market and interacting with business owners and leaders about the challenges and opportunities the region presents…in particular, I have spent a lot of time talking to people from outside the region looking for their route to the UAE market.  These conversations obviously focus on the tremendous opportunities the UAE presents, thanks to the country’s favourable economic environment, strategic location, and progressive policies. However, navigating the legal and financial landscape requires careful planning.


In recent years, legislative developments have enhanced the UAE’s position as a highly attractive prospect for foreign investors.  Perhaps the most notable of these developments was the relaxation of the foreign ownership restrictions that had shaped the business landscape for many years, but this was just one of multiple developments, which collectively create a business friendly, flexible environment in which to operate a business.


If you’re considering entering the UAE market, here are my top five essential factors to keep in mind to set your business up for success.

1.  Location Matters: Mainland vs. Free Zones


The most common question I am asked is whether a company should be established in UAE mainland or in a freezone, and if so, which one.  The answer to this question is not straightforward because one size most definitely does not fit all, and there will be multiple factors that influence this decision.


The term mainland is used to refer to non-freezone areas within the UAE.  In contrast, freezones are economic zones designed to attract investment into the UAE, with some aimed at specific industries or commercial sectors, and some having a more general approach.


Mainland companies can engage with the local market in the Emirate in which they are established, but there is currently no concept of an Emirate-wide licence to carry on business in the UAE, meaning that a business must be licensed in each Emirate in which it intends to do business.  Similarly, a business established in a freezone is limited to carrying on business within that freezone, or freezone-to-freezone, and can’t generally trade with the local market.  Each Emirate in the UAE has established at least one freezone, with Dubai alone having established over 50 at the last count, so the range of options can be overwhelming.   


Historically, the key difference between mainland and freezones was that a free zone entity could be 100% foreign owned by non-UAE nationals and required no other UAE national participation, whereas corporate entities established in the mainland were subject to ownership restrictions.  However, in 2020 foreign ownership restrictions were lifted in most sectors (excluding sectors considered as having significant strategic importance), which was game-changer and dramatically enhanced the UAE’s competitiveness across the region.


Pro Tip: Your choice depends on your business model and goals. Want local clients? Consider the mainland. Want global operational freedom? A free zone might be your best bet.


2.  Corporate structure


Choosing the correct corporate entity will shape everything from legal liability to operational flexibility. The key options include Limited Liability Companies (LLCs) and branch offices.  LLCs share many of the features you might expect to see in a home jurisdiction, such as limiting the liability of the shareholders and certain governance requirements. 


Factors to consider when structuring the business include:


  • Nature of the business: The sector in which the business operates, and whether the business is B2B or B2C, will influence the corporate structure and operating model, and may also give rise to additional compliance or regulatory requirements.

  • Budget: The cheaper option now could lead to higher costs down the line if your structure doesn’t match your growth plans.

  • Operational and resource requirements: Factors such as employees, office space and connectivity should be included in the decision-making process.

  • Short and long-term objectives:  Focus on scalability and exit strategies from the start.


Pro Tip: Understand your business objectives thoroughly to choose a structure that aligns with your short- and long-term goals.


3.  Licensing – Get specific


Both mainland and freezone entities must be licensed to undertake the specific activities they intend to undertake, and it’s not one size fits all; it’s detailed and activity-specific.


Each Emirate and free zone has its own activity list, approval requirements, and fees. Operating outside your licensed activities could lead to fines or business interruption.


Pro Tip: Work closely with an expert to select the appropriate license — an error here can cost valuable time and resources.


4.  Understand the Tax Landscape


The UAE is known for its favorable tax environment, but staying compliant is critical. The main taxes in the UAE are corporate tax and VAT.


  • Corporate Tax: Introduced in 2023, corporate tax applies at 9% for profits exceeding AED 375,000. Companies operating in qualifying free zones may remain exempt.

  • VAT: A 5% Value Added Tax applies to most goods and services. Registration is mandatory for businesses crossing the AED 375,000 revenue threshold.


Pro Tip: Be proactive. Newly incorporated entities must register for corporate tax within three months of establishment to avoid penalties.


5.  Hiring and Workforce


Labor laws in the UAE are generally favourable for employers, but certain regulations govern hiring practices, employment contracts, and termination. Key considerations to bear in mind when building a workforce include:


  • Visas: Companies are responsible for sponsoring work visas for foreign employees. The UAE has streamlined this process, but specific documentation and processes vary between mainland and free zones.

  • Emiratisation: Requirements in some sectors mean that some roles must be filled by UAE nationals.

  • Benefits: Employers must provide mandatory benefits such as health insurance, annual leave, and end-of-service gratuity.


Pro Tip: Budget for these commitments early to maintain seamless operations and attract top talent in compliance with UAE labor laws.


Final Thoughts


I have been advising businesses on establishing a presence in the UAE for nearly twenty years (time flies!), yet writing a general overview such as this is always slightly tricky because, and I can’t stress this enough, so much will depend on the nature and objectives of the business.


The UAE’s regulatory landscape is dynamic and frequently evolving to encourage investment and support economic goals. This dynamism is part of what keeps working here so interesting!  But here’s the key takeaway: success lies in preparation. From defining your market entry strategy to understanding tax and licensing nuances, every detail matters.


Have questions about establishing your business in the UAE? Reach out to Alison Hubbard for a discussion to see how you can make the most of your opportunities in the UAE.


City skyline with Burj Khalifa under a blue sky. Yellow text: "Establishing a Business in the UAE". Mood conveys ambition.

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This material is provided for general information only. It should not be relied upon for the provision of or as a substitute for legal or other professional advice.

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