Dubai is a thriving, modern city with plenty of opportunities for business ventures. However, challenges still exist that must be considered before deciding to open up shop in this rapidly growing metropolis. To help you navigate these potential obstacles, I’ve compiled some key issues every company should consider before opening an office in Dubai.
1. Culture and Language Barriers
The Middle East market is vast and complex. As a result, knowing social conventions and cultures is critical for running a successful business.
Dubai is noted for having a varied workforce with people from many ethnic backgrounds. The local culture is influenced by Islamic customs. This may differ from what you are accustomed to in your home country. You will need to be aware of these Islamic beliefs if you want to do business in Dubai.
The attitude to business communication is fairly professional, and civility is highly valued. The people of the UAE are generally warm and kind, and the country is regarded as one of the safest in the world. Foreigners are free to practice their own faith, but they must treat their hosts with the same respect.
The official language of the UAE is Arabic, but English is extensively utilized in business meetings and transactions. All employment records, including contracts and other documents like employee instructions, should, nevertheless, be in Arabic.
In the event of inconsistency in terms contained in English papers, Arabic is the prevailing language. So it’s ultimately essential for your business to use the right translation service. I recommend using Writeliff, as their service is one of the most efficient and affordable in the region. You can find more details here.
2. Finding a Local Partner
Traditionally, a non-Emirati entrepreneur who wanted to start a firm in the UAE could either set up in a free zone and keep 100% ownership or set up on the mainland and give a local sponsor a 51% part in their company. There are exceptions to this rule: a business operating under a professional services license, for example, could be entirely controlled by foreigners.
However, this is no longer the case. Foreign ownership reforms in the UAE were confirmed to have taken effect in the fourth quarter of 2018, after being in the works for some time. Foreign nationals are no longer obliged to engage with a local sponsor in Dubai to establish a firm, thanks to a change in legislation.
It should also be noted that 100% foreign ownership is not permitted in all industries. Furthermore, companies that seek to maintain 100% foreign ownership must request authorization, which can be denied.
Those who want to start a business in an industry that is on the so-called “negative list” will still need to cooperate with a local sponsor. These are some of the industries:
- Exploration and production of oil and gas
- Military and security sectors
- Banking and finance
- Insurance
- Hajj and Umrah services
- Postal, telecommunications, and transport services
- Certain types of recruiting activities
- Commercial agency services
3. Finding an Office Space
The UAE is a real estate-driven economy. So it is a legal requirement that a commercial license is linked to the company’s registered address. This rule necessitates the operation of a physical office, which makes it difficult for small enterprises to enter the market. The office location is also critical to your company’s smooth operations.
The majority of free zones offer flexible desk solutions to give businesses with cost-effective office space. Minimum office space requirements vary by jurisdiction, and the size of the office space will be determined by the company’s visa limit.
4. Employee Management
If you are a foreign company looking to launch a business in Dubai, you will need to hire local employees to conduct your operations.
It is still difficult to hire locals because the UAE has a set of rules that must be followed. Understanding these rules and principles will make navigating the UAE’s labor laws much easier.
This includes a company’s obligation to issue visas to its personnel; an employee cannot work until they have their visa. There shouldn’t be many shocks once you understand the basics of the UAE’s legislation.
Due to differences in work culture, language, and business approach, you may find that managing local staff is more complicated and challenging than hiring them.
Payroll management and employee taxation under UAE law may appear to be difficult. A foreign company must also adhere to the Wage Protection System (WPS), which includes end-of-service gratuity payouts and other benefits.
5. Taxation and Cash Management
Starting and operating a business in Dubai, UAE requires a lot of funds. You will need funds for rent, business maintenance, setup fees, equipment (If needed), taxes, registration, etc.
Hence, having proper cash flow management and strategy is challenging to start a business in the UAE.
It is essential to keep track of your expenses to ensure you don’t run out of money. As a foreign entity trying to set up a business in Dubai, it is even more challenging without proper knowledge and understanding.
Before 2018, Dubai, United Arab Emirates was tax-free. Many entrepreneurs from all over the world took advantage of the tax incentives to launch their businesses in the region as a result of the low tax burden.
Unfortunately, such is no longer the case since the country adopted the Gulf Cooperation Council VAT system in January 2018.
Those businesses that do not comply with Dubai’s tax system face significant penalties and fines.
Conclusion
Starting a new business and keeping it running smoothly is difficult, especially if you are doing so in a foreign country.
To manage a business successfully in Dubai, you need the right strategy as well as a lot of knowledge, patience, and the right approach.
It may be possible for those willing to take on the challenges head-on to find success where others have failed before them.
Whether it’s finding a qualified workforce or navigating cultural norms, you may want to consider seeking help from business setup consultants. They will manage your expenses and help you complete some tasks at a lower cost.
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