30th May 2018
Setting up a business in Abu Dhabi doesn't need to be difficult. However, there is still confusion about where to setup, e.g. a free zone or onshore. It is important that you understand the legal requirements. You will need to know the start up costs, as well as the ongoing costs. Choosing the right business professionals and consultants to help you will be key. What is right for one business isn't necessarily right for another. It's best to get a bespoke consultant for your particular situation. Gateway Group in Abu Dhabi can assist you.
We regularly hear about company formations where the total cost wasn't made clear at the start. By the time the full costs are starting to emerge, the foreign company is already into the setup process. We also hear about business setups which took a long time because the appointed professional wasn't up to speed with the requirements and processes.
Gateway is a company formation specialist based in Abu Dhabi. We are on the ground in Abu Dhabi. We are familiar with the document requirements and processes. In this article we outline how to setup a business in Abu Dhabi.
Step-by-step guide for setting up a business in Abu Dhabi, UAE
1) Free zone or onshore?
Free zones are ideal for companies wanting to work with other companies in a particular free zone. Free zones are often set up by sector, e.g. Abu Dhabi Global Market free zone is a financial free zone. Free zone companies can also work with overseas-based companies. Foreign companies can own a free zone entity 100%. However, free zone companies are not permitted to work onshore.
Onshore companies provide the most flexibility. They are licensed by Abu Dhabi's Department of Economic Development (DED). Onshore companies can work directly with the government. Oil & Gas companies can apply for Supreme Petroleum Council approval to work directly with ADNOC. If your intended clients are onshore or government entities, an onshore license is required, CLICK HERE for more information.
2) LLC, Foreign Branch or Representation Office
Limited Liability Companies (LLCs) are the most common legal structure in the UAE. To sell any type of products an LLC is mandatory. LLCs are currently required to engage a local sponsor to hold 51% of the shares. These structures can be setup to mitigate the risks in order to protect the control and profits of the business. Gateway can assist you with this via our nominee corporate sponsorship service. It has been announced that some sectors will be opened up to 100% foreign ownership by the end of 2018, CLICK HERE for more information.
Foreign Branches are ideal for companies providing services. Foreign companies own the Abu Dhabi foreign branch 100%. This structure is attractive to the risk averse. It is not possible to sell products under this structure. Tax will be applicable in the parent company's home jurisdiction.
Representation Offices, also called Rep Offices, are purely for the purpose of marketing the services of the overseas parent company. They can't transact or provide services. They are ideal for companies wanting a commercial presence in Abu Dhabi. They are restricted to a maximum of five employees.
3) Local Sponsor or Service Agent
Onshore companies are required to have a local Emirati partner in some form. LLCs require a local sponsor to hold a minimum of 51% of the shares, CLICK HERE for more information about how to choose a local partner). Foreign Branches and Rep Offices are required to have a service agent to facilitate their registration, CLICK HERE for more information about service agents.
4) Trade License Activities
All companies are issued a trade license, which is renewable annually. The trade license lists the activities the companies is licensed for. Free zones have lists of activities to choose from. The DED has an extensive activities list too. It is necessary to select the activities which will cover your intended scope of business. It is possible to have multiple activities on one license, but they must complement each other. Specialist activities may require special approvals from various government departments, e.g. restaurants will require an additional license from the Abu Dhabi Food Control Authority (ADFCA) which confirms the restaurant meets it requirements.
5) Trade Name
There are strict rules relating to trade names. They should reference the main activity of the company. Foreign branches take the name of the parent company. CLICK HERE for more information about choosing a Trade Name.
6) Document Preparation
Foreign companies should prepare their corporate documents in their home jurisdiction prior to starting the business setup in Abu Dhabi. As a minimum, their Certificate of Incorporation and Memorandum & Articles of Association will need to be notarized, legalized at the UAE Embassy and also stamped at the Ministry of Foreign Affairs (MOFA, or its equivalent). A Board Resolution to set up the company and Powers of Attorney (POAs) issued by the foreign company will need to go through this process too.
7) Legal translations & Notarizations in the UAE
All corporate documents need to be translated into Arabic. Once foreign documents are received in the UAE they need to be stamped at MOFA and then legally translated into Arabic by a licensed translator. Documents requiring notarization will need to go through Abu Dhabi's pre-approval system. Once approved the signatory can take the documents to the Notary Public for signing. Documents requiring notarization in Abu Dhabi will be either the Memorandum of Association or Service Agent Agreement, depending upon the structure of the Abu Dhabi entity being setup. Any POAs being issued by the Abu Dhabi company will also need to be notarized, following its incorporation.
8) Tawtheeq Contract
All businesses are required to have a commercial premise. The type of premise is determined by the activity on the license. When the tenancy agreement is signed with the landlord, a Tawtheeq contract will be applied for from Abu Dhabi Municipality. This means that the tenancy contract is registered with the Municipality. This is mandatory for the trade license to be issued.
9) Trade License Issue
Once all of the above is arranged the trade license can be applied for.
Congratulations upon reaching this point. Obtaining the trade license means the new company in Abu Dhabi is officially setup and fully registered.
After the Trade License is issued
We often hear that new companies haven't been given any information about what to do once their company is set up. Following are some key points that we think you should be aware of:
- Register the new company in Immigration and the Ministry of Human Resources and Emiratization (MOHRE) if you intend to visa staff
- Register with the Ministry of Finance
- Organize Visas for Expat employees (it will be necessary to supply health insurance too)
- Open a corporate bank account
- Arrange your monthly payroll with your bank to be compliant with the federal payroll system called WPS, Wages Protection System CLICK HERE for more information about what you need to know about WPS.
- Register with the Federal Tax Authority for VAT when your revenues hit the AED375,000 per annum threshold (AED175,000 is the voluntary level at which you can register). CLICK HERE for more information about registering for VAT in the UAE.
- Trade licenses are renewable annually and updates in various government departments are required annually too.
Number of New Abu Dhabi Trade Licenses is increasing
Abu Dhabi's DED registered a total of 2,935 licenses during Q1 2018. This represents a 26% increase on the same period in 2017.
According to The National, the UAE has attracted an average $10 billion of Foreign Direct Investment (FDI) annually so far this decade. The UAE has also been recognised in the Top 10 countries globally for attracting FDI in 2017.
Taking the first step to setup your Abu Dhabi business
For assistance with your Abu Dhabi company formation, arrange a consultation with Gateway in Abu Dhabi. We will assess your current position and future plans to guide you to the most appropriate location and legal structure for your new business. We provide a corporate nominee local sponsor and service agent service. We also manage the whole commercial registration from start to finish. Our on the ground experience and expertise means we can take care of the company formation whilst you focus on developing your business. To arrange an initial free consultation with Gateway to discuss your Abu Dhabi company formation, please email us: Info@GatewayToAbuDhabi.com
Written by Jenny Hunt, Founding Partner & CEO, Gateway Group of Companies
Related Blogs you may be interested in:
By providing bespoke business setup, corporate local sponsorship, and visa processing in Abu Dhabi, award-winning Gateway Group uses its on-the-ground experience and knowledge to help companies make informed decisions that are right for their business and in line with their goals.