Information technology, or IT for short, has solidified its place in the business world and it is not going anywhere anytime soon. IT is needed in every business in every sector and industry to stay afloat in this competitive ecosystem. As the authorities of the UAE are looking to transform the economic structure of the country. The demand for IT is at an all-time high. That is why today we are going to see how an IT business setup in Dubai and the UAE looks like.
As a foreigner, if you are looking to invest in the information technology industry in the UAE. You must comply with the various laws and regulations the government has put into place. The UAE is the most technologically advanced country in the Middle East and Dubai is the most technologically advanced city in the Middle East. That is why there are a lot of investment opportunities for IT business setups in Dubai.
Before diving into the details of setting up an IT business in the UAE and Dubai in particular, here is a list of decisions you need to take:
- Choosing between a mainland company and a free zone company.
- Choosing a trade name for your business.
- Choosing what type of legal entity your business will be (sole proprietorship, partnership, corporation, S corporation, or Limited Liability Company (LLC)
These decisions will affect what your business will look like after formation, what activities it can perform and cannot perform, and what legal structure it can form. Among these, we will discuss the first point to help you decide better.
Mainland IT business or Free Zone IT business?
At the present, due to some amendments of laws, investors and entrepreneurs are choosing the mainland over free zones. However, that does not mean the free zones are without their perks. Before the amendments, foreigners could not own more than 49% of a mainland business, even if they were the founders. Now, foreigners can own 100% of a business from almost any sector except the strategically important ones like gas and oil. So, now a foreigner can own 100% of an IT startup in the mainland.
Benefits of mainland IT business:
- Freedom to take on any contracts throughout the UAE.
- Freedom to access the global IT market.
- Freedom to diversify the business operations.
- 0% tax on personal and corporate incomes.
- Unlimited growth potential.
Unfortunately, IT businesses that are located in free zones cannot take on government contracts. However, they can do business freely across the free zone and international markets.
Benefits of free zone IT businesses:
- 100% exemption from import and export taxes.
- Do not need to register from the Chamber of Commerce.
- The company formation procedure is shorter and straightforward.
- No restrictions on company size.
Here are a few of the popular free zones for information technology businesses in Dubai:
Dubai Internet City
Dubai Internet City caters to businesses that focus on cybersecurity, the Internet of Things, Artificial Intelligence, Big Data, and similar sectors.
Dubai TechnoPark focuses on IT businesses that involve industrial development, life science development, information, and communication technology development.
Dubai Media City
Dubai Media City caters to the media sector just as the name suggests. Businesses in this sector provide services like graphics design, web development and design, animations, and other creative services.
Dubai Silicon Oasis
Dubai Silicon Oasis attracts many different types of IT businesses. They provide financial and technological support to IT startups looking to set up business there.
Professional license for IT company
Before setting up the business, you must obtain a professional license from the Department of Economic Development in Dubai. The professional license allows you to engage in business activities in the UAE. There are a few crucial steps for obtaining this professional license. The best course of action is to seek the help of experts who have done this before.
Here are the documents you need to submit to the Department of Economic Development in Dubai:
- Copies of your passport and your partners’ should you choose to have any.
- The proof of payment of the initial approval fee.
- A copy of your local partner’s naturalization book should you have one.
- A no objection letter from the sponsors of expatriate partners should you have any.
- A security deposit of 20,000 Dirhams each for partners in a professional license.
- A security deposit of 10,000 Dirhams for single investors.
- If the IT company will be a partnership, the partnership agreement needs to be signed in front of a notary.
If you are starting your business in the mainland, the registration procedure needs to be completed with the Trade Register in Dubai. If you are setting up business in one of the free zones, then the registration will be completed by the respective free zone authority. Finally, you need to register for VAT if you want to start an IT company. Once all these are done, mainland licenses are issued by the Dubai Companies Register from 7 to 15 days. Free zone licenses are issued by the respective free zone authority within a few days.
Why opt for IT businesses in Dubai?
IT companies in Dubai and the UAE does not need to pay corporate taxes. Repatriation of profits is completely free of cost if the company is formed in a free zone. As Dubai has become a hub for entrepreneurs, it has also seen an influx of talented workers from all over the world. New businesses can hire from this pool of experienced professionals. The government understands the importance of IT in the development of businesses and the economy as a whole. That is why they continue to provide incentives to foreign entrepreneurs.
If you are looking to start an information technology business in the UAE, it is recommended that you work with company formation professionals. Company setup experts have the necessary connections that help make the whole process smooth and effortless. Remember that the process is only easy and hassle-free when the business setup is done without any error.