Dubai has positioned itself as one of the most attractive business hubs globally, thanks to its strategic location, robust economy, investor-friendly policies, and a range of incentives designed to appeal to both local and foreign entrepreneurs. As a result, more and more business owners are looking into how to set up shop in this dynamic city. However, one of the first questions that arises when considering a company formation in Dubai is: How much does it cost to start a company in Dubai?
This blog will break down the various costs associated with setting up a business in Dubai, covering different types of companies, government fees, office space, visas, and other essential expenses.
Understanding the Business Environment in Dubai
Before diving into the specific costs, it’s essential to understand Dubai’s business ecosystem. There are three primary types of company setups in Dubai, each with its cost structure and regulatory requirements:- Mainland Companies: These are licensed by the Department of Economic Development (DED) and allow businesses to operate both within Dubai and across the UAE.
- Free Zone Companies: Dubai has more than 30 free zones, each catering to specific industries like logistics, finance, and technology. Free zone companies offer benefits like 100% foreign ownership and tax exemptions.
- Offshore Companies: Offshore companies are primarily used for managing international operations and asset protection. They do not require a physical office in Dubai and cannot conduct business within the UAE.
Cost Factors in Starting a Business in Dubai
The costs involved in setting up a company in Dubai include several components. Some are fixed, while others depend on your business’s nature, location, and scope. Here’s a breakdown of the primary expenses:1. Business License Fees
One of the first expenses to consider when setting up a company in Dubai is the cost of the business license. Depending on the type of business you plan to start, you’ll need to apply for one of the following:- Commercial License: For trading and general commerce businesses.
- Professional License: For service providers like consultants, IT professionals, and freelancers.
- Industrial License: For manufacturing or industrial activities.
Cost Breakdown:
- Mainland: Business license fees for mainland companies range from AED 10,000 to AED 15,000 per year, depending on the type of license and the scope of the business.
- Free Zone: Free zone licenses are typically more affordable and range between AED 10,000 and AED 50,000, depending on the free zone and business activity. Some specialized free zones charge higher fees for companies that require specific facilities.
- Offshore: Offshore companies generally have lower licensing fees, usually between AED 5,000 and AED 10,000 annually, but they cannot operate within the local UAE market.
2. Trade Name Registration
Once you’ve chosen your business activity, you need to select a trade name. The trade name is subject to approval from the Department of Economic Development (DED), and the process involves several steps. Choosing a unique, non-offensive name is crucial for approval.Cost Breakdown:
- Mainland Trade Name Registration: AED 620 to AED 700.
- Free Zone Trade Name Registration: Varies by free zone but is generally around AED 500 to AED 1,500.
3. Initial Approval and Legal Fees
Before you can proceed with the company registration, you must obtain initial approval from the relevant authorities. This approval ensures that your business activity complies with UAE regulations. Additionally, there are legal costs associated with drafting documents like the Memorandum of Association (MOA) and shareholder agreements, particularly for mainland companies.Cost Breakdown:
- Mainland Initial Approval: AED 1,000 to AED 3,000.
- Free Zone Initial Approval: Included in the licensing fee or charged separately, typically AED 1,000 to AED 2,000.
- Legal Document Drafting: AED 2,000 to AED 5,000 for notarization and legal documentation.
4. Office Space and Lease Agreement
Every company in Dubai must have a registered office address. Mainland companies are required to rent physical office space, while free zone companies can opt for flexible office arrangements, such as virtual offices or shared spaces.Cost Breakdown:
- Mainland Office Rental: Costs can vary significantly based on the location and size of the office. On average, expect to pay between AED 20,000 and AED 100,000 annually for small to medium-sized office spaces. Prime business districts like Downtown Dubai or Business Bay will be more expensive.
- Free Zone Office Rental: Free zone companies benefit from flexible workspace solutions. A shared desk or flexi-desk can cost between AED 10,000 and AED 15,000 per year. Larger offices will cost more, especially in free zones like Dubai Multi Commodities Centre (DMCC) or Dubai Silicon Oasis.
- Offshore Companies: Offshore companies are not required to have a physical office in Dubai, which reduces overhead costs.
5. Visa Fees
Visas are an essential part of setting up a company in Dubai. As a business owner, you can apply for an investor visa, which allows you to live and work in the UAE. Additionally, you’ll need to sponsor visas for your employees.Cost Breakdown:
- Investor Visa: The cost of an investor visa ranges from AED 2,500 to AED 3,500 for mainland companies. This includes medical tests, Emirates ID registration, and visa stamping.
- Employee Visas: Employee visa costs depend on the number of employees and the size of the office space (in mainland). On average, the cost is AED 5,000 to AED 7,000 per visa, covering medical tests, insurance, and visa processing.
- Free Zone Visas: Free zones often include a set number of visas as part of their business packages, but additional visas can cost AED 3,000 to AED 5,000 per employee.
6. Local Sponsor or Service Agent Fees (for Mainland Companies)
For mainland companies, foreign entrepreneurs previously required a local sponsor (UAE national) who holds 51% of the business shares. However, recent reforms in certain sectors allow 100% foreign ownership. Where a local sponsor is still required, their fee typically depends on the agreement.Cost Breakdown:
- Local Sponsor Fees: Sponsors usually charge an annual fee for their services, ranging from AED 10,000 to AED 20,000, depending on the business type and the agreement. If a service agent (for professional companies) is used instead of a sponsor, the fee may be lower, ranging from AED 5,000 to AED 10,000 annually.
7. Government Fees
Aside from licensing, there are additional government fees to account for, particularly for mainland companies. These include DED fees, notary fees, and municipal fees.Cost Breakdown:
- DED Fees: AED 3,000 to AED 5,000 depending on the business activity.
- Notary Fees: AED 1,000 to AED 2,000 for notarizing legal documents.
- Municipality Fees: Dubai Municipality charges around 5% of the annual office rent as a municipality fee.
8. Insurance
Companies operating in Dubai must provide health insurance for their employees. Additionally, depending on the nature of your business, you may need property insurance, liability insurance, or professional indemnity insurance.Cost Breakdown:
- Health Insurance: Employee health insurance premiums range from AED 1,500 to AED 5,000 per employee annually, depending on the coverage level.
- Business Insurance: General liability insurance, professional indemnity, and other business-related insurance policies can cost anywhere between AED 5,000 and AED 20,000 per year, depending on the industry.
9. Additional Setup Costs
There are several additional expenses that you may incur during the company setup process, including:- Translation Costs: Legal documents must be in Arabic, so translation services will be needed, especially for the MOA and other business contracts. Translation fees can range from AED 500 to AED 2,000 per document.
- Bank Account Opening: While opening a corporate bank account is usually free, some banks require a minimum deposit, ranging from AED 50,000 to AED 200,000.
- Marketing and Branding: If you are setting up a business that requires a strong brand presence, initial marketing, website development, and branding expenses can add up, costing anywhere between AED 10,000 and AED 50,000.
10. Annual Renewal Fees
Once your company is established, you’ll need to account for ongoing costs such as license renewal, visa renewals, office rental, and sponsorship fees.- Mainland License Renewal: AED 10,000 to AED 15,000 annually.
- Free Zone License Renewal: AED 10,000 to AED 50,000 depending on the free zone.
- Visa Renewals: Visa renewals cost approximately AED 2,500 to AED 5,000 per person, depending on the visa type.
Total Estimated Costs for Starting a Company in Dubai
While the exact cost of starting a company in Dubai will depend on several factors, here’s a general estimate for the three types of company formations:- Mainland Company: AED 25,000 to AED 50,000 for small businesses, with higher costs for larger companies.
- Free Zone Company: AED 15,000 to AED 50,000, depending on the free zone and office
