A business setup in Dubai is the dream of entrepreneurs and investors all around the world. The environment in Dubai is perfect for any business setup. The modern infrastructure, tax-friendly environment, and global business opportunities, the city provides all the facilities to have a Dubai business setup easily. However, one question that confuses new entrepreneurs is, "Do I need a local sponsor to set up a business in Dubai?"
Read on to find the answer.
Earlier, If you want to have a business setup in Dubai in the mainland, you should have a local sponsor, Emirati national. He will have 51% of business shares and will help with government procedures, licenses and approvals. This rule was designed to encourage collaboration between UAE nationals and foreign investors.
But over the years, the UAE has made drastic changes to its business laws. Now there are investor friendly reforms, where foreigners have greater ownership rights, depending on the type and location of the business setup in Dubai.
When You Need a Local SponsorIf your business setup in Dubai falls under certain activities that are considered strategic or commercial by UAE law, you might still need a local sponsor. These are usually Dubai business setups related to:
In such cases, the Emirati sponsor doesn’t take part in daily operations but holds 51% ownership on paper. The foreign investor, on the other hand, manages the business setup in Dubai and enjoys full profit share through a side agreement. This structure is still valid for some specific mainland business setup in Dubai categories.
When You Don’t Need a Local SponsorIn 2021, after 100% ownership law was introduced most business setups in Dubai do not need a local sponsor. The foreign investors can fully own their companies in many sectors. This rule is applicable mainly in these industries,
If you are planning to start a new business setup in Dubai under these activities, you do not need any local partner. The Dubai Department of Economy and Tourism (DET) provides a detailed list of eligible business setups in Dubai that allow full ownership.
Free Zone vs Mainland SponsorshipOne of the first decisions you must make when planning your business setup in Dubai is whether to operate in a free zone or on the mainland.
Free Zones – These areas are designed for international trade and investment. A business setup in Dubai in the free zones enjoy 100% ownership, full repatriation of profits, and zero customs duty on imports and exports. No local sponsor is required here. Popular free zones where entrepreneurs usually have a Dubai business setup are Dubai Multi Commodities Centre (DMCC), Dubai Internet City (DIC), and Dubai Silicon Oasis (DSO).
Mainland Companies – If your business setup in Dubai needs to trade directly within the UAE market or work with government clients, a mainland license is necessary. In this case, some activities may still require a local sponsor, while others can be fully foreign-owned.
Benefits of Having a Local SponsorEven though sponsorship is not mandatory for most Dubai business setups, there are situations where having a local sponsor can be advantageous.
Even though a local sponsor is not necessary for a business setup in Dubai, having one sometimes has advantages.
Professional vs Corporate SponsorshipIn Dubai, sponsorship can be of two types — individual or corporate.
Individual sponsorship means a UAE national acts as the sponsor for your business setup in Dubai.
Corporate sponsorship means a UAE-owned company takes the role of sponsor of your Dubai business setup.
Many foreign investors go for corporate sponsorship, if their business setup in Dubai is a large-scale project. Corporate sponsorship offers more stability and professionalism.
Steps to Start Your Business Setup in Dubai Without a SponsorIf you have 100% ownership of your business setup in Dubai, here is how to proceed:
Dubai aims to become the world's best business hub. The changes made to the business laws attract foreign investors leading to more business setups in Dubai. Allowing 100% foreign ownership increases the confidence of the investors. As a result, the number of new business setups in Dubai continues to grow each year.
ConclusionTo conclude, whether you need a local sponsor for your business setup in Dubai or not, depends on the activity of your Dubai business setup and the location. If you set up in a free zone, you don’t need a sponsor. If you have a business setup in Dubai on the mainland, you might need one for some sectors.
If you are unsure about the right structure for your company, consulting a business setup company in Dubaiis the best move. They can help you navigate legal procedures and ensure your company is registered in the most beneficial way.