Publication
Doing business in the UAE: cultural and legal features
The UAE, a country of seven emirates on the Persian Gulf coast, has emerged in recent decades as an important international hub for business and investment. Its favorable business environment, attractive tax system and strategic location attract entrepreneurs from all over the world. However, when doing business in the UAE, it is necessary to take into account both the cultural and legal features of this country, on the understanding of which your success depends. Let's take a closer look at these aspects with Antwort Law.
Let's start with the cultural characteristics of this country:
Hospitality and respect are central to the culture of the UAE. Along with sincere hospitality, guests in turn should also pay special attention to respecting local traditions and customs. Greetings and thanks are considered an integral part of interaction, and respect for local religion and culture is an important aspect of the relationship.
Business etiquette: formal behavior is valued. Shaking hands is the standard way of greeting, but avoid physical contact with members of the opposite sex. Business meetings are often lengthy and may be preceded by lunches or tea parties, which not only facilitate discussion of business issues, but also strengthen mutual understanding and trust between partners. It is also important to follow the dress code when visiting government and financial institutions: knees and shoulders must be covered - long trousers/skirt and shirt/dress, and shorts, slippers and flip-flops are excluded.
The work environment is characterized by a multinational and culturally diverse workforce. People from different cultures and countries meet here, creating a unique business environment. In such an environment, it is necessary to have skills in effective intercultural communication and cooperation, taking into account and respecting the cultural characteristics and traditions of colleagues.
To get an idea of the legal features of doing business in the UAE, let's look at the key areas of doing business:
Types of Companies: There are several types of companies available in the UAE, offering different business benefits depending on the specifics and objectives of your business. Here are some of the most common types:
Mainland Companies
- can conduct business throughout the UAE, including transactions with other mainland companies, free economic zones and outside the UAE;
- corporate tax of 9%;
- many types of activities may be under 100% foreign ownership;
- suitable for those who want to work directly in the UAE market and have the opportunity to participate in government projects.
Free Zone
- more than 45 free economic zones;
- 100% foreign ownership without the need for a local sponsor;
- the scope of activity is limited to trade within its zone or international operations, a distributor is required to work on the mainland of the UAE;
- complete tax exemption subject to certain turnover parameters;
- specialized licenses depending on the topic of the zone, for example, Dubai Healthcare City for medical activities or Dubai Internet City for IT companies.
Offshore (Offshore Companies)
- are not considered residents of the UAE and are most often used for international financial transactions, investments and real estate ownership;
- 100% foreign ownership;
- the scope of activity is limited to activities outside the UAE, they do not have the right to conduct business within the country.
Tax system: The UAE has one of the most attractive tax systems for businesses and individuals.
- there is no personal income tax, which means that citizens and residents are not required to pay tax on personal income, including wages, income from personal investments and income from real estate investments, if the total turnover from such activities does not exceed 1 million dirhams ( AED)
- from June 1, 2023, a corporate tax of 9% was introduced for businesses with net profits over AED 375,000, but exceptions are provided for small businesses, self-employed individuals and investors.
Licensing and Regulation: Starting and operating a business in the UAE requires meeting a number of regulatory requirements, obtaining the appropriate licenses and permits depending on the scope of your business.
Success in this region requires a deep understanding of the local business culture and strategic planning based on this knowledge. Each entrepreneur must evaluate which type of company best suits their business model, consider tax benefits, and ensure they meet all requirements to obtain the necessary licenses and permits. Whether you are looking to set up a company in the UAE to expand your business in this key region or to improve the operations of an existing business, Antwort Law's international team of specialists will be happy to assist you with all legal and tax matters.
Lidia Ivanova
International lawyer
Antwort Law
FAQ
What cultural and business etiquette features should be considered when doing business in the UAE?
In the UAE, great importance is attached to hospitality and attention to local traditions and customs. A formal business style is appreciated, and a handshake is the standard way of greeting. Business meetings can be long and preceded by lunch or tea, which promotes mutual understanding and trust between partners.
What types of campaigns are available for registration in the UAE and what benefits do they provide?
There are different types of campaigns in the UAE such as mainland campaigns, free zone campaigns and offshore campaigns. Each type of campaign has its own unique advantages and limitations, given the specifics and goals of the business.
What are the tax conditions and accounting requirements for business in the UAE?
The UAE has an attractive tax system with no personal income tax. Corporate tax has been introduced since June 1, 2023 and is 9% for businesses with a net profit of more than AED 375,000. For businesses, there are also accounting requirements and the need to obtain appropriate licenses and permits from regulatory authorities.