Cost of Doing Business – Dubai 2014/2015 Update
According to the World Bank Group report on Doing Business in UAE which publishes annually, the total ranking of doing business in UAE has been improved by 3 units, reached to 22 rank (rank 1: best country in doing business , rank 100: worse country in doing business). The total index rank compromised of 10 sub factors: Starting a Business, Dealing with Construction Permits, Getting Electricity, Registering Property, Getting Credit, Protecting Minority Investors, Paying Taxes, Trading across Borders, Enforcing Contracts and resolving insolvency. The report indicate that UAE business environment has been improved in Getting credit, Protecting minority investors and trading across borders while it recorded declines in Starting a Business, Getting Electricity and Resolving Insolvency.
There is no doubt that UAE authorities has done a great job in creating business friendly environment by investing in infrastructure namely, roads, water facilities, electricity facilities, internet and telecom in especially in Dubai. Moreover the safety and family friendly environment has been the main reason that most of business owners prefer to stay and live in Dubai. This expansion in investment and facilities has also another face which will eventually cause the prices and cost of living to rise. Cost of doing business in favorable areas like Dubai and Sharjah which are the central areas of trade and are focal points of commercial access is high. Cost rising had a hampering impact on small and medium startup companies formation. This is the key reason that the rank of starting a Business has been declined by 9 units from 49 in 2014 to 58 in 2015. Simply so many small and medium enterprises would fair to cover the costs during first year unless they have calculated a proper business plan. The sample of minimum administration cost of doing business in Dubai without taking care of nature of operation has illustrated as follows:
Cost (Dubai Rates) Amount (AED) Annual Estimation
Office Rent (Small Studio in Commercial Area) 36,000 – 40,000
Business license 20,000 *
Cost of labor (Administration in Labor) 16,000
Salary of 2 labor (Inc. Ticket per yre)** (13,000)12 = 36,000
Total 118,000 – 122,000 AED
*Different based on nature of business, average in Dubai Land ** one office boy (5000 AED per month) ,one professional (7000 AED per month)
This estimation shows that no matter of what is the nature of your business is, the business owner should spend minimum 118,000 AED as administration overhead cost every year.
Many Business owners and young entrepreneurs prefer to start their business without bearing these costs. The main problem is that working as freelance is not legally acceptable according to the UAE commercial regulations. Hence the freelance services are under certain legal limitations.
UAE Free Zones Vs. Dubai Department of Economic Development (DED)/ Dubai Land Establishments
There are more than 20 Free Zones operating in Dubai:
- Dubai Airport Free Zone
- Dubai Cars and Automotive Zone (DUCAMZ) also known as Dubai Auto Zone
- Dubai Healthcare City
- Dubai International Academic City
- Dubai Internet City
- Dubai International Financial Centre
- Dubai Knowledge Village
- Dubai Media City
- Dubai Gold and Diamond Park
- Dubai Multi Commodities Centre (DMCC)
- Dubai Silicon Oasis (DSO)
- International Media Production Zone
- Jebel Ali Free Zone
- Dubai World Central(DWC) Business Park
When it comes to starting your own business in Dubai many companies prefer to choose Free Zone option because you are entitled 100% ownership of your entity.
However in choosing between Free Zone and Main Land establishment, these items should be considered carefully:
1.When you get a license from a particular Free Zone you have to limit all business administration issues to the regulation of that specific free zone. If you wish to move out of the Free Zone you will lose the license.
2.Free Zone rents are higher compared to the rent in the mainland.Even if you do not take an office space,Free zones still charge you a virtual office fee for which amount you can take a small physical office in Dubai.
3.Free Zone license fees are higher than Dubai Department of Economic Development(DED)/Dubai Land which offset the cost of sponsor in DED/Dubai Land option.
4.With a Free Zone license you can not legally lease office outside the Free Zone.
5.With a Free Zone license you can not legally do business outside the Free Zone.
6.Many Free Zones have minimum capital requirements whereas DED/Dubai Land has none.Sources: http://www.doingbusiness.org/data/exploreeconomies/united-arab-emirates#dealing-with-construction-permits https://www.linkedin.com/groups/Starting-your-business-in-Dubai-4118883.S.83971559?trk=groups_most_popular-0-b-ttl&goback=.gmp_4118883