When it comes to business and commerce, Dubai has emerged as one of the best destinations one can opt for. From 0% personal income tax, strategic location, excellent infrastructure, to entrepreneur-friendly policies, the city has a lot to offer to those who dare to dream. This explains why so many business owners from the UK are moving to Dubai to start their business.
Now, it might be an excellent idea to own a company in the city, but there are certain things you need to be mindful of before you can call your business a “Dubai-based business”. Let’s be real, many UK founders think that doing business in Dubai is like doing business in the UK. However, that’s not the case, and that’s why many of them end up making some common Dubai business mistakes.
If you’re a UK entrepreneur, this guide will help you learn about what those mistakes actually are. In addition, we’ll also share some quick business setup tips in Dubai that you can always refer to before starting.
Let’s get started!
7 Common Mistakes UK Entrepreneurs Make When Starting Business in Dubai
Avoid these 7 common mistakes UK entrepreneurs make when starting a business in Dubai to save time, money, and stress.
Mistake 1: Thinking Dubai Would Be the Same as the UK
This is one of the most common Dubai business mistakes UK entrepreneurs make, and honestly, we don’t blame them.
In the UK, it’s relatively easier to set up a limited company through Companies House. However, in Dubai, things are very structured. Here, you’ll have to select from Free Zone, Mainland, or Offshore jurisdictions.
Each has its own licensing authority, activity limitations, and compliance needs.
Quick Tips:
- Ensure that your business activities are well-defined.
- Know your target market and the kind of customer base you have.
- When choosing a structure, consider your revenue model, not speed.
Mistake 2: Selecting the Wrong Jurisdiction for Your Business
Another mistake UK business owners make when starting their company in Dubai is selecting the wrong jurisdiction for their business. For example, choosing a Free Zone license because it is marketed as pocket-friendly and fast, without knowing its limitations.
Some Free Zones prohibit direct trading with UAE clients who are in the Mainland. Few activities need additional approval. Some structures don’t align when it comes to long-term scaling goals.
That’s why you need to have a strategy-first approach rather than a cost-first approach, along with the following business setup tips in Dubai.
Quick Tips:
- Know where you’ll get your income from. Is it global, UAE Mainland, or UK?
- Double-check if your activity demands special approvals.
- Make sure the jurisdiction you select aligns with your long-term plans.
Mistake 3: Thinking It’s Easy to Open a Bank Account
Entrepreneurs from the UK are accustomed to digital-first banking and faster onboarding. So, they think it’d be exactly the same in Dubai. However, banking in Dubai is quite thorough, which could especially be one of the key UAE startup challenges. Local banks carry out rigorous AML (Anti-money Laundering) and KYC (Know Your Customer) checks.
That’s why you should have documentation for your business model, projected invoices, or contracts, along with the proof of presence and substance. The key is not to underestimate the depth of compliance and regulations.
Quick Tips:
- Ensure you have a solid business plan and cash flow projections.
- Make sure your UK financial history is clear and transparent.
- Your business activity goes with the license you have.
- Connect with advisors who are well-informed about the banking expectations in the UAE.
Mistake 4: Assuming There’s No Tax in Dubai
While there’s 0% personal income tax in Dubai, most UK entrepreneurs think that having a business in the city means they are exempt from paying taxes. This cannot be further from the truth. Yes, Dubai is tax-efficient. However, it is not tax-free. As a business in Dubai, you need to pay 9% corporate tax if your net profit is more than AED 375,000. In addition, there are annual license renewals, compliance filings, and reporting obligations.
It doesn’t mean the benefits go away; it simply means you need a holistic approach to your strategy.
Quick Tips:
- Understand how corporate tax is applicable before setting up.
- Base your company structure on your expected revenue.
- Be spot-on with your accounting from the very first day.
- Consult with experts who understand cross-border taxation (UK & UAE).
Mistake 5: Not Understanding the Actual Operational Costs
As a UK entrepreneur, you must not make one of these Dubai business mistakes. Don’t just think about the cost of incorporating your business within the city. You also need to consider the ongoing costs, such as visa and annual license renewals, need for office or flexi-desk, bookkeeping and accounting, PRO services, and audit (in a few Free Zones).
With appropriate planning and strategy, it would be very easy for you to get over this problem.
Quick Tips:
- Set your budget at least 18-24 months prior to the operations.
- Know the complete breakdown of the cost involved, not just the setup.
- Take the visa costs of the dependents into consideration if they’re relocating with you.
- Plan early when it comes to sailing costs.
Mistake 6: Expanding Without Knowing the Market
When it comes to the business culture in Dubai, it is very relationship-driven. This means that oftentimes, personal connections and trust have an impact on decisions, just like pricing and proposals. In addition, the decision cycles in Dubai can also differ. It may involve multiple stakeholders, informal conversations, or lengthier stages of building trust. Furthermore, since Dubai has a diverse market, the pricing sensitivity also differs.
And lastly, the B2B dynamics are different compared to the UK since processes and documentation are crucial.
Quick Tips:
- Make sure you test the market before you relocate completely.
- Build trust and local connections by attending industry events.
- Ensure your messaging and prices complement the region.
Mistake 7: Picking the Wrong Consultants for Your Business Setup
You need the right advisors to avoid common mistakes or UAE startup challenges. If you rely on the wrong consultants or advisors to set up your business in Dubai, it might result in problems when it comes to the setup, overall compliance, or strategy. A lot of entrepreneurs could end up taking this consideration lightly, but it is extremely important if you want your business to thrive.
The correct advisors would know business setup processes in Dubai like the back of their hand and would be best able to support you.
Quick Tips:
- Do your research and have a list of consultants handy.
- Make sure you go through their websites, testimonials, and socials.
- Select the most reputable consultancy to work with.
How Shuraa UK Helps You Avoid These Dubai Business Mistakes?
We, at Shuraa UK, help set up your business in Dubai with extreme transparency and finesse. Our highly qualified experts help you every step of the way, helping you avoid the common business mistakes in Dubai. We offer:
- Personalised Guidance: From helping you select the right jurisdiction, maintaining overall compliance, to providing VISA or PRO services, we make sure you set up your business in Dubai successfully.
- Holistic Knowledge: Our experts are trained and know the UAE business setup like the back of their hand. With them, you don’t have to worry about know-how.
- Excellent Track Record: In our 26+ years of operation, we have successfully helped 100,000+ businesses find their roots in the UAE. You could be next!
So, if you don’t want to make these common Dubai business mistakes and are planning to go ahead with your company formation in Dubai, feel free to drop us an email at info.london@shuraa.com or call on +44 7538 205604. We will be happy to help you begin your business journey in Dubai.
FAQs
1. Can a UK Citizen Start a Business in Dubai?
100% yes! As a UK Citizen, you can start a business in Dubai. However, you’ll have to:
- Get a residence visa (if staying in the UAE)
- Have a trade license.
- Make sure you’re registered with the appropriate government authorities in accordance with your business activities.
2. What Challenges Do Entrepreneurs Face in the UAE?
Apart from the challenges mentioned above, entrepreneurs in the UAE could face the following challenges:
- Tough competition
- Onboarding the right talent
- Moving in parallel with the overall innovative pace in terms of technology
3. Is It Too Difficult to Set Up a Business in Dubai?
No! With the right advisors or consultants, you can set up your business in Dubai without any stress. That said, just make sure you do your due diligence and check out business setup tips in Dubai.
4. Does the UAE Levy any Taxes Now?
Yes. If your net profit is above AED 375,000, you are required to pay a corporate tax of 9%.
