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Challenges of Doing Business in UAE

12 Challenges of Doing Business in UAE (Explained)

Before making any important decisions in my life, I always consider the potential challenges that may arise from my choices. So, when starting a business in the UAE, it’s very important to know the possible Challenges of doing business in UAE.

So, how can we ignore these challenges?

You can face many challenges such as registering your business company,  establishing ownership, finalizing a local partner, and other critical challenges.

Let me help you by digging into these possible Challenges of doing business in uae.

Challenge 01: Complications in registering a local company in the UAE.

There is no doubt that the UAE is one of the most attractive countries for business opportunities. Still, when it comes to registering a local business company in the UAE, you can face many complications. Before starting a business in UAE, you need to choose the type of company that you want to create, either in its mainland or freezone. You have to go through the complex licensing procedures of various government departments to get licenses and permits for registering a local company in the UAE.

But the good news is that we can help you register a business company for you.

Get a free consultation from our dedicated professional team for setting up a business company in the UAE.

Let’s talk about ownership rights for newly formed companies in the UAE.

Challenge 02: Establishing ownership rights for a newly formed company in UAE.

We all want to have full control and ownership of our business, and ownership rights of business companies in the UAE vary depending on the structure and type of your company.

If your UAE-based business company has a freezone structure, you can avail the 100% ownership of your business company.

On the other hand, if you have a mainland-based business company, you will need a local UAE citizen who can be your business partner. In that case, you will only acquire 49% of your company.

Ultimately, the final decision is in your hands, but choosing between 100% ownership and 49% ownership with a local partner is a complex process.

Challenge 03: Obstacles to securing a local sponsor/partner for your business in UAE

So, if you’re considering starting a mainland business company in the UAE, be aware that you’ll need a local partner, and finding a suitable local Emirati business partner is also one of the Challenges of doing business in uae.

Mindset is paramount. Differing mindsets between you and your partner can lead to frequent conflicts and hinder business growth.

As we know, communication is key in any relationship. A language barrier between you and your business partner can also create communication gaps, which can be detrimental in a shared business venture.

So, that’s why before starting a business in UAE, choose a partner who is compatible with you and has expertise in the business; otherwise, you might get the bank corrupt.

Challenge 04: Hurdles in VAT (Value Added Tax)  Applicability in UAE

We all business people want a little relief from tax, but we have to give it to the UAE government for the betterment of the country.

You have to give 5% of VAT (Value Added Tax) to the UAE federal tax authority. 

If you don’t have any financial background, it will be much more complex to deal with VAT (value-added tax) matters.

You can get many hurdles, including registering VAT, filing taxes, and dealing with audits, so I suggest you hire a professional tax accountant with a finance background in UAE.

If you need an accountancy service, we can assist you, so we suggest you contact us for a free one-on-one consultation call.

I also suggest you read more about VAT (Value Added Tax). Here are the resources provided by the Federal Tax Authority (FTA).

Challenge 05: Overcoming High Initial Investment Costs of Business in UAE

We both know that starting a business in any country needs high initial investment costs, and the same goes for the UAE.

So, starting a business in the UAE will also need a high initial investment.

But, the best thing is if you have good business and management skills, you can start with a low initial investment.

Here are some of the methods to overcome high initial investment costs for doing business in Dubai.

  • Minimize the initial Expenses of your business.
  • You have to minimize initial costs by prioritizing essential expenses and minimizing overhead costs such as rent and equipment.
  • Utilize your negotiable skills; yes, use your communication skills and negotiation skills; it will help you to negotiate with vendors and suppliers.
  • If you are passionate about starting a business in the UAE, then to overcome high initial costs, you have to sacrifice yourself by using personal resources.
  • Try to secure funding for your business in the UAE.

The second method that I would personally like to use to overcome the initial cost of business in the UAE is getting funding for your business. 

You can get a lot of funding for business opportunities in the UAE to overcome the high initial investment cost.

  • Find the Angel investors or venture capitalists, and pitch your idea to angel investors and venture capitalists to grab a chunk of investment.
  • You can also raise capital funding with the help of crowdfunding platforms like Kickstarter or GoFundMe.
  • Look for government grant opportunities for raising investment for your business. The UAE government is relaxed in terms of giving grants and subsidies.

Instead of these business opportunities in UAE, you can also partner with a local sponsor and get help from incubators or free zones; that’s how you can overcome one of the challenges of doing business in UAE.

Challenge 06: Standing Out in a Competitive, saturated uae business market

I personally like healthy competition in business because it helps to grow the business, but at the same time, you don’t have to compete with everyone in your industry.

Competing with large, saturated, and settled companies will be very challenging for you.

Here are some of the points you need to consider while competing with your competitors.

  • Start with Targeting the specific micro niche market. If you want to set up an Automobile repair business, then start it with car washing services. It is better to start small and then grow exponentially.
  • Your business model should have a unique selling proposition (USP), which means you should provide something different to your customers compared to your competitors. It will help you increase customer retention and minimize your competition.
  • Focus on creating a brand rather than doing traditional business; this way, your business will develop the brand identity, and it will help you to stand out in a competitive market.
  • Customer relationships matter the most. Try to build a strong and emotional customer relationship with your customers; this way, you will get high customer retention and stand out in your business industry.

Instead of these methods, you can also use innovative solutions and gather and utilize customer feedback to grow and stand out for your business in front of your competitors.

Challenge 07: Recognizing and Avoiding Scams, Frauds

One of the primary Challenges of doing business in uae is avoiding scams and fraud.

Many people want to have shortcut money, so they do scams and frauds in order to get quick money. You have to recognize these people; otherwise, you will be one of the victims of scams and fraud.

While doing business in dubai, you might face Investment scams, Rental scams, Email scams, and Ponzi schemes; you have to be careful about it.

Do proper research before involving your money, never share your financial information with anyone, and always use secure payment methods.

If you ever become a victim of any scam or fraud in UAE, try to contact relevant authorities like the Central Bank of UAE or UAE Police.

Here are the links to relevant authorities dealing with UAE scams and fraud.

  1. Dubai Police – Cyber Crime
  2. Consumer Protection Section Of the Central Bank of UAE

Challenge 08: Navigating Social and Cultural Nuances in UAE Business

It’s very important to get cultural exposure to the country where you will set up your business company. Cultural nuances help to build relationships and to network with people.

If you don’t get any cultural exposure, you won’t be able to maintain good relations to grow your business.

To grow a business, you must be aware of its local cultural norms and traditions.

Challenge 09: Linguistic Challenges in Conducting Business in the UAE

Communication is the key to any business, and you cannot grow or start your business in the UAE without proper communication.

But how will they communicate with you when you don’t know their native language?

Don’t worry! English is widely used in business in the UAE, but Arabic is the official language, and you can’t deny this!

You can face problems in documentation, get limited access to local talent, and deal with local vendors.

I suggest learning some basics of Arabic, and if you don’t know Arabic, try to hire a translator when you get in to talk with a local vendor.

Challenge 10: Hurdles of Securing Work Visas and Permits in Uae

You will also face many hurdles while securing a Business work visa and permits in the UAE.

You have to go through many documentation and legal requirements, and it will become a little complex.

But, we offer you a free consultation regarding visa issues; we are happy to help you and guide you through the visa process.

Challenge 11: Mastering the Maze of Employee Management for Business in UAE

If you ask me what’s the one skill that I need to learn before starting a business, my answer will be management.

If your employees are skillful and have expertise related to your business, you have to manage their workflow.

To effectively manage your employees, you have to build trust and genuine relationships based on communication, respect, and mutual understanding.

Also, please provide them with tailored training opportunities and resources to help them upskill in relevant areas and advance their careers.

Secret Insider tip: Sharing company equity with your employees can boost their performance and make them feel invested in the business.

Challenge 12: Navigating Geography and Climate Challenges in UAE business.

Meanwhile, the UAE has a great geographical location for business opportunities, but there are still some Geographical and climate challenges to doing business in the UAE.

You will face challenges like limited land and natural resources, especially water; the UAE has thrived despite being mostly desert.

Regarding climate, UAE mostly has extremely hot weather conditions exceeding 40°C, which can affect productivity and limit outdoor activities.

These geographical and climatic factors impact operations, costs, and logistics.

In order to navigate geographical and climate challenges, you must use water-efficient technologies and heat mitigation strategies using renewable energy.

Conclusion

Starting a business in the UAE can be a smart decision, but it’s important to be aware of the potential Challenges of doing business in UAE. You may encounter these challenges in business, such as navigating the business registration process, establishing ownership rights, and finding a local partner.

Overcoming these hurdles requires strong leadership and management skills.

Now you are aware of all the common challenges of starting a business in the UAE, take your decision and start your business right away.

If you are still confused, please contact us if you need any help setting up a business in the UAE.

Our team will be there for you throughout the process.

FAQ’S

Do foreign companies need local sponsors in the UAE?

Yes, It depends on the structure of your company. If you are setting up a mainland business company, you will need local sponsors, but if you are setting up a Freezone-based company, you do not need any local sponsors.

Does the UAE have a corporate income tax?

Yes, since June 2023, the UAE has implemented a 9% corporate income tax on most businesses earning above 375,000 AED annually.

However, some sectors and free zones have exemptions.

How competitive is the market landscape for businesses in the UAE?

The competitiveness of the market landscape for businesses in the UAE varies depending on the specific industry and business sector of your business.

However, the UAE presents moderately competitive challenges in the business environment.


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