A lot of confusion exists around whether you need a local sponsor in Dubai to set up your business. With ever-changing policies and scattered information present in the media, it is challenging to keep track of the current news.
Moreover, since Dubai offers many business opportunities through its favorable policies and growing economy, many entrepreneurs are confused about whether they really need a local sponsor in Dubai to conduct business operations.
Being an incubation hub for startups and enterprises, Dubai provides entrepreneurs with several new avenues to set up their businesses across industries, budgets, and size. You can easily find state-of-the-art infrastructure, world-class business facilities, a market that is friendly to foreign investment, along a supportive workforce.
But, if it’s your first time eyeing opportunities in the city of gold, you might want to understand the rules and regulations regarding a local sponsor clearly.
A local sponsor is a shareholder who helps foreign investors set up their companies in the Dubai mainland. The Dubai mainland is a geographical area in the UAE that the Dubai Economic Department offers to entrepreneurs and all commerce entities. Dedicated to business operations and trades, the mainland is one of the best areas for foreign investors to set up a business.
However, since foreign investors might find it difficult to set up their business in the mainland due to a lack of knowledge about policies and laws, the government of Dubai had earlier made it mandatory for them to partner with a local sponsor. This has been changed with a new amendment providing 100% foreign ownership in Dubai.
Therefore, a local sponsor can be any citizen of the UAE who owns a family membership card. They were earlier acting as a sleeping partner in your enterprise, owning 51 percent of the shares of your business entity. In most cases, the local sponsor acted as a guarantee for your business, letting you run it as per your wishes.
The share in company profits was decided based on a mutual agreement in front of an attorney. With the current policy, a local sponsor is not mandatory for the mainland, and anyone can have 100% business ownership in Dubai. With 100% ownership of a company, you can leverage the market for much greater profits and global expansion.
If you’re setting up your business on the mainland, you were earlier required to partner with a local sponsor in Dubai. However, now you are allowed a Dubai 100% ownership. Here are a few types of local sponsors and sponsorships-
An individual local sponsor is a resident of the UAE who offers their shareholding services to foreign investors. According to the guidelines of the UAE government, the individual local sponsor is required to hold at least 51 percent of the equity shares. However, they don’t need to take part in the day-to-day business operations and decisions. An individual local sponsor can be a business person or government officer helping you conduct your trade activities as per your wishes in Dubai.
Another kind of sponsorship available for foreign investors in Dubai is corporate sponsorship. A corporate body is a business entity such as a registered and established firm in the UAE. Just like in the case of an individual sponsor, the corporate body sponsors the foreign investor’s idea to set up a business in Dubai. In return, they hold 51 percent equity shares of the company. Corporate local sponsorships are best for LLC types of business in Dubai.
Another sponsorship available for your professional business and services is a local service agent. They’re not directly a local sponsor but help you conduct trade activities and business operations in Dubai. Local service agents are required when you decide to set up your business outside the Dubai Mainland, i.e., the free zone.
These agents do not hold 51 percent equity shares of your business. However, it is mandatory to partner with them to conduct business operations in exchange for an annual fixed fee.
While the fee can vary depending upon the niche and requirements of your business, the LSA does the job of representing your business with government officials and ministers on your behalf.
With a local service agent by your side, you no longer have to worry about your administrative work and finding a representative for your company.
With the latest update in-laws, the government of Dubai has launched an initiative where foreign investors are given 100% ownership of the business in the UAE. Coming in effect from June 1, the law allows businesses across industries, scales, and budgets for a mainland company 100% ownership.
While the earlier laws required a mandatory 51% ownership of a local sponsor in any foreign-invested business in the mainland, now anyone can get Dubai mainland company 100% ownership.
All those businesses which possess a business license in Dubai and are running their company can get their licenses amended for 100 percent foreign ownership UAE. With Dubai being a global investment destination, the amendment of UAE 100% ownership opens even more doors for businesses seeking profits, expansion, and a superior brand reputation.
The move aims to heighten the investment opportunities for global businesses now that the policies are much more flexible and business-friendly. Hoping to increase investment in the local economy in the next 50 years, the 100% foreign ownership in Dubai is expected to attract many potential investors.
If you do not want to give away the 51 percent equity of your business to a local sponsor, consider opening a business in the free zone. The free zone is another geographical area in Dubai, like the mainland, that is governed by a slightly different set of rules.
If you are setting up your business in the free zone, you traditionally don’t need a local sponsor in Dubai. The UAE government offers the advantage of setting up any type of business with 100 percent ownership in the free zone.
Additionally, your business is also provided with personal and corporate tax exemptions. On the one hand, you are the complete owner of your business, while on the other, you leverage the plethora of benefits by setting up your company in the free zone.
Handing over a significant amount of equity to a local sponsor in Dubai seemed like a bottleneck for many foreign investors. For this reason, the UAE government offered more liberal opportunities in the free zone.
Once you establish your company here, you’re only required to partner with a local service agent who acts as a representative for your business while conducting trade operations.
We understand that setting up a business as a foreign investor can involve much planning and research. At Shuraa, we aim to reduce this burden by helping you find the best opportunities for your business. Connect with our expert team to find the best local sponsorship for your business.
