There was a time when any non-GCC national wishing to start a business in the Dubai mainland would require the services of a local sponsor. However, things have changed in recent years meaning that 100% foreign ownership of UAE mainland business is permitted in many cases.
That said, this is not possible in all industries. And even in those where it is allowed, permission is required – and it can be denied.
The good news is, if you do require a local sponsor, with the right help, finding one can be fast and straightforward. In this article, we’ll explore the key factors you need to consider along the way, including:
- Local sponsor in Dubai – what does it mean?
- Do I need a local sponsor in Dubai?
- Finding a local sponsor in Dubai
- Types of local sponsors
- What to be aware of when hiring a local sponsor
- Duties of a local sponsor
- How to change local sponsor in Dubai
- Getting a Dubai trade license without local sponsor
Local sponsor in Dubai – what does it mean?
A local sponsor is appointed by an overseas investor to hold a 51% stake in a UAE business. While the sponsor holds a controlling stake, they have no decision making power and do not interfere with day-to-day operations.
They also do not take 51% of the profits. Instead, sponsors are paid an annual fee for their services. Sponsors can be individuals or corporate entities.
Do I need a local sponsor in Dubai?
If you are setting up in Dubai or any other part of the UAE mainland in the following industries, you will require a local sponsor:
- Oil exploration and production
- Security and military services
- Banking, financing and insurance activities
- Pilgrimage and Umrah services
- Water and electricity provision
- Fishing and related services
- Post and telecoms services
- Road and air transport
- Printing and publishing
- Commercial agency
- Medical retail (including pharmacies)
- Blood banks, quarantines, and venom/poison banks
Outside of these industries and others like them, you may be able to retain 100% ownership of your business. However, you will need to apply to the Dubai Department of Economic Development (DED) for permission to trade.
Finding a local sponsor in Dubai
Like any vital business decision, finding and appointing a local sponsor should not be taken lightly. While you are not business partners in the traditional sense, you will need to have a strong and trusting relationship with your sponsor. For this reason, it can be hard for entrepreneurs new to the UAE to be sure they have found the right match.
That’s why the best way to find a local sponsor is to work with an expert such as Business Incorporation Zone (BIZ). We can help you find a trusted sponsor, giving you peace of mind that your business is always in safe hands.
Types of local sponsors
There are several types of local sponsor to choose from in Dubai. You can appoint an individual, a corporate or a local service agent.
Individual sponsors can be male or female, but they must be UAE citizens over the age of 21. Also, while they do not need any expertise in your field of business, they should be professionals, business owners or government employees.
As the name suggests, corporate sponsors are business entities. They can be any local or government-registered business operating in the UAE. It is important to note that not any corporate entity can be a sponsor: they must be correctly licensed by the government to do so.
Finally, local service agents are required when starting a professional services business. In this case, overseas entrepreneurs can maintain 100% ownership but need a service agent to liaise with government departments. Local service agents are also paid an annual fee for their services.
Duties of a local sponsor
The primary duty of a local sponsor is to act as your representative in all dealings with government and official bodies. They carry out several other duties too, including interpreting Arabic business documents, closing bank accounts and cancelling permits such as work visas.
What to be aware of when hiring a local sponsor
There are many things to consider before hiring a local sponsor. When setting up in Dubai, you must ensure that your chosen sponsor is resident in the emirate – otherwise they will have to travel back and forth to sign and approve official documents.
You should also look into the background and prior business dealings of your sponsor to ensure they are legitimate and reliable. It’s also incredibly important that you set out all expectations, duties and fees clearly in writing before committing to any sponsorship agreement.
When you work with BIZ, we do all this and more on your behalf, so you can have total confidence in your sponsorship arrangement.
How to change local sponsor in Dubai
From time to time the need may arise to change your local sponsor. Once again, with expert help, this can be a straightforward process.
The first thing to do is to approach your current sponsor and tell them of your intentions to make a change. With this taken care of, you’ll need to pull together your sponsorship documents such as your Memorandum of Association, power of attorney and proof of your annual payments.
Finally, you and your sponsor will need to attend court together to dissolve your sponsorship. New documents can also be issued at this stage to begin your new sponsorship. BIZ can guide you through this entire process.
Getting a Dubai trade license without a local sponsor
There are several options available if you wish to obtain a trade license in Dubai without a local sponsor. You could start a professional services business and maintain 100% of your company, working only with a service agent.
Alternatively, you could start a mainland business outside a regulated industry such as those listed above and apply to the DED to retain 100% ownership.
Another option is to set up in a Dubai free zone. Free zone businesses benefit from 100% foreign ownership, 0% tax on corporate and personal income, 100% customs tax exemption and full repatriation freedoms.
To find out which option is best for your business requirements, get in touch with the expert team at BIZ.
Why choose BIZ?
Whether you are in search of a local sponsor or looking to start a business without one, BIZ is your perfect partner. We can advise and support you with all things relating to business setup in Dubai – giving you everything you need to launch, operate and grow your enterprise here in the UAE.
We pride ourselves on our commitment to giving our clients the best possible start to business ownership. So, we’ll always take the time to understand your needs before we advise on the most suitable solution.
As well as assisting with trade license applications and company administration, we can also help you find and access banking services, guide you through the UAE visa and relocation process, and support you throughout the life of your business with our wide range of concierge services.
Ready to get started? Get in touch with our expert team today on 800 BIZ (249), email [email protected], or pop in and visit us at our offices in Dubai and Fujairah.