How UK Entrepreneurs Can Cut Their Tax Bill by Setting Up a Business in Dubai

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ARTICLE HIGHLIGHTS

• Free Zones in Dubai offer significant exemptions, with no personal or corporate tax

• No residency is required to own a Dubai-based business

• Starting a business in Dubai costs on average between £5,000 to £15,000
  

🎧 Listen Now: Sidehustles.co.uk One-Minute Podcast: Save Tax by Setting up a Business in Dubai

UK entrepreneurs can significantly reduce their tax obligations by establishing their business in Dubai, leveraging tax benefits to boost profitability.

As you grow your side hustle in the UK, you may already feel the pinch from UK taxes and export fees on your cash flow. What if there was a way to make your business global while reducing your tax payments? There are a few methods. One strategy is setting up your business in Dubai. 

Operating from this Middle Eastern country not only puts you at the centre of shipping and logistics operations, but the move can also help you significantly reduce tax payments.

Are you wondering how a UK citizen can set up a business in Dubai to save tax? We have shared a comprehensive guide you can follow below. Let’s dive in.

Dubai, UAE’s capital, is far from the UK. There are also major cultural differences that may make it difficult for foreigners to seamlessly integrate. At first glance, it doesn’t make a lot of sense to move your company so far, especially since the UK is already highly connected to international trade routes. 

However, there are major benefits to moving to Dubai. First is the lack of income tax in jurisdictions called Free Zones, which we will discuss later. Dubai, and the UAE government by extension, is very accommodating to foreign investors and business owners. It surpassed the UK in receiving foreign investment capital in 2020.

These achievements were possible because the UAE has a very business-friendly government. The processes for setting up a business are streamlined, with minimal bureaucracy to impede your progress. In addition, Dubai serves as the heart of Middle Eastern trade and commerce. Your expansion to international markets will feel easier when you have access to the city’s infrastructure, manpower, and other resources. 

A Dubai free-trade zone or Free Zone is a special economic zone created by the local government to encourage trade and investment. In these areas, businesses can enjoy zero income tax, customs duty benefits, and lower fees compared to what they can expect to make on the mainland. Here, foreign businesses can also maintain 100% ownership of their company.

Currently, there are 21 Free Zones in Dubai alone. Most are dedicated to a specific industry, such as the Dubai Healthcare City, Dubai International Financial Centre, and the Dubai Silicon Oasis. Whichever niche you pick, each Free Zone will give you access to the city’s world-class supply chain infrastructure and logistics, enabling you to sell around the world with ease.

While you can start a business in Dubai outside of the Free Zone, many UK entrepreneurs are taking advantage of the ease and cost-effectiveness of these locations. These zones are designed for foreign investment, after all.

The number one reason why UK citizens set up a company in a Dubai Free Zone is the tax concessions. You won’t have to pay income tax in addition to corporate taxes (in some zones). Export and import fees are also usually exempted. However, there are a few other benefits that you can take advantage of.

More Privacy for Companies

Sensitive company details aren’t disclosed for businesses in Free Zones. Shareholder details, ownership information, and other classified information won’t be shared — not even with the UAE government. This confidentiality makes it easier for business owners who are conscious about their company’s privacy.

Entry to Various Other Trade Routes

In the UK, most of the trade happens with the EU and Northern America. Businesses in Dubai can take advantage of the city’s location, which opens you up to trade with the Gulf Cooperation Council, Asia, and Australia. 

Full Repatriation Benefits

Should you decide to return to the UK, you can leverage a Free Zone’s full repatriation benefits, meaning that all your profits and financial assets can be transferred back to the UK without any reductions or restrictions.

If you're starting to consider that setting up or moving your business to Dubai is worth the initial effort for the long-term savings on taxes, you're not alone. However, before sealing the deal, here are a few things you should keep in mind for a successful international expansion or relocation.

Budget

It’s a given that moving your business or setting up a company in Dubai is not free, and will require some capital. You’ll have to consider if you have the resources to make this relocation possible and if you could quickly recover the ROI.

Business Activities

Some UK businesses need to stay in the country because their operations require them to do so. For example, companies that rely on raw materials and skilled labour from the UK would be better off staying. However, if your operations aren’t tied down to the UK, relocation to Dubai may be beneficial with its world-class supply chain infrastructure and other resources.

Visa Requirements

Moving to the UAE will require you to secure a visa. You should consider if you’re able to get this document for you and the people you’re bringing, like family or business partners. In some cases, you may have to consider if key employees can get their visas, especially if they’re crucial to your business operations.

These are just the most basic requirements you should consider. To get an in-depth idea of what it takes to relocate your UK business to Dubai, you can consult business planning experts or accountants. They can provide ideas, advice, and options to help you make more informed decisions.

If after consulting with a lawyer, business accountant and your stakeholders, you’ve decided that moving your business to Dubai is the best move to make, what are the next steps? Here’s how to register or set up your businesses in Dubai.

1. Choose Your Company’s Legal Structure

While there are a few types of legal structures in Dubai, one popular option is establishing a Free Zone company. This option can give you many tax benefits and other concessions.

2. Select Your Trade Name

You need to choose a trade name and register it with the appropriate authorities. UAE has certain requirements for trade names, and you can find the restricted ones here. 

3. Submit Required Documents

You will need to submit the required documents to Dubai’s Department of Economic Development or DED. These will include business plans, proof of residency, and copies of your passport.

4. Secure a Trade Licence

DED provides a trade licence once they’ve verified your documents and other requirements. 

5. Open a Corporate Bank Account

You will also need to open a Dubai corporate bank account, which is a mandatory requirement. Make sure that you meet the bank’s policies and compliance rules. The bank you choose may also ask for additional information during the onboarding. 

One aspect that has a huge effect on your business is its legal structure. Making the right choice could be the difference between huge tax concessions and large tax payments. 

Free Zone Company

To maximise your tax savings, registering as a Free Zone company is a popular route. You’ll enjoy the tax and fee concessions we mentioned above as well as 100% foreign ownership. The only drawback is that you can only operate within your Free Zone. You’re not allowed to hold operations outside of the designated area.

Mainland Company

An onshore or mainland company structure means you’re going to establish your company anywhere in Dubai, allowing you to operate in the city and beyond. You will need to have a UAE sponsor who owns 51% of the company. In addition, you’ll have to pay taxes under this legal structure.

DED will ask you to submit various types of documents to verify your application and ensure that things are in order. Here are a few essential documents that you’ll want to start processing ahead of time.

• A business plan that includes an executive summary, business description, objectives, etc.
• New company setup application
• Passports of key executive personnel
• UK company documents if applicable (e.g. Certificate of Incorporation, Companies House registration, etc.)

Opening a Dubai Business Bank Account

One question that many UK business owners ask is if they can open a bank account in Dubai. Yes, you can. However, there are a few major requirements you have to meet before you can open a corporate bank account. The most important one is a UAE residency visa. Having this document leaves you with more banking options as well as ongoing support. While you can create off-shore bank accounts if you don’t have a residency visa, the process will be more complex.

Aside from a residency visa, you’ll need the following documents to open your Dubai corporate bank account. Keep in mind that the requirements will vary from bank to bank.

• Business plan
• Know Your Customer (KYC) compliance
• Anti-money laundering compliance
• Business licence and registration
• Passports for shareholders and authorised signatories
• Disclosure of source of funds
• Existing contracts 

Cultural Considerations and Challenges To Keep in Mind

Moving to another country may not be as challenging if the cultures are closely related. However, the UK and the UAE have vastly different societies, which may make the relocation not as straightforward as you’d hope. The following are cultural considerations to keep in mind before you decide to move your company to Dubai.

Islamic Principles and Traditions

Islam is the dominant religion in the UAE. You’ll need to respect this faith by adhering to customary laws, such as dressing modestly in social and public settings. You should also remain mindful of holidays like Ramadan and how these could affect your operations. 

Language Barriers

English is thankfully the standard language used in professional settings in Dubai. However, it will still be helpful to learn a few phrases in Arabic in case you need to talk to locals and build rapport with clients or partners.

Business Attire

Modest and conservative clothing is usually what’s encouraged in professional settings. Those who have to visit government buildings and similar locations may need to dress in even more conservative, culturally appropriate attire.

Social Cues

There are a few major differences in social cues between the UK and UAE. First, there is a large emphasis on hierarchy. Using last names and titles is also the norm, and you only start referring to others more casually once you’ve built a close relationship with them.

Weather

While not a social aspect of the Middle East, weather plays a major role in how you can integrate into the region. It’s hot — hotter than any other location in the UK. The desert climate may result in uncomfortable days, so make sure that you have the right clothing, utilities, and other items that can make life easier.

Moving your business to Dubai is more than just a way to expand internationally. The relocation can also help you save on taxes and other fees, especially if you establish your company in one of the city’s Free Zones.

There are a lot of considerations to keep in mind when relocating, such as the feasibility of the move, documentary requirements, and cultural differences. Use the guide we shared above to get an in-depth understanding of these requirements and ensure a successful relocation. 

For more details about tax in Dubai, we recommend you speak to a firm of Chartered Accountants experienced in foreign taxation and related topics.

Before you go, remember that moving your business abroad is just one of the many strategies to manage your tax liabilities more efficiently. If relocating to Dubai feels like a leap too vast for now, don't worry. There are still numerous ways you can optimise your tax bill right here in the UK.

Our next article, "TAX-SAVING SECRETS: HOW YOU CAN REDUCE YOUR TAX BILL," delves into less dramatic yet highly effective methods to minimise your tax expenses. Whether you're a seasoned entrepreneur or just starting out, this guide is packed with actionable advice to make your tax planning more effective. Don't miss out on these valuable insights—ensure you're keeping more of what you earn without crossing seas.

TAX-SAVING SECRETS: HOW YOU CAN REDUCE YOUR TAX BILL

🎧 Listen Now: Sidehustles.co.uk One-Minute Podcast

How UK Entrepreneurs Can Cut Their Tax Bill by Setting Up a Business in Dubai

Welcome to the Sidehustles.co.uk One Minute Podcast. In the next 60 seconds, we're sharing a real-world insight from our network of seasoned side hustlers. This quick tip is designed to offer you practical advice that you can apply immediately in your side hustle journey.

Today, we're looking at How UK Entrepreneurs Can Cut Their Tax Bill by Setting Up a Business in Dubai. One practical tip that emerges from our exploration of setting up a business in Dubai, especially for UK entrepreneurs considering this move, is the strategic use of Dubai's Free Zones. These zones are not just about the appealing tax savings—although that's a significant advantage. They offer a gateway to global markets, thanks to Dubai's strategic location as a trade and logistics hub. Whether or not you're ready to take the leap and move your business abroad, understanding the benefits of international diversification can be incredibly valuable. Even if relocating isn't in your immediate plans, considering how you might expand your business's reach internationally could open up new opportunities and perspectives. This insight encourages small business owners to think globally, leveraging international zones like Dubai's Free Zones as a springboard for growth and tax efficiency. It's a reminder that sometimes, the best way to grow and protect your business isn't just about looking inward but also exploring what the wider world has to offer.

That's your one-minute real-world insight. Stay tuned for more!

https://www.thenationalnews.com/business/economy/uae-was-the-world-s-15th-biggest-recipient-of-foreign-investment-last-year-1.1245031 

https://www.freezonesgateway.ae/en/why-dubai/what-is-a-free-zone 

https://u.ae/en/information-and-services/business/starting-a-business-in-a-free-zone 

https://wise.com/us/blog/business-bank-account-in-dubai