Skip to content Skip to sidebar Skip to footer

10 Challenges of Doing Business in The UAE

The UAE has become a business hub for companies looking for a central location for international expansion. The country is business and tax friendly with simple legislation and offers a range of business opportunities. As in any other country, new entrants face numerous challenges in the UAE. These challenges of doing business in the UAE can discourage companies looking to begin their global journey from choosing the region as their place of business.

Challenges Doing Business in the UAE

10 Challenges of Doing Business in The UAE
In this article, we are going to look at the most common challenges faced by overseas companies in the UAE and how a PEO can help resolve these issues.

1. Ownership of the company

The overseas company must share ownership of its business if it wants to start its business in the UAE. This can involve entering the market through local distributors, entering into partnerships with local companies, operating franchises or opening a representative office. The overseas company also needs a local partner to set up a limited liability company in the UAE.

2. Difficulty finding a local sponsor / partner

If an overseas company is planning to start a local business in the UAE, a local sponsor, partner or consultant is a must! Finding the right sponsor or partner who is suitable and reliable for the company can be difficult. In addition, the local partner must have market knowledge, understand the laws and handle local operations.

3. Applicability of VAT

The UAE follows the Value Added Tax (VAT) system introduced by the Gulf Cooperation Council in January 2018. Value-added tax is an indirect tax that is levied on all goods and services, with the exception of basic foods, educational institutions, and health items. The tax is levied at a rate of 5% and is said to have simplified taxation for companies. However, one of the biggest challenges of doing business in the UAE is getting used to VAT. In addition, companies that fail to comply with the tax system or delay their registration can face hefty fines.

4. Means of conducting operations in the UAE

Any overseas company wishing to set up a business in the UAE also needs sufficient funds to run its business smoothly. Finding a local investor can be a challenge and the overseas company needs to establish its detailed fund management plan for its long-term services.

5. Challenges related to real estate

The UAE is famous for its real estate and a company's business license is also attached to its registered address. This rule makes it vital for a business to operate from a physical office, which often makes it difficult for small businesses to enter the market. The location of the office is also the key to smooth operation. The UAE Free Zones offer affordable real estate options to overseas businesses. However, local expertise is a must to determine the location and size of the office space as per the visa.

6. Language challenges when doing business in the UAE

The official language of the UAE is Arabic, although English is the standard for business communication. However, when hiring local employees, a foreign company must ensure that the employment contracts, records, training manuals and other documents are in Arabic. To do this, a company may need to find a local translator or legal professional who can write them in both Arabic and English.

7. Relaxed understanding of time

Compared to the countries of the West, Europe and APAC, the understanding of time in the UAE is more relaxed. People in the UAE are more likely to accept and allow themselves to be delays and even cancellations of meetings. Unlike other countries, the UAE also has a different working week. Therefore, any overseas company planning to set up a business would have to lower its expectations for punctuality and a long working week.

8. The challenge of obtaining work visas and permits

A foreign worker must obtain a work or residence permit in order to live and work in the country. In particular, the overseas company bringing its overseas employees to the UAE must comply with visa standards. The company must also comply with the regulations of the General Directorate for Residence and Foreigners Affairs and the Ministry of Human Resources and Emiratisation.

9. Access to local talent

To start a business in the UAE, a foreign company would need to hire local talent to run its business. To this end, the UAE has certain guidelines that an international company must follow. Hiring local employees can be a challenge for a small business that does not understand these rules and practices.

10. Employee administration

Another challenge in doing business in the UAE is managing the local workforce efficiently in accordance with local laws and standards. Human resource management can be difficult due to the different culture, language and administrative approach. Payroll and employee taxation under UAE laws can also seem complicated. In addition, a foreign company must comply with the Wage Protection System (WPS) and payments for tips and other services.