8 Challenges entrepreneurs face while shifting business to UAE

Over the past 2 decades, the UAE is diversifying economy from oil/gas income to commerce, tourism, and financial services. This makes UAE the global business hub that attracts entrepreneurs and corporations from around the world. Its strategic location, favorable tax policies, and advanced infrastructure are among the main drivers.

Investing in technical innovation, sustainable energy sources, and entrepreneurship is the way to go. Still, setting up a business in the UAE and running corporate operations can turn out challenging. The country is not immune to economic changes, global market patterns, and evolving customer opinions.

Therefore, entrepreneurs must stay updated on economic developments and government policies to align their business strategy effectively. In this article, our prime focus is to discuss key challenges entrepreneurs face while shifting their businesses to the UAE. Learn how they can overcome these hurdles to make their firms successful in this competitive landscape.

The UAE as the golden place to establish your business

Diverse economic activities in trade, services, and industry of the UAE make it an attractive business destination. Its liberal policies and market-driven approach support trade endeavors. The presence of international banks and financial institutions reinforces its reliability as a business location.

This makes the UAE an ideal hub for expansion into the Middle East, North Africa, and East Africa. Dubai is experiencing significant economic growth, driven by its ambitious “D33” economic agenda, which aims to double its economy by 2033. The Economist Intelligence Corporate Network predicts the Middle East and Africa’s combined economies will expand by nearly 25% by 2027.

Moreover, Dubai’s focus on the digital sector and sustainable economy makes it an attractive destination for FDI. Its tax-free environment, 5% VAT in 2018, and strategic location provide access to a market of over 2 billion people. Dubai, as the crown jewel of the UAE is at the front of this advancement.

8 entrepreneurial challenges while relocating a business to UAE

The top challenges faced by UAE business owners include the following.

Business scams for newbies

Phishing and fraud are common issues targeting overseas businesses, especially small and medium-sized ones. Investigation is crucial, and companies should be aware of unverified firms offering attractive business opportunities. Skepticism is key, and companies can notify commercial affairs if they receive questionable unsolicited offers. The global epidemic and economic crisis impacted the UAE, leading to a recession and reduced non-oil economy, making economic forecasts uncertain.

Social and cultural barriers

The Middle East market is complex and requires foreign enterprises to understand social conventions and cultures, including UAE’s religious and Arab traditions. Understanding Emirati business culture and establishing ties with local partners is crucial for business success. Therefore, commercial networking is essential for trust and long-term connections. Entrepreneurs of diverse ethnicity often struggle to adapt to business etiquette, negotiating style, and customer expectations. A cultural understanding and respect for local norms can improve business engagement and progress.

Linguistic problems

The UAE’s primary language is Arabic, but English is used for corporate communications. Foreign firms must ensure hiring contracts, paperwork, and training manuals are written in Arabic. Potentially, hiring a local translator or legal professional is helpful.

Financial challenges

International entrepreneurs bringing a company to the UAE require adequate finances for efficient operation. Acquiring local investors and sponsors can be challenging, and a clear capital management approach is necessary. Costs include business registration, leasing, licensing, employee recruiting, local sponsor charge, visa fee, and operational costs. UAE Free zones are cost-effective, but start-up fees in desirable areas can be prohibitively expensive.

Extremely competitive market

The United Arab Emirates (UAE) is a highly competitive market due to its regional trade hub and international economic activity. Successful businesses rely on technological and qualitative advantages. For example, excellent customer service, and effective after-sales services to stay competitive.

Selecting right jurisdiction

The entrepreneurs coming to the UAE face challenges in choosing between mainland, free zones, and offshore jurisdictions. Sometimes, too much unique corporate benefits and tax implications for specific industries can turn out intriguing. Aligning business setup with long-term objectives is crucial, as each jurisdiction caters to specific industries.

Geography and climate change

The UAE offers great business opportunities due to its geographical location, but faces challenges such as limited land and natural resources, particularly water. The hot weather conditions, exceeding 40°C, can affect productivity and outdoor activities. These factors impact operations, costs, and logistics. To overcome these challenges, businesses must use water-efficient technologies and heat mitigation strategies using renewable energy.

Revenue management

Effective revenue management is crucial for running a business in the UAE, as poor cash flow management leads to 82% of startups failing. To avoid overspending, manage initial capital requirements and business setup costs, and consider loans or investment opportunities offered by banks and financial institutions. Despite challenges, the UAE offers an excellent environment for conducting business due to its booming economy and strategic location, making it an attractive market for businesses.

Solutions to challenges for entrepreneurs and investors in UAE

Choosing appropriate location

Picking the right location depends on specific business needs and should be done with the advice of a business advisor. Free zones in the UAE offer lower taxes through exemptions and breaks. It makes them an attractive proposition for those seeking financial advantages.

Also, they serve as incubators for foreign direct investment (FDI) due to their liberal legal infrastructure. Additionally, free zones provide seamless flexibility in the terms of the types of businesses that you can incorporate. Moreover, they affect the operational approaches that the business owners can adopt.

Tax management

Businesses in the UAE must adhere to tax regulations to avoid penalties and fines. Key tips include registering for VAT and collecting from customers, filing annual tax returns, paying corporate income tax. Declaring imports and customs duties, declaring excised goods and paying excise taxes, and staying informed about all other applicable tax laws is beneficial.

Furthermore, businesses must also pay taxes on profits, declare all imports and excisable goods, and comply with excise tax obligations. It is crucial for businesses to be transparent and compliant with these regulations to avoid penalties and fines. Stay compliant to remain safe from the regulatory authorities ever.

Partner with business setup consultants to overcome the hurdles

There are various companies in the UAE like KWS Middle East that provides business set up services. They help in choosing the right jurisdiction, office setup, staff hiring, tax management, and corporate bank account opening. KWS ME focuses on educating businesses about employment regulations, supporting entrepreneurs in understanding visa processes, and ensuring compliance. This knowledge, combined with their commitment to business support, facilitates a smoother hiring and management process.