If you decided to register a company in the UAE, you will have to determine which business activity or activities you are going to conduct. Where do you start? Each registration authority maintains a business activity list, which you may find either on their official website or specifically request from one of their representatives.
In the past, each registration authority had their own list and one and the same activity could be called differently by various authorities. Since recently this system was unified for Dubai, but in northern emirates, you can still find business activities, which are broad in nature, and which do not have equivalents in the Dubai system. Regardless of existing differences, still each registration authority has its own business activity list.
Now let’s have a look, what each activity list looks like. Generally, there are several columns included in it. First comes the code column. Every activity has its own code assigned to it. This code contains several digits. On the one hand, such a coding system allows shortening of the activity name, by referring to a code only, instead of writing a full activity name. On the other hand, activity code shows which group or category a particular business activity falls under.
When do you need to know, if activities you choose belong to the same group or not? Here comes the answer: most registration authorities have their own internal policies with respect to how many activities can be mentioned on one and the same license and under which circumstances. It would be difficult for entrepreneurs to navigate through the activity list if authority would say: “you can pick 6 activities from the same group for free” or “you can choose up to 6 activities from different groups, provided you pay for each additional activity, say, 1,000 dirhams”. Since the list has several hundreds of activities, it would make it hard to do this “activity matching”. That’s why authorities often simplify everything and say: “you can pick that many activities with no additional charge, if first four or first two digits are the same, and add that many activities for an additional fee if that many first digits are the same”. Here please do not forget that every registration authority in the UAE decides independently, how many activities can be added on the license and which additional charges, if any, will apply.
Based on our practical experience working with many registration authorities in the UAE, we can conclude the following. Different authorities – different rules with respect to adding several business activities on the license. There are authorities in the UAE, which apply extra charges for additional activities in the first year only but not at the time of license renewal. There are also those, who allow many activities from the same group with no additional fee. Others are very strict and allow only a few of them to be stated on the license. Now that you know that there is no universal rule, always request a list of business activities from the authority in the UAE and enquire, how you can combine several activities and on what terms.
Now let’s go back to our activity list. We said that the first column in the table is a code column. Next we will have an activity group column, after it activity name and finally activity description. As you can imagine, business activity list cannot cover all possible business niches. Especially now, when new industries start evolving. That’s why often we are asked, what one should do, if the activity you require is not in the list. We recommend to share your plans with respective authority’s representative in the UAE, so you can receive an advice, as to which activity would be the most suitable and closest to what you plan to do. We also saw cases, where authorities created new activities and added them to the lists. As such, there is always a solution to this problem.
Not everyone knows, that certain business activities in the UAE require external approvals. Usually, these approvals are Non-Objection Certificates, which are issued by respective government authorities for a certain fee. This fee can be as low as AED 500 and as much as AED 5,000 or more and most of the time you need to obtain these NOCs every year. These can be approvals from the Ministry of Health, Municipality, Police, Central Bank and other government authorities. Our common suggestion is as follows: if you know you will require external approval, before you initiate company formation, find out the requirements of the relevant authority you will need to seek approval from. We want you to make sure that you will be able to comply with these requirements. Sometimes these requirements are linked to your qualification proof, sometimes it is a bank guarantee deposit you will need to pay and you need to know how much it will be, or it can be a business plan or other documents you will need to furnish. If you do not find out this before you start company formation process, you may need to part with application fees that you usually pay when applying for company registration.
As we already mentioned it, some of the business activities require bank guarantee deposits. This amount is returned to you only then when your company is liquidated. The riskier the nature of your business is, the higher guarantee deposit will be. For example, the travel agency has to deposit AED 100,000 at the Department of Tourism & Commercial Marketing. Customs brokers need to deposit AED 50,000 at the Customs Office. And there is a number of other industries, where a guarantee deposit will be required.
You also should not know, that certain activities you will not be able to conduct. The Cabinet may based on the proposal made by the Minister in coordination with the competent authorities, issue a Decision setting the class of activities to be exclusively exercised by UAE nationals.
Now that you have learned what you shall start with when choosing the future business activity for your company in the UAE, feel free to read our other articles, where we share very helpful information.
Business Boutique | UAE-Consultants.com has an expertise in company formations and all business consultancy matters within Dubai and the UAE. We would be happy to assist you with any follow-up queries within our competency. You can contact us via [email protected] or via our office phone no. +971 4 368 48 84.
Prepared by Business Boutique | Published on Oct 5, 2018
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