Apart from the license you need to choose which business activity or activities you are going to conduct. Where do you start? Let’s see. Each registration authority maintains a business activity list, which you may find either on their official web-site 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 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 into 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 coding system allows to shorten the activity name, by referring to a code only, instead of writing 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 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, 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 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 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, 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 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 sometimes you need to obtain these NOCs every year. These can be approvals from Ministry of Health, Municipality, Police, Central Bank and other government authorities. Our common suggestion is as follows: if you know you will require an 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, travel agency has to deposit AED 100,000 at Department of Tourism & Commercial Marketing. Customs brokers need to deposit AED 50,000 at Customs Office. And there is a number of other industries, where a guarantee deposit will be required.
You should also 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. Today among activities, which are restricted to UAE nationals and companies wholly owned by UAE nationals are real estate agency and brokerage activities, certain educational activities and some others.
If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.
Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.
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