Major Business Problems You Can Encounter While Launching a Business in UAE

UAE is a federation of seven emirates. Every federation follows his or her own rules and regulations. Henceforth, when it comes to doing business with these federations, then there’s a strong chance that you may feel it a bit of a challenge. Just as much as the laws and regulations in UAE are biased for business owners, so is the fact that this place is a treasure trove for businesses. It has commendable growth rates, a progressive profitability margin, and a great chance of business success.

Moreover, The Free trade zones, which approximate around 40, has also become a driving force to increase foreign investments by offering 100% ownership to foreign individuals setting up businesses.

In short, UAE is a hub for business growth and development. But at the same time, it has its fair share of business problems. If you are planning to set up your business entity in the UAE market, here are some business challenges you may have to face when doing business within the state.

UAE Organization Ownership

If you’re planning to start your own company in the UAE market, under LLC (Limited Liability Company), you will require a local sponsor to come in collaboration with you. It means that you will be compelled to create a contract with a UAE national who owns 51% of the ownership of the partnership program. While a small scale or medium-sized business might agree with these facts & figures, a fully established organization or an enterprise might find this proposition very unsuitable.

It’s why UAE has now established Free Trade Zones, allowing enterprise-level organizations to perform businesses with a complete 100% ownership of their respective businesses. There are almost 40 zones across the UAE that fall under the category of the Free Trade Zone.

Finding a Local Sponsor for Business

Just as much as convincing yourself the fact that you have to pay extra dirhams to a local sponsor is difficult to digest, so is the fact that searching up a local sponsor is equally challenging. The UAE market is very versatile and many different individuals can sponsor you but finding the trustworthy one can be a bit challenging. When searching up a local sponsor as an investor, you may have to check if they already have a pre-established business in the UAE market.

You need to find a local sponsor who can provide you maximum liberty in doing business worldwide. At the same time, you want your sponsor to allow you to deal with businesses on your terms.

Finding such a sponsor to discuss your business problems and solutions can be a challenging task.

The Implications of VAT (Value Added Tax)

As per January 2018, UAE has introduced 5% value-added tax throughout the Gulf Cooperation Council (GCC). Here’s a tax return applied to almost every goods and service except for the essential edible items, healthcare products,, and education. Among the current business problems of 2020, finding and registering your business for VAT can prove a bit of a challenge.

Finding the right channels to register for the value-added tax can pose a few threats & challenges.

Getting Your Project a Funding

If you’ve just started out with a business and it is stuck in the commencement phase, obtaining funds for it can be a little challenging. After all, finding the right funding is necessary because you don’t want to fail with your big business idea now, don’t you? Assuming that you’re submitting an application for a business loan, you will have to show at least three years of audited balance containing positive figures.

The numbers will eventually confirm as growth indicators and will become proof that you’re on track.

Adapting to the Level of Formality in UAE

If you are setting up a business in the UAE market, you should be well aware of the formalities. There is a traditional culture that is greatly exercised all across the United States, indicating that men and women introduce and communicate with each other using traditional formalities. Suppose you are new to the UAE market. In that case, you may have to adapt to the Arab culture and norms to ensure you can effectively communicate with the audience.

Men communicate among themselves differently, whereas women communicate differently. If you are not aware of the customary acts and different tones of communication, then you can gravely suffer a formality setback which can pose a threat for your business.

Such customary greetings & communication can become seemingly difficult for Arabs to adapt to.

Getting Accustomed to the Job Market

Once you start a company, you are given the responsibility of not only just hiring employees but also providing them with visas. No employee is permitted to work within an organization or a company unless they have a work visa under their name. These certain rules and procedures are set by the government of the UAE to exercise lawful conducts and business transactions among employees & the employer. Once you get accustomed to the job market, it becomes relatively easier for you to enhance your workforce and add more individuals to your growing businesses.

Reported as per the Association of Chartered Certified Accountants, almost 82% of startups fail because of poor cash flow management and not able to hire the right people for the jobs.

Concluding Thoughts

The UAE market is expansive and there are plenty of opportunities. However, just as much as the market is vibrant with opportunities, so is the fact that the market is filled with many business problems to solve. The year 2020 brings COVID 19 and it has come to us as no surprise. It has closed down many businesses and made these challenges much more difficult to achieve. If we are a business aiming to deliver a world-class experience to our clients and customers, we need to learn what is the best way to overcome these business problems in the UAE.

Have you successfully overcome these challenges? Share your experience with us so that others can benefit from your solution.