Top 5 Legal Considerations for Starting a Business in Dubai

October 15, 2024

Starting a business in Dubai is an exciting prospect, especially with the city’s continuing rise as a global economic hub. However, the legal landscape has shifted dramatically in the last few years. As of 2025, new regulations regarding foreign ownership, taxation, and hiring have transformed how investors approach the market.

To ensure a smooth and successful business setup in Dubai, you must look beyond the basics and understand the current compliance ecosystem. Here are the top 5 legal factors you need to know for 2025.

Navigating the New Ownership Landscape (Mainland vs. Free Zone)

For decades, the biggest decision for investors was choosing between a “Mainland” and a “Free Zone” setup. While this choice still exists, the lines have blurred significantly.

The Game Changer: As of late 2025, the requirement for a local sponsor (owning 51% of the shares) has been abolished for most commercial and industrial activities on the Mainland. This means you can now enjoy 100% foreign ownership while trading directly within the local UAE market.

• Mainland: Ideal if you want to trade directly with UAE consumers or bid for government contracts. You now have full operational control without needing a local partner for most licenses.

• Free Zone: Remains a powerful option for businesses focused on international trade, re-export, or digital services. The key advantage here has shifted from “ownership” to tax efficiency (see point 5) and specific infrastructure ecosystems like DMCC or DIFC.

Obtaining the Correct License & Approvals

Your trade license is the foundation of your legal operations. In 2025, Dubai offers “Instant Licenses” and digital-first applications, but accuracy is vital.

The type of license you need depends entirely on your activity:

• Commercial License: For trading, retail, and contracting.

• Professional License: For service providers, consultants, and artisans.

• Industrial License: For manufacturing and packaging.

Pro Tip: Be precise with your “activity code.” If your actual business operations drift outside the scope of your license (e.g., a consultancy firm selling physical goods), you risk heavy fines or banking complications.

Complying with Updated Employment Laws & Emiratisation

The UAE’s labor laws have undergone a complete overhaul. The old “unlimited” contracts are gone, replaced by fixed-term contracts for all private sector employees.

More importantly, Emiratisation is no longer just for large corporations.

• The New Rule: In 2025, small businesses with 20–49 employees in key sectors (such as IT, real estate, education, and healthcare) are required to hire at least two UAE nationals.

• The Risk: Failing to meet these targets can result in fines starting at AED 96,000.

Before you hire your first team member, ensure your HR policy aligns with the latest Ministry of Human Resources and Emiratisation (MoHRE) regulations, including mandatory unemployment insurance and end-of-service gratuity schemes.

Understanding Visa Options for Investors

The link between your business license and your residency has become much more flexible. You are no longer strictly tied to a standard 2-year partner visa.

• Golden Visa (10 Years): If you own a property worth AED 2 million or have a substantial registered capital in your business, you may qualify for the 10-year self-sponsored Golden Visa. This provides immense stability for you and your family.

• Green Visa (5 Years): A fantastic mid-tier option for freelancers, skilled employees, and partners in small businesses, offering a 5-year residency without the need for a rigorous sponsorship process.

Adhering to the Corporate Tax Regime

The most significant financial shift in recent history is the introduction of Federal Corporate Tax.

• The Rate: A standard 9% tax rate applies to taxable profits exceeding AED 375,000.

• Small Business Relief: If your revenue is below AED 3 million, you may qualify for relief that exempts you from paying tax for a specific period, though you must still register.

• Free Zone Nuance: Free Zone companies can still enjoy 0% Corporate Tax, but only if they meet the strict definition of a “Qualifying Free Zone Person” (QFZP) and derive “Qualifying Income.”

Ignoring this is not an option. All businesses, regardless of profit or zone, must register with the Federal Tax Authority (FTA) to avoid penalties.

Conclusion

Setting up a business in Dubai in 2025 offers more freedom and opportunity than ever before, but it also demands stricter compliance. From Emiratisation targets to Corporate Tax registration, the details matter.

By partnering with a professional business setup consultancy, you can navigate these modern legalities with confidence, ensuring your business is not just open, but built to last.