Real Talk: The Cost Of Running A Business In The UAE
You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.
Small to medium-sized businesses are the lifeblood of any economy. That’s especially true in the UAE, where SMEs make up 95% of all the businesses in the country. And yet, as any entrepreneur will tell you, setting up your own business is one of the hardest decisions anyone can take. The hours are long, and there’s the financial risk. That’s why government support matters to those who are willing to go it alone and set up their own business.
I’m one of the thousands of entrepreneurs who calls the UAE home. I left a comfortable corporate life to do something different. It’s a journey I love, and I’ve never regretted it, but being a small business owner isn’t getting easier, mainly due to increasing costs. Here’s my story.
In 2018, I moved my company’s trade license from one free zone, which wanted to charge me over AED25,000 per year to renew the license, to a free zone with a less painful AED13,000 for renewal. With this new free zone, I got a license with no visas allocated, as I had a visa under another company. The renewal date for my new license is August each year. Now, if you want to live in the UAE peacefully, you have to have a residence visa and Emirates ID, so I cannot wait until August to renew and amend my license- which I hear would be a cheaper option.
Until last week, I had my residence visa with a real estate company (this is a long, silly story, but the short version is that we entrepreneurs sometimes have to make extra money to survive, whilst waiting for their company to make millions, or to get investors!), and this week, I instructed my free zone to start the process for getting a residence visa under my company, Decluttr Me.
This was the costs breakdown to get a residence visa under my company:
License amendment cost
- Licence Amendment Fee: AED2,000
- Occupancy Agreement: AED3,675
- Visa Allocation (Quota): AED1,600 per allocation (You can have up to six visa allocations)
- Immigration Card: AED1,500 (valid for three years)
- E-channel: AED7,150 (AED5,000 refundable deposit + AED2,150 registration fee)
- **Visa Application Fee: AED3,500 (investor), AED3,080 (employee)
- Change of Status (in-country): AED950
Total: AED19,955 (US$5,430)
Yes, it costs me nearly AED20,000 to get a residence visa. Plus, these costs do not include the costs for taking the medical and photographs for the visa, which will total approximately AED5,000.
Let’s look deeper into a few of these costs. The deposit for the e-channel fee, for instance- that’s something that took seven months to be returned to me when I changed free zones. Indeed, most free zones have now waived this deposit, as it was causing more bureaucracy than anything else. In my case, when I asked if the fee would be waived by this free zone, I was told no- so, that’s AED5,000 just languishing in a department for no real reason.
If you look at the license amendment cost, I am being charged AED7,275 for what is basically administration to get a visa under this license. When I looked at the forms to do just this, I realized that I was being charged over AED7,000 just so as to tick a checkbox on a form and put in “1” when asked for the number of visas.
It’s also worth noting that in most free zones, there is an allocation of four visas per license; however, this free zone charges you for each allocation no less than AED1,600.
I can make the case for the visa processing fees being extortionate as well, but, at least, the immigration card is valid for three years. I can even accept that the visa application fee is AED3,080, as there is administration involved to get that pink sticker on my passport.
All these charges do not include my renewal fees for my trade license which will be due in August. That will be another AED11,000 to AED13,000 (US$ 3,000-3,500) approximately. You may ask what do you get for paying these high license fees, and my answer would be: “Nothing.” It’s just a soft copy trade license and permission to run your business in the UAE.
The cost of forming companies in other countries is much lower, and they don’t charge renewal fees. Here is a list of prices in other countries to form a company and make amendments to it:
Formation (Local Currency)
Amendment (Local Currency)
2000 (plus other costs)
(*These are the costs for a standard private company which may vary depending on the type of entity and area of formation.)
I used to deal with company formation and company secretarial matters in my old life as a Solicitor, so I know that the administration for forming companies is very similar in most countries. However, it does not make sense how it can cost this much to form a company in the UAE, and to amend a license.
There are articles in the media regularly stating that the country is encouraging SMEs to form and thrive, but how is that possible when you have to pay so many onerous fees? These fees have to be paid before you can make any money in your business. I have run my business for nearly seven years, but I have been wary to scale up partly due to the costs involved of doing just that with the free zones.
For now, I fear I will have to buck up and accept that I will have to pay AED20,000 of my hard-earned money to continue to have the right to live and run my business here in the UAE. One can only hope that this situation will change in the future.
If the country is sincere in its goal of promoting SMEs, there has to be a nationwide strategy that looks at reducing costs and incentivizing entrepreneurship. Till then, we’re going to bleed cash on bureaucracy, which means we can’t invest as much as we need in our own businesses. We will grow at a slower pace. There’s got to be more love for SMEs in the UAE if we’re going to fulfill our potential.