UAE Tax
The Real Cost of Setting Up a Company in Dubai (Including What Setup Agents Don't Tell You)
By Huzefa Vorajee · Published · 9 min read
Every week I speak to someone who has been quoted a licence fee for a Dubai company and has mentally filed that number as "the cost of setting up in Dubai." It isn't. It's the cost of the licence. Everything that makes the company actually work — a visa, a bank account, an office, the accounting you're legally required to keep — sits outside that number, and setup agents rarely walk you through it because their commission is tied to the licence sale, not to your first year of trading. I've watched clients arrive with a budget built entirely around the quote they were given, then scramble six weeks in when the real bill starts landing. This is what the real cost looks like, broken down honestly.
The headline licence fee is the deposit, not the price
Free zone packages are advertised from around AED 12,000 to AED 20,000 a year, and mainland licences can be similar or higher depending on activity and the number of visas attached. That figure gets you the trade licence and, usually, one visa quota. It does not get you a functioning business.
The reason agents lead with this number is simple: it's the lowest figure they can honestly quote, and it's the number that closes the sale. I'm not saying they're lying — the licence really does cost that. I'm saying it's roughly a third to a half of what you'll actually spend getting the company from 'registered' to 'operating' in the first twelve months.
Visas, the establishment card, and medical testing
Before you can sponsor anyone — including yourself — the company needs an establishment card, which has its own fee and renewal cycle. Then each visa involves an entry permit, a status change or stamping, an Emirates ID application, and a medical test, and each of those has a fee attached.
For a single founder taking their own visa, budget somewhere in the region of AED 5,000–7,000 all-in once you include medical, Emirates ID and typing/processing charges. Add dependents — a spouse, children — and you're duplicating most of that per person, plus the salary threshold you'll need to show to sponsor them.
- Establishment card (immigration file): a separate cost from the trade licence itself
- Entry permit and status change or stamping fees per person
- Emirates ID application and typing centre charges
- Mandatory medical fitness test per visa holder
Corporate banking is a process, not a formality
Nobody puts a number on this because it isn't strictly a fee — but it should be budgeted as a cost, because it costs you time, and time costs money when you can't invoice or receive funds. UAE banks have tightened compliance significantly, and a new free zone company with no trading history, a foreign shareholder, and a virtual office address is exactly the profile that gets extra scrutiny.
Realistically, plan for four to twelve weeks to open a business account, sometimes longer, and expect to be asked for a business plan, proof of source of funds, and evidence of a genuine UAE presence. Some banks will decline outright and you'll need a second application elsewhere. If you're relying on that account to invoice clients or draw a salary, build a cash buffer to cover that gap — it is the single most common cause of early cash-flow stress I see in new arrivals.
Office space: flexi-desk vs the real thing
Most free zone packages include a 'flexi-desk' — a shared or notional workspace that satisfies the licence requirement. It's cheap, and for a single-person consultancy it's often genuinely fine. But if you plan to claim Qualifying Free Zone Person tax treatment, sponsor several employees, or simply need a place your team can work from, you'll outgrow it fast, and physical office space in Dubai's main business districts is not cheap — figure several thousand dirhams a month upwards for anything beyond a shared desk.
This matters for tax reasons too, which I'll come back to separately: a business claiming preferential tax treatment needs to show genuine substance, and a flexi-desk with no staff on-site is a weak position to defend if it's ever queried.
The compliance costs that start on day one, not year three
This is the part that catches people out hardest, because it's ongoing rather than one-off. From the moment your company is licensed, you have bookkeeping obligations. You will very likely need to register for corporate tax. Depending on turnover, you may need to register for VAT. Many free zones require an annual audit regardless of size. None of this is optional, and none of it is included in the licence fee.
A reasonable outsourced bookkeeping and compliance package for a small owner-managed company runs from a few hundred dirhams a month upwards, scaling with transaction volume. Audit, where required, is typically a separate annual fee. Treat this as a monthly cost of doing business, not a nice-to-have you'll get to later — the penalties for late corporate tax registration and VAT non-compliance are real and they compound quickly.
What setup agents genuinely don't tell you
Most agents aren't malicious, but their incentives are misaligned with giving you the full picture. A few things I wish every client heard before they signed anything:
- Renewal year two is rarely cheaper than year one — and some 'discounted' first-year packages renew at a noticeably higher rate
- Changing your business activity or adding a shareholder after incorporation usually triggers fresh government fees, not a quick edit
- A free zone licence that doesn't allow mainland trading may require a second, separate licence if your customer base shifts onshore
- Not every free zone bank relationship is equal — some free zones have far better banking outcomes than others, and agents rarely mention this before you commit to a jurisdiction
Building a realistic first-year budget
If I were advising you to sit down and build an honest number, I'd want you including: the licence fee, establishment card, your own visa and medicals, office space appropriate to your actual activity, a banking contingency (in time and cash flow, not just fees), and a monthly compliance retainer from day one. For a single-founder consultancy, a realistic all-in first-year figure is often close to double the headline licence quote once everything above is included — and that's before you've paid yourself a salary or covered UK-side wind-down costs if you're relocating an existing business.
None of this is a reason not to do it. The UAE remains a genuinely good place to build a business. But go in with the real number, not the marketing number, and you'll make better decisions about timing, structure and cash flow from the outset.