Traditionally, if you wish to start your business in Mainland Dubai without much hassle and complication, then you needed a local sponsor who owns 51% of your business. Now the need for having a local sponsor is only limited to a few strategic industries like road transport, air transport, medical retail, telecom services, post services, banking, security, oil, and gas. A local sponsor can be an individual, a corporate firm, a local business, or a service agent.
Local sponsorship in Dubai is beneficial to the foreign business as it smoothens company registration and licensing, affords access to local networks and resources, enhances credibility with local authorities and customers, and offers valuable insight into the local market, particularly when navigating cultural and regulatory nuances, which may be crucial for the foreign company as it establishes its presence in the region.
The most significant advantage of a local sponsor is that he or she can make the process easier for obtaining government approvals and licenses. Wherein, some businesses in Dubai require specific permits or approval from local authorities, which a local sponsor can easily make possible.
Identifying How Local Sponsorship Benefits Foreign Businesses in Dubai
Key benefits of a local sponsor for foreign businesses in Dubai:
- Market Access
Local sponsors can facilitate access to the most influential persons in the local market for foreign companies and make relations with potential clients and partners.
- Recommendation on Regulation
Local sponsors, based on their experience and knowledge of the local legal regime, can provide advice to a foreign company in relation to regulation while opening up or doing business in Dubai.
- Credit Building
A local sponsor can help a foreign firm gain acceptance and credibility with concerned local customers as well as with the concerned authorities.
- Visa facilitation
Work visas to allow the employees aboard most of the times can be availed with the help of a sponsor
- Business Networking
The business contacts of the sponsor will open for new opportunities in business and joint venture.
Sometimes referred to as the local partner to your business in Dubai, a local sponsor is one who helps you cross the complex legal framework of Dubai and act as a link between you and the local regulatory authorities.
Some businesses even require having a local sponsor in places such as banking, oil, security, gas, insurance, medical retail, and transport. It is legal and serves as a comfort for any foreign investor who wishes to establish his or her business within these sectors of Dubai. Basically, a local sponsor in Dubai would represent you before the government authorities and deal with any issues that might be related to your business, if any. Additional to the above, the local sponsor can also be of assistance in some diversified tasks. As with the translation of Arabic documents in a language understandable to you, or dealing with revocation of work permits, there are many other key advantages of local sponsorship when setting up your business in Dubai:
There are no such discriminatory practices being done against the foreign investors by considering them just as investors and hence it would not be really hard for foreign investors to attain residence visas, even for dependents.
LLCs with a local sponsor are totally tax-free and investors can even repatriate 100% of their earnings.
If you have a locally sponsored company, then you are being granted legal right to set up infinite numbers of branches through the UAE.
Having a local sponsor for a business helps create one’s network in the area that could translate into converting a future customer or partner in the long run.
Important things while choosing local sponsor in Dubai
The most very first thing that you will have to check is that he or she has to be the UAE national.
You must ask your local sponsor about his background. In case if your local sponsor comes from noble origin, it will helpful to your business. You’ll get the chance of using his contacts and network by you and to expand your trading operations.
One of the very important things is to check the qualifications of the local sponsor so that, in the future, there should not be any issue concerning the language barrier.
Try to go for a government employee as your local sponsor. Having a government employee as the sponsor will benefit your business, as he or she must have strong connections within government bodies.
This is not before 2021; for instance, to open a business, there needed to be a local sponsor of the business, owned by the foreign investor 51%.
However, following the amendment of the Commercial Companies Law of the UAE in 2021, it is possible to have a 100% ownership of businesses located in Mainland Dubai and pertaining to different forms of commercial activity, such as food, beverages, tourism, education, technology, wholesale, retail, and professional services.
In addition to these, oil, transport, gas, banking, and insurance are among strategic sectors in which there is still the legal necessity to have a local sponsor and in such cases the sponsor must possess 51% of the venture. Besides being a legal prerequisite, the local sponsor is still a very essential part that ties up a foreign investor with the respective local regulatory organs. It enables you to navigate your way through the complex issues of law that relate to the business setup much more efficiently and smoothly. The local sponsor has an upper hand with 51% ownership of the company, but it never interferes in the day-to-day affairs of the business. He generally levies fixed rates of charges or a particular percentage of business profit and then delegates all control to run the business to a foreign investor through power of attorney.
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