Israel and the UAE have signed an agreement on establishing diplomatic and economic relations. The agreement states that the countries will engage in regional cooperation in significant economic fields, including tourism, security, technology, energy, health, culture, and environment.
In view of this agreement, many Israelis have expressed their desire to seize the opportunity to develop their business activities in the Emirates.
The United Arab Emirates offer excellent business opportunities within their borders, as well as allowing easy and convenient access to many countries in Asia and Africa, places in which Israelis have previously had difficulties operating in.
There are some creative business solutions that enable providing services in the UAE without establishing a legal entity, allowing the client to maintain independence and maximum managerial control.
What are the unique characteristics of the labor market in the UAE? What are the advantages and disadvantages of establishing a legal entity in the Emirates? What are the alternatives to establishing a legal entity in the UAE?
Keep reading this article to find out more about this subject!
What are the unique characteristics of the labor market in the United Arab Emirates?
The Emirati labor market mostly consists of foreign residents and the public sector is under the control of the citizens of the UAE. As a result, although the Israeli business owners are interested in providing services and selling their products to the residents of the Emirates – most of their conduct will be with foreign residents, and therefore it is important to know how to deal with the foreign residents, who come from different backgrounds.
In addition, unlike many countries in the western world, in the UAE it is customary to keep the contract open for negotiations even after signing. As a result, due to the importance of trust between the sides to the deal, it is important to take time to create personal connections with the local business partners. Doing so will make negotiations more productive in the duration of the business activity in the Emirates.
It is important to remember that the United Arab Emirates is not a democracy. Getting into trouble with the authorities will not be answered with leniency, and therefore one must make sure to follow the rules and receive all of the required permits before running a business activity in the Emirates.
What are the advantages and disadvantages of establishing a legal entity in the UAE?
The main advantage of establishing a legal entity lies in the fact that it provides security to the shareholders, for instance – when establishing a limited company.
Another significant advantage is the option given to do tax planning through certain legal entities. Tax planning is designed to maximize the company’s profits by reducing tax liability.
However, establishing a legal entity in the UAE has several disadvantages. Firstly, establishing and operating a legal entity in the Emirates requires substantial expenditures, which most companies who are only beginning their journey of expanding the business abroad are uninterested in committing to.
Secondly, managing a legal entity in a foreign country, such as the United Arab Emirates, could limit the ability to provide services efficiently, since managing a legal entity entails having to deal with a lot of bureaucracy – which takes away resources and precious time from the managerial level.
Thirdly, establishing a legal entity determines the location of the Israeli business. Since there is not much experience for Israeli business owners in the Emirates – it is likely that the business activity will encounter adjustment difficulties, at least in the first years.
It is recommended to delay the establishment of a legal entity for at least two years, when the business will be more efficient and independent.
What are the alternatives to establishing a legal entity in the UAE?
There are different ways to provide services in the Emirates without establishing a legal entity.
First of all, if the company is selling a digital product, it is possible to enhance the presence of the product in the UAE by marketing and sponsored advertising on the internet – resources can be invested to develop a quality website, accessible to both Hebrew and Arabic speakers. By doing so, it is possible to improve the presence of the product in the United Arab Emirates.
Additionally, it is possible to hire the services of local marketing people, as well as signing distribution agreements, exclusivity agreements and franchise agreements.
Moreover, it is possible to use the services of a management company, including payroll services, outsourcing, etc. The main advantage of using the services of a management company lies in being able to implement complex project, without having to deal with company registration or the local bureaucracy in the Emirates, all the while the client maintains maximum managerial and business independence.
By using a management company, it is possible to examine the potential of the business activity in the UAE, while minimizing the risks. Furthermore, the day the business owner decides he wants to operate on his own – the infrastructure that the management company creates for him will help the business operate independently and stably in the local market.
If the business wishes to apply direct employment, the management company can help recruit employees by using its placement services.
Adecco Israel – who are we?
Establishing a legal entity in the United Arab Emirates is a complicated matter that should be considered carefully. By using the different alternatives, it is possible to act with maximum independence while reducing the risks.
By using Adecco Israel, a company that specializes in providing business solutions, Israeli business owners can break through into the Emirati local market with convenience, efficiency, and security.
Adecco Israel is a business solution management company that operates in 66 countries around the world. Adecco Israel’s numerous services help their Israeli clients operate in the United Arab Emirates while saving time and resources.
Among the many services provided by Adecco Israel, you can find employment solutions, administrative management, recruitment and placement services, consulting and financial management, Payroll and outsourcing services and more.
Contact us to receive full consultation regarding the options available to you.
We would be happy to be at your service!