Abu Dhabi, the capital and the second largest city of the United Arab Emirates, is a thriving global business hub. With its strategic location, excellent infrastructure, and pro-business policies, Abu Dhabi attracts entrepreneurs from all over the world to set up their ventures. However, starting a business here does come with certain costs. In this article, we will look at the key expenses involved in setting up a company in Abu Dhabi.
License and Registration Costs
To formally start operations, the first step is to register and license your business. The exact license fees depend on the type of business activity. Some of the common licenses required are:
- Commercial license: AED 10,000-15,000 per year
- Professional license: AED 7,500-10,000 per year
- Industrial license: AED 15,000-20,000 per year
- Tourism license: AED 10,000-15,000 per year
Additional costs for registration include:
- Initial approval from Department of Economic Development: AED 1,000
- Registration fees for Memo of Association: AED 20,000
- Publication of registration in local newspapers: AED 3,000
So in total, expect to spend AED 35,000-50,000 to formally register your business.
Visa and Sponsorship Costs
If you are looking to hire staff from overseas, you will need to sponsor their work visas. The costs for an investor visa are:
- Entry permit: AED 1,000 per person
- Status change: AED 5,000 per person
- Health insurance: AED 3,000 per person
- Medical test: AED 600 per person
So for a 10-member team, your visa sponsorship costs can be around AED 100,000.
Rental Costs
Office space is one of the major setup costs for Abu Dhabi businesses. Rental rates vary significantly depending on:
- Location – Central business districts like Al Maryah Island command a premium. Further away areas are more affordable.
- Type of space – Commercial offices, retail units, warehouses etc. have different rental rates.
- Size – Per square foot rates reduce as office size increases.
On average, you can expect to pay:
- AED 14,000-18,000 per month for a 500 sq ft office
- AED 30,000-40,000 per month for 1500 sq ft space
- AED 100,000+ per month for 5000 sq ft
So budget AED 200,000-300,000 per year for a medium sized office space.
Utility Costs
Regular business operations will incur utility expenses like:
- Electricity – AED 1.5 per kW hour
- Water – AED 7 per 1000 gallons
- Telecom – AED 500-1000 per month
These costs can add up to AED 15,000-20,000 annually.
Other Operational Costs
Some additional expenses to factor:
- Business insurance: AED 8,000-15,000 per year
- Accounting and legal services: AED 50,000 per year
- Marketing and advertising: Variable, around AED 150,000 per year
- Salaries for staff: Highly variable, budget AED 300,000+ for 10 employees
- Office supplies and equipment: AED 20,000-30,000 per year
Government Fees
Abu Dhabi levies certain fees that must be paid by all enterprises:
- Chamber of Commerce membership: 0.5% of annual revenue, minimum AED 1,000
- Worker pension contribution: 15% of salary costs
- Worker social security: 3.5% of salary
- Corporate tax: up to 55% of net profits
Total Costs
Adding up the above expenses, here is an estimate of the total first-year costs to set up a business in Abu Dhabi:
| Expense | Cost |
| Licensing fees | AED 40,000 |
| Visa and permits | AED 100,000 |
| Rental costs | AED 250,000 |
| Utilities | AED 20,000 |
| Other operations | AED 500,000 |
| Government fees | Variable |
| Total | AED 910,000+ |
So you should budget at least AED 1 million to formally start operations. Complex businesses or larger teams can cost over AED 3 million in the first year.
Optimizing Setup Costs
Here are some tips to control your Abu Dhabi business setup costs:
- opt for an affordable flexi desk or shared office instead of conventional space.
- Hire remote staff instead of sponsored employees.
- Outsource accounting, HR and legal tasks instead of full-time staff.
- Take advantage of free zone incentives to reduce licensing and visa fees.
- Negotiate discounts from vendors providing equipment and services.
- Start small and expand gradually to manage cash flows.
Key Factors That Influence Setup Costs
The major factors that determine how much you’ll need to spend are:
- Business activity – Trading or retail needs more licensing than professional services.
- Business size – More employees and office space increase costs.
- Location – Premium addresses mean higher rental expenses.
- Nationality – UAE citizens get fee discounts in many cases.
So the exact costs for your company will depend on these factors. Consult with a local advisor to estimate your specific business setup costs in Abu Dhabi.
Key Takeaways
- Formal registration and licensing can cost AED 35,000-50,000.
- Sponsoring overseas staff for visas adds around AED 100,000.
- Rental rates for office space start from AED 14,000 per month.
- Operational expenses like staff, marketing etc. can exceed AED 500,000.
- Overall, expect to spend AED 1 million or more in first year.
- Controlling setup costs requires smart choices about location, space, staffing etc.
Conclusion
Abu Dhabi offers an excellent ecosystem for ambitious entrepreneurs looking to set up successful companies. But launching a business here does need extensive planning and budgeting. Carefully evaluate all the registration, licensing, real estate, HR, legal and operational costs involved. With the right strategy and local expertise, your business can benefit from Abu Dhabi’s thriving marketplace and favorable policies. The high startup costs are an investment into a potentially highly rewarding opportunity if executed correctly.
Frequently Asked Questions
Q: What are the major business licenses needed in Abu Dhabi?
A: The main licenses are commercial, professional, industrial, tourism depending on your activity. Approval from Department of Economic Development is also needed.
Q: How much minimum capital is required to start a business in Abu Dhabi?
A: There is no fixed minimum capital requirement. However, to get licenses, sufficient capital must be shown based on business plan. For LLC, capital of AED 150,000 is generally needed.
Q: Are there additional costs for free zone companies?
A: Yes, free zones charge licensing and administrative fees. But costs are lower compared to mainland companies.
Q: How much rent can I expect to pay for a retail shop?
A: Average rental cost for a 500 sq ft shop in Abu Dhabi is AED 60,000-80,000 per year. High footfall areas can cost over AED 100,000.
Q: Are there any incentives for startups and SMEs?
A: Yes, Abu Dhabi provides concessions like discounted office space, relaxed visa quotas and fee exemptions for qualifying startups.
Q: Can business setup be done digitally?
A: Many processes can be completed online via government portals. But physical documents and approvals are still needed in most cases.
Q: How long does it take to set up a business in Abu Dhabi?
A: If all requirements are met, company formation takes 2-4 weeks on average. But allow up to 2 months for the full setup.
Q: What are the ongoing costs after initial setup?
A: Main recurring costs are license renewal, office rent, salaries, visa renewals and utilities. Legal, accounting and marketing fees also continue.
Q: Is it cheaper to set up a business in Abu Dhabi or Dubai?
A: Setup costs are broadly similar in both cities. Dubai has more affordable office space. Abu Dhabi offers more incentives and flexibility.
Q: Do I need a local partner for my business?
A: UAE companies require a local shareholder with 51% ownership. A local partner or sponsor is mandatory in most cases.
Q: Can I get funding to start a business in Abu Dhabi?
A: Yes, there are government grants, venture capital funds and bank loans available. Collateral is usually needed to secure funding.
Q: Are there any restrictions on foreign investment?
A: Very few sectors like oil, defense etc. have FDI restrictions. Otherwise most sectors are open for 100% foreign ownership.
Q: What support does Abu Dhabi offer for innovative startups?
A: There are designated coworking spaces, incubators, accelerator programs, and other resources to assist innovative technology startups.
