That’s how many new businesses joined Dubai Chamber by the third quarter of 2025, pushing registrations up by nearly 4% and highlighting the city’s relentless growth.
Everything seems smooth when investors land in the UAE until the paperwork, approvals, and region-specific rules start rolling in. The country moves fast, updates regulations often, and expects businesses to keep up. Even those who’ve run companies before find the setup phase more challenging than it looks.
What many investors do not see immediately are the hidden challenges that operate behind the scenes. Issues like unclear tendering processes, late payments, strict verification checks, and the need for careful due diligence can affect early decisions.
These obstacles do not reduce the opportunity in the UAE, but they remind investors that success here requires proper planning and reliable guidance. So let’s take a look at some of the Top Challenges Foreign Investors Face in the UAE listed out by the Damaar, the top Business setup consultant in UAE.
What Foreign Investors Commonly Struggle With in the UAE
1. Legal and Regulatory Challenges
Foreign investors often find the UAE’s legal system quite detailed. The country has three main business jurisdictions. Each one follows different rules and suits different goals.
Mainland companies allow wide trading across the UAE but require approval from local authorities such as the Department of Economic Development.
Free Zone companies offer full foreign ownership and easier import and export procedures, but operate within specific zones or internationally.
Offshore structures focus on global operations without a physical office inside the UAE.
Ownership rights, visa rules, economic substance requirements, and other compliance steps differ based on the jurisdiction. New regulations can also come into effect with short notice, and investors must adjust quickly. Because of this, many entrepreneurs rely on experts to review legal structures, prepare documents, and coordinate with authorities.
2. Licensing and Company Formation Process
Getting the correct business license is one of the most important early decisions. Investors must choose between commercial, professional, or industrial licenses based on their activity. Problems often arise when:
The chosen activity does not match the business plan
External approvals are not identified early
Paperwork is incomplete or inconsistent
Name reservations or initial approvals take longer than expected
Investors who try to manage all of this alone often run into delays, especially when dealing with several departments at once.
3. Ownership Rules and Local Sponsorship
The UAE has expanded full foreign ownership in recent years, which is a major advantage for new investors. Still, a few activities require a local service agent or sponsor. Some investors worry about losing control, but the model today is more flexible than it used to be. With the right agreements, decision-making power stays protected.
If a business does require a local partner, choosing someone reliable is essential. A transparent relationship removes confusion and keeps the business running smoothly.
4. Cultural and Business Etiquette Differences
Relationships matter in the UAE. Investors who take time to understand local customs usually build stronger partnerships. Respect, clarity, and patience shape business interactions. Many misunderstandings happen when foreign investors:
- Rush negotiations
- Communicate too directly
- Skip greetings or formalities
- Expect quick decisions without building trust
Simple actions such as learning basic Arabic greetings, being punctual, and following up professionally help create positive impressions.
5. Banking and Financial Challenges
Opening a corporate bank account is often one of the toughest parts of doing business in the UAE. Banks follow strict verification rules to protect the financial system.
- Investors commonly experience:
- Longer onboarding timelines
- Requests for detailed business plans
- Strict KYC and AML checks
- Minimum balance requirements
- Limited credit support for new companies
Banks often ask for invoices, contracts, residency documents, and shareholder details. Missing or unclear information can slow down the entire process.
6. Taxation and Compliance Obligations
The UAE has introduced new tax rules that foreign investors must follow with care.
- Corporate tax is set at 9 percent for profits above the threshold.
- VAT applies to most goods and services.
These taxes are simple in theory but become more detailed when a company operates across multiple jurisdictions or within Free Zones. Investors sometimes struggle with:
- Determining tax eligibility
- Understanding qualifying income in Free Zones
- Managing VAT returns
- Handling recordkeeping and audits
Mistakes can lead to penalties. Reliable accounting and timely filings help prevent issues.
7. Real Estate and Office Space Requirements
Finding the right office space is part of the setup process. Mainland companies need Ejari registration for their tenancy. Free Zones may offer shared desks, private offices, or warehouses depending on the business type.
Foreign investors sometimes face challenges due to:
- Unclear lease terms
- Renewal conditions
- Security deposits
- Service charges
- Location requirements linked to their license
- Choosing the wrong office can delay license issuance, so careful planning is important.
8. Talent Acquisition and Visa Procedures
Hiring in the UAE comes with specific steps. The country attracts global talent, but companies must follow the proper workforce process.
- Common challenges include:
- Visa quotas tied to office space
- Verification of qualifications
- Medical tests and Emirates ID procedures
- Renewal and cancellation timelines
Rules can change, and missing a step may slow down operations. Many businesses prefer professional support to manage HR, visas, and paperwork efficiently.
9. Practical Challenges Highlighted by International Trade Experts
Foreign companies, especially SMEs, often face challenges that are not visible during the initial planning stage. These include:
- Exposure to scams or unsolicited offers targeting new investors
- Delayed payments, especially in government-linked contracts
- Unclear tendering processes without a unified platform
- Slow dispute resolution for commercial disagreements
- Inconsistencies across the seven emirates, which may affect approvals and timelines
These issues reinforce the importance of due diligence, clear contracts, and proper risk assessment before entering the market.
How Damaar Helps Protect Your Business
Foreign investors need a setup partner who is reliable, clear, and aware of the risks that come with entering a new market. Damaar Business Consultants offers steady guidance so investors avoid common setbacks and stay protected throughout the entire setup stage.
Licensed and Transparent
Damaar is fully licensed in the UAE and follows a clear and open process. Every cost is explained in advance, and clients receive straightforward quotes without hidden charges.
Complete Business Setup Support
The team handles company registration, trade license steps, visa support, document clearance, and local service agent arrangements when needed. Each service is planned around your business model so you can move forward without confusion.
Knowledge of Mainland and Free Zones
Whether you set up in a mainland jurisdiction or a free zone, Damaar ensures your structure follows all UAE rules. The team helps you choose an option that suits your needs and long-term goals.
Guidance to Avoid Fraud
Foreign investors often face misleading agents, unofficial visa handlers, and unclear processes. Damaar educates clients on red flags, checks each step for authenticity, and ensures every action is done through verified government channels.
Working with Damaar means you start your UAE business on solid ground with a team that prioritizes clarity, safety, and your long term growth.
