- How to rent commercial real estate in the UAE: general rules
- UAE office rental options for offshore companies
- UAE office rentals for free zone companies
- Renting a UAE office for an onshore (local) company
- How to seamlessly rent offices in the UAE: expert recommendations to follow
- Summing up
Foreign entrepreneurs who want to set up businesses in the UAE can choose from different methods to register their companies and benefit from UAE tax incentives. FYI: The UAE changed its corporate laws in 2023. Now, the corporate income tax rate is either 0% or 9%, depending on your company type (whether it is an offshore, onshore, or local entity) and its annual income.
As provided for under the local laws, every company in the UAE shall have an office or a legal address regardless of its type. Thus, foreign-owned onshore companies must rent offices in the area where they are registered while free zone companies may opt for a virtual office. Offshore companies, in their turn, do not face any physical substance requirements in the Emirates.
If you need to rent office space in the UAE, you should know who can use the registered agent’s address and when the office size matters for your business. Let’s explore all of the above in more detail.
How to rent commercial real estate in the UAE: general rules
Foreign investors who want to start a business in Dubai, UAE, have to choose between mainland and free zone licenses. These licenses have different rules and benefits. Mainly, free zone companies have no right to do business or rent offices on the mainland, unless they get special permission.
FYI: This permission is called a No Objection Certificate (NOC), and it is issued by the corresponding free zone authority in the UAE.
Office space requirements in the UAE
To rent commercial real estate in the Emirates, you need one of the documents mentioned below:
- valid business license
- permission to set up a company in the UAE.
Consider these important factors when looking for office rentals in the UAE:
- Your future office must match the business activity stipulated in your license. This way, you are not allowed to use a warehouse as an office, or an office as a warehouse.
- You cannot share an office with another company unless the two companies have the same owners and structure.
- You have no right to use a residential building as an office in the UAE. Only commercial real estate may be utilized for that purpose.
- The office space you found shall be big enough for your employees. The minimum office size in the UAE is 9 sqm per person, and 30 sqm in total.
NB: The size and type of your office will affect the number of resident visas that you can get for your employees.
Types of offices in the UAE
Besides the virtual office option, which is only for certain companies in the Emirates, there are two kinds of physical commercial spaces:
- Fitted Office: These are offices that are ready to use, and you can rent them with or without furniture.
- Shell & Core: These offices are unfinished, so you’ll have to renovate them.
Another option is renting a private office or a desk from a secretarial firm.
Resident visas for foreign employees in the UAE
The number of visas that a company in the UAE can get for its foreign workers depends on the type and size of its office space:
- Physical Space: This is a real office, and the company is allowed to have as many workers as it can fit in a 9 sqm area (per person).
- Flexi Desk: With this virtual office option, you may obtain only 3 UAE visas for your employees.
- Serviced Office: Here, a fully serviced office in the Emirates is meant that gives the company the right to issue 4 to 5 visas to its workers, depending on the office area.
Supported by your registered agent or International Wealth industry pros, you will have no issues locating and renting the best properties for office rental in the UAE.
UAE office rental options for offshore companies
If you have an international company registered in the Emirates, and you only make money from foreign sources (basically, we are speaking about offshore companies here), you have no right to rent an office in the UAE. Your official address will be the same as your registered agent’s office address (legal address), and you can use it to open a bank account for your international business in the UAE. It is better if your agent’s license is issued for their physical address and not a virtual one.
UAE office rentals for free zone companies
Free-trade zones, free economic zones, or simply free zones are special areas in the UAE, where each one of them has its own laws and authorities. Companies established therein are free to choose from different office types, like physical offices, separate offices with desks in business centers, or virtual offices.
Some free zones in the Emirates only issue licenses to companies with a physical presence in the jurisdiction. For example, JAFZA and DIFC are like that. Mind that your office rental opportunities in the UAE will depend on your business license (namely, what type it is). Without a valid license, you will never be able to rent an office to match your industry sector requirements.
Renting a UAE office for an onshore (local) company
As provided for under the UAE laws, foreign investors who run local (a.k.a. onshore) UAE companies have to rent a physical office in the jurisdiction. This means an office in a business center or a separate office. Virtual office rentals are not an option for local UAE companies.
How to seamlessly rent offices in the UAE: expert recommendations to follow
When you sign property lease contracts in the UAE, it is highly recommended to get help from qualified lawyers and registered agents. In some cases, you can even register a company in a UAE free zone and rent an office on the mainland. When you start a business in the Emirates, pay close attention to the laws and regulations of both the country and the specific emirate.
Types of lease agreements
The UAE comes with different types of commercial (office) lease contracts:
- Direct Lease between the Landlord and the Tenant: This is a simple lease agreement where the tenant signs a contract with the landlord, without any third-party involvement.
- Sublease between the Main Tenant and Other Office Users in the UAE: In this case, one tenant rents the whole space and then rents out parts of it to other tenants, splitting it into several offices or sections. The corresponding tenant should make sure that the main tenant has written permission from the owner and the UAE authorities to sublet. The tenant in question should also get a copy of the main lease contract, because if the latter is canceled or expires, the sublease may end as well.
- Lease Assignment or Extension: This contract stipulates the rights and duties of each party and may involve the transfer of lease rights or the extension of the lease period.
Forms of lease contracts in the UAE
In the United Arab Emirates, all lease agreements are classified into four types:
- Modified-Net Lease: This is the most common lease contract type, where the landlord and the tenant share the costs of maintaining the office as provided for under the agreement they made. This helps to avoid future conflicts.
- Triple Net Lease: The above contract type favors the tenant more than the landlord and thus does not enjoy great popularity on the market. Thereunder, the tenant pays all the taxes, utilities, and other office expenses, while the landlord does not contribute anything.
- Land Lease: This is a type of contract that allows the tenant to get a piece of land and build a commercial building on it. When the lease expires, the land and the building go back to the landlord. The corresponding financial details shall be negotiated by the parties to the above contract.
- Gross Lease: Another common type of contract, a gross lease contract is the one where the tenant pays a fixed monthly rent for the office in the UAE. The landlord pays any extra expenses that are not covered under the contract.
Tax implications of office rentals in the UAE
UAE rents for commercial real estate are subject to Value Added Tax (VAT) at the rate of 5%. This amount is deemed to be the income of the landlord, who is legally liable for paying the said VAT to the authorities. However, the landlord and the tenant can agree on who pays VAT under the lease agreement. Usually, the landlord adds the VAT amount to the total rent to be paid by the tenant.
Documents needed for office rental in the UAE
To rent an office in the United Arab Emirates (UAE), you need to provide the following documents:
- A passport copy for each owner of the company.
- A business license for the company or a registration approval (the document necessary to incorporate a new company in the UAE) if it is a new company that is about to rent an office.
- A passport copy for the person who will sign the lease agreement.
- A letter that authorizes the signatory to act on behalf of the company.
- Proof of ownership for your existing company.
These are the details that the lease agreement in question shall include:
- agreement date and property address
- payment terms, including the rent amount, security deposit, and payment frequency
- conditions of use in respect of the office premises (e.g., permitted activities, maintenance responsibilities, and subleasing policy)
- contract duration, including, inter alia, its start and end dates, renewal options, and termination clauses)
- any other relevant information, including utilities, parking, and insurance terms.
Rental registration procedures
Office lease agreements in the UAE must be registered with the local authorities of each emirate. The registration process and the maximum lease duration may differ depending on the emirate. Here are a few examples:
- In Abu Dhabi, commercial real estate leases are registered via the Tawtheeq service, which records all the information related to the property, landlord, and tenant. The maximum lease duration in Abu Dhabi is four years.
- In Dubai, lease agreements made for less than ten years must be registered with Ejaari, a service that verifies the authenticity of the lease contract and protects the rights of both parties.
Mind that if your lease agreement is not registered, you may face difficulties in obtaining or renewing a trade license and processing visas for your employees. Therefore, complying with the local registration requirements of each emirate is essential to duly operate in the UAE.
The United Arab Emirates (UAE) is a popular destination for foreign entrepreneurs who want to register an offshore, onshore, or local company. The UAE has a neutral and friendly stance towards European countries and offers equal opportunities for immigration, residency, permanent residency, and business registration to anyone interested, regardless of their nationality.
One of the essential steps in registering your business in the UAE is to lease office space. International Wealth partners will be happy to help you with this step. Besides, they will provide you with comprehensive service packages to suit your needs. You can find more information about this and other offerings in the UAE country section of our website. Alternatively, you are welcome to request a free consultation with International Wealth experts.