The UAE’s regulatory framework mandates that each company clearly defines its business activities before incorporation. These activities determine the precise UAE license scope, the jurisdictions in which operations may occur, and any additional approvals from government bodies. Misalignment between declared activities and actual operations can incur delays, fines or license amendments.
This article explains the critical link between business activities in the UAE and licensing outcomes, offering a summary guide for any incorporation.
What Constitutes a Business Activity?
A business activity in the UAE is a formally classified operation such as trading, consulting or manufacturing, assigned to a unique activity code. This code must match exactly on all official documents: trade license, visa applications, tax and bank declarations. Accurate code selection ensures clarity, regulatory compliance and simplifies interactions with authorities.
Business activities are generally categorized into:
- Commercial (e.g., trading, services)
- Professional (e.g., consulting, education, tech)
- Industrial (e.g., manufacturing, assembly)
- Tourism
- Agricultural
- Crafts
Some free zones, like DMCC and DSOA, allow dual listing. Dual listing refers to licensing a company for both service and trading under separate legal codes.
New reforms are introducing the Digital Unified License (DUL) across selected emirates, and the Unified License Platform is set for rollout in October 2025, which will simplify activity code mapping across regulators.
Mapping Activities to License Types
Once an activity is defined, the next step is matching it with the correct license category and regulatory authority.
The table below outlines a selective view of business licenses in the UAE, including the issuing authorities, permitted activities, capital and office requirements, visa entitlements, and any necessary external approvals, providing a clearer comparison to help select the most suitable license for their operations.
Regulator Roles:
- DET oversees most commercial and professional activities.
- MOIAT ensures industrial compliance.
- DTCM regulates tourism licenses.
- MOCCAE governs agricultural approvals
- KHDA regulates private education and training providers.
- MOH oversees healthcare facilities and medical activities.
Legal Structures and Compliance Considerations
Once the license type is determined, selecting the right legal structure becomes critical. This choice must reflect the business activity, visa requirements, capital availability, and regulatory obligations under frameworks such Ultimate Beneficial Ownership (UBO) rules. Below is an overview of common legal structures available in the UAE:
Free Zone License (FZ-LLC)
Favoured by international startups, especially in the technology and service sectors, free zone entities offer:
- 100% foreign ownership
- 0% corporate tax (subject to Qualified Free Zone Person rules)
- Setup within 10–20 days
- Fixed visa packages (typically 2–6 visas)
- Limitations on direct trade with the UAE mainland
Mainland LLC
A popular structure for businesses seeking access to both UAE and GCC markets. Under the latest reforms, over 1,000 activities now allow 100% foreign ownership. Key features include:
- Scalable visa quotas (1 visa per 9 sqm office space)
- 9% corporate tax on profits exceeding AED 375,000
- Compliance with Emiratisation targets:
- 20–49 employees: 1 Emirati hire by Dec 2024; an additional by Dec 2025
- 50+ employees: 2% annual Emirati employment growth, with penalties of up to AED 108,000
Offshore Companies
Typically used for holding assets or international trade, offshore structures offer:
- Asset protection and confidentiality
- No UAE market operations permitted
- Exclusion from visa eligibility and physical office requirements
Sole Establishment
Ideal for solo professionals such as consultants or freelancers:
- Owned by a single individual
- Allows up to 4 employee visas
- Requires appointment of a local service agent for regulatory liaison
Branch Office
Enables a foreign parent company to operate in the UAE under the same brand and activity:
- No separate legal identity
- Subject to activity-specific capital thresholds (e.g., AED 500,000 for regulated sectors)
- Directly linked to the parent company’s financial and legal obligations
Hybrid Models
To maximise operational flexibility, around 30% of startups adopt hybrid models that combine free zone benefits with mainland market access. These structures involve either dual licensing or contractual arrangements to optimise cost efficiency, compliance, and reach.
Bundling Activities & Dual Licensing
The DED Portal’s grouping tables enable verification of compatible activity bundles. For example, Group 742 covers software development, IT consulting and cybersecurity. Where activities such as logistics and creative services are incompatible, dual licensing becomes necessary, adding additional fees and processing time.
Avoiding Common Pitfalls
- Bank Account Delays: Surveys indicate up to 30% of applications face rejection due to mismatched activity codes.
- Taxpayer profile misalignments: Incorrect codes lead to administrative penalties.
Keeping up with regulatory updates maintains compliance and reduces risks.
Actionable Roadmap to Incorporation
- Map real operations to precise activity codes.
- Match codes with the optimal license type and regulator.
- Select jurisdiction and legal structure that support growth objectives.
- Pre-validate code compatibility via DED grouping tables.
- Align visa needs with office footprint or free zone packages.
- Avoid generic codes in highly regulated sectors.
- Continuously monitor updates to tax, employment and licensing regulations.
Conclusion
Defining the right business activities is essential to obtain the appropriate UAE startup license, structure legal entities, and meet regulatory obligations. Aligning with official activity codes and recent regulatory changes enables businesses to manage the business setup process with clarity and position their business for sustainable growth.
About SimplySolved
SimplySolved is an ISO 9001, 27001, and 42001 certified Corporate Services Provider supporting local or foreign SMEs, startups, and subsidiaries entering the UAE market. From free zone selection and company formation to visa processing, DET licensing, and compliance, our advisory team ensures complete alignment with UAE commercial laws, governance frameworks, and tax regulations. We operate across multiple lines of business including Company Formation, Finance & Tax (FTA Tax Agents) and HR & Payroll to offer our clients full support from planning to operational support.
Partner with SimplySolved to build a compliant and reliable foundation for your UAE business and support to manage key Account, Tax and HR/Payroll operations.
While this guide provides high-level guidance, it is not a substitute for tax or legal advice, and we encourage you to seek advice regarding the specific matters that concern you. If you wish to speak to us, you may contact us directly.
