Experts say British companies could flock to Dubai’s new virtual company licence as the UK prepares for a possible Brexit no-deal
British companies are set to flock to Dubai’s new Virtual Company Licence (VCL) as the UK prepares for a possible Brexit no-deal.
That’s according to experts who anticipate a renewed drive for non-EU business as potentially punishing tariffs cut into European profit margins.
Dubai’s VCL, which was launched earlier this month, allows global businesses to access a regulated e-commerce platform populated by Dubai-based companies, while also exploring new markets and investment opportunities digitally.
The initiative, which allows investors worldwide to do business in Dubai digitally without having to live in the emirate, is expected to attract more than 100,000 companies.
According to Wes Schwalje, COO of Dubai-based research firm Tahseen Consulting, the VCL programme is likely to be “very interesting” for British tech, creative and services SMEs which have the UK as an operating base due to its business-friendly environment and access to human capital but which transact globally.
“The programmes will enable smaller businesses to more effectively utilise IP-based and business model optimisation strategies to create tax efficiencies,” Schwalje told Arabian Business.
“Dubai’s VCL is very likely to boost UK trade with the UAE and other GCC countries as smaller British businesses begin to understand the opportunities in the MENA,” he added.
Brexit ‘starting point’
Joe Hepworth, CEO of British Centres for Business, a Dubai business set-up firm, said the VCL could act as a ‘starting point’ for UK-Dubai collaborations and partnerships in a post-Brexit world.
“The VCL has obvious benefits for UK firms given the current travel restrictions… it could act as an interesting ‘toe-in-the-water’ to test the market without a fully-fledged set up,” Hepworth told Arabian Business.
Coronavirus trade boost
During the coronavirus pandemic, some companies may not be in a financial position to set up a new office in a new location, but the VCL could enable UK business owners to explore the Dubai market, said Stephanie Williams-Quinn, head of entity governance and compliance, PricewaterhouseCoopers (PwC) Middle East.
She said there would be particular opportunities for synergistic trading between the UK’s strong technology sector and Dubai’s highly developed digital infrastructure.
Williams-Quinn added: “Geographically, Dubai is well positioned and convenient – it is close to Europe, Asia and Africa – and both business owners and investors consider Dubai as one of the locations to expand their operations and portfolios, with closer access to other markets.”
The VCL initiative is designed in full compliance with international agreements that Dubai and the UAE are party to.
The programme allows only verified non-resident individuals to register a company, and the owners have to be the nationals or tax residents of countries that have implemented the Convention on Mutual Administrative Assistance in Tax Matters and share tax information about their citizens and residents.
VCL owners can manage all their business-related activities, including document signing and submission digitally, and the signatures are legally binding in the UAE.
‘Welcome news’ for UK firms
Noman Khawaja, co-founder and COO of the UK’s largest premium halal food company Haloodies, welcomed the news that Dubai is accepting virtual business registrations.
“It will be beneficial for overseas businesses to access the Dubai customer base and equally for Dubai residents to access global products. Regulation is important as there will be compliance and governance issues so only legitimate companies can trade,” he said.
“There will be the halal compliance issue that will need regulating. This will surely assist in boosting the economy. It will be attractive for entrepreneurs who can run a streamlined business remotely and access a new and willing customer base,” Khawaja added.
Laurence Kemball-Cook, CEO of London-founded smart energy firm Pavegen, said that doing business in Dubai often represents the ‘standard first step’ when engaging in the Middle East region.
“Given how hard the pandemic has hit global business travel, the VCL could be instrumental in allowing businesses to continue to establish operations in the region without the requirement to physically be in market,” Kemball-Cook said.
“With the Dubai Expo fast approaching, it will hopefully put the spotlight back on Dubai to ensure scale-up businesses return to the region to seek their growth and provide solutions,” he said.
Potential pitfalls?
While the VCL could be beneficial for UK-Dubai bilateral trade, PwC’s Williams-Quinn warned that having a purely virtual presence could be “as much of a downside as it is a benefit” to conducting business in a foreign country.
“Employees, directors, business owners of a UK company are not guaranteed a visit or business visit visa to the UAE by virtue of their VCL,” she said.
She also noted that UK companies are also limited to initially transacting with interested customers via the prescribed e-commerce platform, DubaiStore.com, and this may not provide all business owners with the flexibility of conducting business by other digital means.
“What’s more, UK companies are unable to hire foreign talent under the VBL, should they have the need to expand operations and hire in the UAE,” she said.
Dubai Economy will start receiving applications for the Virtual Company Licence from business people and investors in 101 countries through the website
