What is a Local Sponsor in Dubai? A local sponsor in Dubai is a UAE resident (often an Emirati) who formally takes on part of the ownership of your company – usually 51% – when you start a business in the mainland (i.e., outside the free zones). This is a legal requirement for certain types of businesses, not an operational collaboration. In practice, a local sponsor usually has no active role within the company and receives an annual fee.
When Do You Need a Local Sponsor?
When Do You Need a Local Sponsor? You need a local sponsor if you want to start a ‘mainland’ company in Dubai in sectors where 100% foreign ownership is not allowed. Previously, this applied to almost every company outside the free zones in Dubai. Since 2020, it has been allowed in many other sectors (source: Full foreign ownership of commercial companies).
In some sectors, a local sponsor is still mandatory. Examples of sectors where a local sponsor is still required:
- Security and defense activities and activities of a military nature
- Banks, exchange offices, financing, insurance, and production of banknotes or coins
- Telecommunications
- Other categories
- Commercial agencies
- Organization of Hajj Umrah
- Institute for reciting the Holy Quran
- Fishing
- Catching natural pearls
- Catching sea animals
View the full list: Foreign ownership restrictions.
However, a local sponsor in Dubai is not always about a business, but can also be used to obtain a visa, for example. If you are a man living in Dubai and want to bring your family to Dubai, you are the local sponsor for your family.
What Exactly Does a Local Sponsor Do?
What does a local sponsor in Dubai do? A local sponsor officially owns 51% of the company’s shares, while the foreign investor (you) owns 49%. In practice, contracts are often used where the sponsor has no say (despite the majority of shares), and you retain full operational control over your own company. This prevents your sponsor from determining everything within the company, even though they own the majority of the shares.
Frequently Asked Question: “Can I be 100% owner of my company in Dubai?” Answer: Yes, this is possible but only in certain sectors and under certain conditions. Additionally, in certain sectors, you no longer need a local sponsor at all and can be 100% owner of your company.
Although a local sponsor is legally a shareholder of your company, the role of a sponsor is often passive. However, the sponsor does have certain responsibilities, such as:
- Signing official documents
- Arranging work visas
- Closing bank accounts upon business termination
- Handling debts (if necessary)
Types of Sponsorship
There are multiple forms of sponsorship, depending on your business structure:
Local Sponsor (Individual)
An individual Emirati who holds 51% of the shares in your company. You fully manage your company through a Power of Attorney. With this option, you often have more personal contact with one contact person.
Corporate Sponsor / Nominee
A UAE-based legal entity (for example, a consultancy firm) legally holds the majority interest. You enter into contracts where you retain full control and have financial security.
A corporate sponsor is a company fully owned by Emiratis and serves as your sponsor. This option is often:
- More professional
- Legally safer
- Less personally dependent
Local Service Agent (LSA)
For 100% foreign companies with a professional license (such as consultants or freelancers). The agent handles administrative matters and does not own any shares.
Advantages of a Local Sponsor
A local sponsor can offer you various advantages:
- Access to the local market and government projects
- Ability to operate outside the free zones, as you have a mainland company (within the UAE)
- More flexibility in location and trading activities
- Often a valuable contact person or company with a large network that you can use.
Risks of a local sponsor
Working with a local sponsor can also involve certain risks. In some cases, you start a business with someone relatively unknown to you. You never know how this person (or company) will react in certain situations. Yes, there can be potential risks in collaborating with a local sponsor. Some points of attention are:
- Legal control: document everything contractually (share transfers, voting rights, exit plan)
- Choose a reliable sponsor with good references
- Determine the annual fee in advance and make it transparent
Average costs of a local sponsor
You often pay a local sponsor a fee. The annual fee varies depending on:
- Sector
- Size of the company
- Negotiating position
The costs for a local sponsor vary greatly, depending on the experience, industry, and the agreements you make. What are the average costs? On average, you can expect an annual fee between AED 10,000 and AED 50,000, but this can be higher for larger companies or more complex sectors.
Can you ‘buy’ a sponsor or do you have to hire one?
You hire the local sponsor. Usually through consultancy firms or specialized service providers who have reliable Emirati connections. This increases safety and transparency.
How do you arrange a reliable sponsor?
- Work through a recognized consultancy firm
- Have legal contracts drawn up by a lawyer
- Check the background and references of the sponsor
- Document agreements in a memorandum of understanding (MoU)
Are there alternatives to a sponsor?
Yes. You can:
- Start a company in a free zone
- Apply for a professional license with a local service agent
- Establish an offshore company (limited trading possibilities within the UAE)
Frequently Asked Questions
Only for certain sectors on the mainland. In many other cases, you have been allowed to be 100% owner since 2020.
Yes, but this requires legal procedures and permission from the current local sponsor.
Someone who acts as your representative with the government without owning shares.
Between AED 10,000 and AED 50,000 per year, depending on the sector and agreements.
Yes, in free zones, foreigners are allowed to be full owners without a local sponsor.
