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UAE opens up the economy, allows 100% foreign ownership of Companies

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The government of the United Arab Emirates (UAE) recently announced a historic change to the country’s foreign investment rules. Starting from June 2022, overseas investors will have the ability to fully own companies across all sectors within the UAE. Let’s explore what this major policy reform means and why it is an important step forward.

Background of the New Law

Previously, the foreign ownership limits in the UAE restricted international investors from holding more than 49% shares in many industries. They had to partner with Emirati entities through joint ventures to carry out business.

This made the investment landscape complicated for multinational firms who seek full control over their regional subsidiaries. It also restricted foreign capital inflow to strategic sectors like technology and renewable energy that require high autonomy.

Realizing these challenges, the UAE leadership decided to liberalize rules to attract global capital and diversify the economy. The new law allows 100% foreign direct investment across all economic activities without domestic shareholding requirements.

Key Features of the Reforms

  • Full ownership rights: Foreign firms can establish wholly-owned local branches or subsidiaries.
  • Property ownership: Land and real estate can be purchased for commercial use.
  • Management control: No need for local board members or managers. Investors have autonomy over operations.
  • Intellectual property protection: Technologies and innovations developed locally can belong fully to the foreign owner.
  • JV restructuring: Existing joint ventures may convert to fully-owned entities by paying applicable fees or taxes.

By removing restrictions, the UAE aims to position itself as a favorable hub for international businesses looking to establish a presence in the Middle East and North Africa region.

Benefits for Foreign Investors

Ease of Operations – Complex joint venture structures are replaced by simplified fully-owned subsidiaries.

Flexibility – Multinationals can organize regional headquarters, manufacturing units according to global strategies.

Ownership Rights – All profits, assets and returns fully accrue to the foreign investor over long-term.

Policy Stability – Demonstrates UAE’s stable policy outlook by global standards reassuring investors.

Access to High-growth Sectors – Opens doors for foreign capital in future technologies like AI, renewable energy.

By allowing full control and ownership, these reforms enhance the attractiveness of the UAE business environment for global corporations and institutional investors.

Impact on the UAE Economy

More Foreign Direct Investment – Liberalized rules to mobilize capital for productive sectors and infrastructure mega-projects.

Economic Diversification – industries like healthcare, tourism and aerospace get a boost diversifying from oil dependence.

New Jobs – As multinationals expand locally, employment rises through new manufacturing units, offices and supply chains

Trade and Logistics – UAE becomes a favourable location for companies to set up regional export/import operations.

Technological Progress – Collaboration between global innovators and local universities leads to applied R&D.

With increased foreign partnerships and investments across vital industries, this policy reform can significantly contribute to the UAE’s transition as a global trade and business services hub.

Conclusion

In summary, by introducing full foreign ownership across economic domains, the UAE demonstrates its continued commitment to liberalization. This progressive step aims to attract greater global capital, spur knowledge transfers and create high-skilled jobs. It also supports the nation’s long-term vision of transforming into a sustainable economy and regional trade centre. The enabling policy environment will fuel the country’s eventual emergence as a advanced economy.

FAQS

How do existing joint ventures get impacted?

They may restructure ownership via documentation but taxation aspects need evaluation case-to-case by relevant authorities.

Which sectors still face restrictions?

Banking and media may see certain foreign equity caps. Strategic areas related to security will be assessed separately by regulators.

What steps does setting up a firm involve?

Key stages are company registration, obtaining commercial license, opening a bank account which usually takes 2-4 weeks if all requirements are duly fulfilled.

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VIBHA MALIK MODI

Ms. Vibha Modi, CA, is supported by 13+ Years of Corporate Tax, International Taxation and Accounting Expertise.

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