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Legislation Related to Foreign Investments in Dubai

Legislation Related to Foreign Investments in Dubai

According to the Dubai FDI Annual Resorts and Ranking 2018, Dubai attracted 523 new projects from foreign investors, 43% more projects compared to the previous year.

The Emirates attracts over 10 billion USD in FDI annually. Even if the country has yet to implement the legislation targeting foreign investments, each Emirate has its own regulations with respect to the rights and investment opportunities for international players. Dubai’s strongest points in attracting FDI are the hydrocarbons, water and electricity industries followed by the ongoing development of the tourism, financial and services sectors.

If you are a foreign investor and want to open a company in Dubai, our local consultants can help you register it. You can also rely on us for any information related to the legislation on foreign investments in Dubai.

Why does Dubai attract foreign direct investment?

The Dubai Government offers foreign investors many benefits. Among these are:

  • no corporate taxes for most types of companies,
  • no direct income taxes,
  • no limitations on the repatriation of profits.

The Company Law does not allow for full foreign ownership of companies within Dubai, but the Emirate’s free zones do allow the establishment of companies 100% owned by international enterprisers. Also, to compensate for the lack of legislation on foreign investments, Dubai has signed several international agreements among which:

  •  bilateral and multilateral international treaties,
  •  double tax treaties,
  •  international cooperation agreements.

The new Company Act in Dubai

In the summer of 2015, the UAE has enabled the new Commercial Law which is more permissive with foreign investors. One of the new regulations abolishes the number of shareholders and directors in limited liability companies which is one of overseas entrepreneurs’ favorite type of business structures. Also, in the years to come, the Government plans to allow full foreign ownership of companies within the Emirates. The new Commercial Code also provides for new conditions for the establishments of holding companies.

The new FDI law in Dubai

In the autumn of 2018, the Dubai government enabled a new law which provides for more relaxed rules for foreign entrepreneurs interested in doing business in Dubai. Federal Law No. 19 of 2018, also known as the Foreign Direct Investment Law or FDI Law, represents the first step towards the liberalization of the market by allowing overseas investors to own more than 49% of a company’s shares in onshore companies in Dubai.

Under the new law, foreign investors can own up to 100% in companies operating in certain industries.

It must be noted that the legislation related to foreign investments became more permissive, however, entrepreneurs must still consider the Company Law’s provisions when it comes to the company registration procedure requirements in Dubai.

Our company formation specialists in Dubai can offer more information on the regulations imposed on foreign investors seeking to set up businesses in the Emirate.

Key points in the FDI Law in Dubai

Through the FDI Law, Dubai has made important progress when it comes to market liberalization, however, according to Article 6 in the law, the UAE government must first create a foreign direct investment committee which establishes the sectors in which full foreign ownership can be permitted.

The same cabinet can impose specific requirements for the investors interested in acquiring full foreign ownership in a Dubai company. Among these requirements are:

  1. the percentage of foreign ownership can be more than 49%, but it can also be less than 100%;
  2. the investor could be required to deposit a specific share capital when setting up a foreign investment company;
  3. the committee can also establish the legal entity under which the foreign investor will be required to operate under;
  4. specific approvals could be imposed at the emirate level or the company could be restricted to operate in one emirate;
  5. the Emiratization requirement which implies hiring a minimum number of UAE nationals.

As mentioned above, full foreign ownership can be permitted in certain industries, for the others a negative list being created.

Our company registration agents in Dubai can offer more information on the legislation related to foreign investments in terms of industries full foreign ownership is allowed.

Restrictions under the FDI Law in Dubai

Even if most industries are open to foreign direct investments, there are also industries in which the Company Law prevails, and full foreign ownership is not allowed. Among these industries we mention the following:

It is important to note that the negative list can be amended at any time by the FDI committee by removing industries from it.

If you want to set up a business and need assistance, our Dubai company formation specialists can help you during the entire incorporation procedure.

Other provisions of the UAE FDI Law

An important aspect to consider when opening a company in Dubai as a foreign investor is that when seeking to operate in an industry that is not on any of the lists, the percentage of foreign ownership will be determined by the FDI committee.

When it comes to the licensing procedure, the applicants will benefit from simplified procedures which should not take more than 5 days. Once the license is issued, it will be published in the foreign direct investment registry and the company will be registered with the Dubai Economic Department (DED).

Our company registration advisors in Dubai can help you register your business with the DED.

The video below presents the main laws encouraging foreign investments in Dubai:

FDIs in Dubai in numbers

According to the Dubai Investment Development Agency, in 2018:

  • FDI projects created approximately 25,000 new jobs in 2018, representing a 77% increase compared to 2017;
  • thanks to this increase, Dubai ranked 9th at a global level in terms of job creation through FDIs;
  • the largest percentage of FDIs came from the US (37%), followed by India (12%); Spain (9%), China (7%) and the UK (5%) were also top FDI contributors in Dubai.

Our company registration agents in Dubai can provide you with details about the provisions of the new Company Law. You can also request our services if you want to open a company in Dubai.

For a complete list of all UAE’s international agreements, please contact our Dubai agents.