1) Foreign Investment Attraction Policy and Recent Trends

The UAE is considered the largest destination for Foreign Direct Investment (FDI) in the Middle East and North Africa, and its primary advantage lies in its free and stable investment environment.
This includes a business-friendly atmosphere, excellent accessibility to aviation and maritime logistics networks, and a fixed exchange rate system.
Furthermore, its relative stability in terms of crime and terrorism risk, along with the absence of income tax and corporate tax, further contributes to its attractiveness for investors.
However, certain weaknesses, such as restrictions on foreign ownership limited to 49% and the requirement for foreign investors to return to their home countries after terminating business operations or employment contracts within a short grace period, have been identified.

In recent years, there has been a growing effort to attract FDI from neighboring regions like Qatar and Saudi Arabia, especially as the UAE introduced the VAT system and imposed corporate taxes starting in June 2023.
Riyadh, the capital of Saudi Arabia, has emerged as Dubai's main competitor by adopting various open policies and economic diversification strategies under the leadership of Prince Bin Salman.
The Saudi government has also decided to conduct business exclusively with companies that have headquarters in the Middle East from 2024.

To maintain its position as a foreign investment hub, especially amidst the economic recession caused by the pandemic and the departure of foreign nationals, the UAE government is making comprehensive efforts and implementing new policies to attract FDI.
In November 2020, it lifted the foreign share limitation, which was initially announced in 2018, and abolished the requirement for a local partner to hold at least 51% of shares.
Some anticipate that commercializing these changes may take time, but the government's willingness to relinquish certain rights to create a more foreign investment-friendly environment is evident.
Additionally, in early 2021, the government announced plans to grant Emirati nationality to select foreigners, such as investors, doctors, scientists, and talented individuals, who have been contributing significantly to the country's development.
Moreover, since 2019, the UAE has been issuing Golden Visas, granting long-term residency, mainly to investors and businessmen, ensuring a 10-year stay, while also introducing retirement visas for real estate owners in anticipation of the potential outflow of foreign population from 2020 onwards.

2) Primary Investment Method

In the UAE, the Foreign Investment Act is not independently enacted but is stipulated based on the Commercial Company Law.
Being a federal country with seven emirates, the legal system is divided into federal and emirate levels, and federal law recognizes that individual emirates can address their own specific issues.
Each emirate has a foreign investment agency, typically the Department of Economic Development, which allows for the establishment of various legal forms of companies under the provisions of the federal company law.

The first company law, Federal Law No. 8 of 1984, also known as the Company Act, deals with general company establishment regulations, including company types, board members, and stock company regulations.
Since its enactment, the company law has undergone several revisions, with the noteworthy revisions being in 2015, 2018, and 2020.

The 2015 Federal Law No. 2 of 2015, commonly known as the law that implemented the foreign investment share restriction system, states that it is impossible to establish a 100% foreign-owned corporation in mainland UAE (Mainland), excluding Free Zones, with foreign ownership limited to 49%.
This system is referred to as the sponsor system, where the sponsor is not involved in the company's management or business activities and only owns a stake.
Additionally, when establishing a branch office or a liaison office, a local agent's appointment is essential, but the local agent cannot acquire a stake in the branch office; their role is limited to providing government-related business services.
However, due to economic instability factors such as the continuous outflow of foreign population, decreased new investment, and falling international oil prices, the UAE government revised some provisions of the company law in 2018.

The 2018 Federal Decree Law No. 07 of 2018 eased restrictions on foreigners, allowing them to hold up to 100% of their shares for the first time.
The purpose of this law was to increase the possibility of foreign capital entering sectors that the UAE strategically wanted to foster, such as manufacturing.
However, certain sectors, including 19 agricultural sectors, 51 manufacturing sectors, and 52 service sectors, still had some limitations.
Exceptions were made for areas that could affect the business activities of their governments and citizens, such as oil exploration and production, water and electricity services, telecommunication mail services, land and air transportation services, and local service agents.
Moreover, differences between emirates existed due to the authority of each emirate's Ministry of Economic Development (DED), high minimum capital requirements were set, and the local service agent system, which foreign companies considered the biggest difficulty, did not prove very helpful for small and medium-sized companies.
Subsequently, amid the economic downturn caused by the COVID-19 incident, the UAE government announced a new revised law in 2020 to create a more attractive investment environment.

The revised bill is the bill to abolish the sponsor requirements described above.
The revised law came into effect on December 1, 2020, the provisions of local service agents applied on April 1, 2021, and the provisions of abolishing foreign investment equity limits applied on June 1, 2021.
Requirements for holding more than 51% of shares of UAE nationals will be abolished, and foreigners (foreign companies) will be able to secure more than half of their shares when entering the country.
Even after the federal government's revision and enforcement of the law, the decision on the stake limit and the applicable industry was left to the discretion of the Emirates government, and the Abu Dhabi and Dubai governments released about 1,000 commercial and industrial activity lists (fields where foreigners can own 100% shares).
The list can be found on the website below.

The Abu Dhabi government list can be found on the Abu Dhabi Ministry of Economic Development website (https://www.adbc.gov.ae ) (suspended service as of May 11th, will be updated later), and the major commercial industry activities that foreign companies can 100% hold are as follows:

The Dubai government list is available on the Dubai Ministry of Economic Development website (https://ded.ae/DED_Files/ded_other/Full_Foreign_Ownership_Activities.pdf), and the major commercial industry activities that foreign companies can hold 100% of their shares are as follows:

3) Investment Procedure

The most basic procedure for establishing a company is acquiring a Trade License.
Companies can be established in both the mainland and Free Zones, which are free trade zones, with location choices varying depending on the business model intended to be pursued in the UAE.
For instance, if a company aims for general import and export and distribution within the region, it can choose to operate in the mainland.
On the other hand, if a liaison office is needed for re-export to nearby areas, the company can opt for the Free Zone.
Generally, establishing a mainland company takes more time, incurs higher costs, and involves more complex procedures, while the Free Zone offers the advantage of 100% foreign ownership and cost-effectiveness.
However, there are restrictions on mainland UAE activities.

Once the location is selected, the next step is to apply for business registration with the relevant authorities having jurisdiction over the area.
For mainland companies, the competent authority is the Department of Economic Development (DED) in each Emirate.
For Free Zone companies, it is the respective Free Zone Management Office (e.g., Jebel Ali Free Zone → Jebel Ali Free Zone Authority).

Subsequently, the company needs to select the type of company authorized by either the Emirates Department of Economic Development or the Free Zone Management Agency.
Although not uniform, the following company types and characteristics are typically available:

Each company type has its specific advantages and limitations, and the choice should be made based on the company's specific needs and objectives in the UAE.
In addition, you need to obtain a business license, but there are four major business licenses, and you can choose according to the area of each company's scheduled activities.

Afterward, the desired company name is selected, and various documents required by the management agency in the intended area of establishment are submitted.
While the specific documents required may vary depending on the Emirate or jurisdiction, typically, company articles (notarized), business activity plans, passports, and company establishment contracts are necessary.
If the corporate activities are regulated, approval from the competent authority is also required.
For instance, business activities in the health sector would necessitate obtaining permission from the UAE Ministry of Health and Prevention.

The UAE has long maintained a policy of encouraging foreign investment.
The stability of Dirham pegged to the U.S. dollar, convenience of foreign exchange remittance when acquiring fruits after investment, and all fields except the oil and gas industry and finance industry are open to establishing companies.
In addition, Free Zone recognizes 100% foreign ownership and recognizes exceptions to various regulations such as corporate tax payment and employment conditions for its own people.

The UAE abolished the restriction on foreign (corporate) ownership in the mainland, encouraging free business activities of foreign companies in most industries.
However, easing equity restrictions for industries that may affect the business activities of their governments and citizens is not allowed, and the main industries exempted from foreign equity restrictions are as follows:

1) Free Zone Overview

A Free Zone is a special zone established to foster the economy, trade, and industry, with the aim of attracting foreign investment through a more convenient business environment and various benefits.
It offers incentives such as simplified business opening procedures, 100% foreign ownership, and tax exemptions.
Since the opening of the Dubai Jebel Ali Free Zone (JAFZA) in 1985, there are now more than 40 free zones throughout the UAE, with many of them centered around Dubai.
Generally, free zones have specialized functions and operate under specific themes or industries, resulting in different industries being allowed, and tenant companies in the free zone can obtain various licenses (for specific types of work).
The available licenses for tenant companies in the free zone are as follows:

2) Preferred Free Zone for Many Companies and Representative Free Zone by United Arab Emirates

The representative free zones where many companies have moved in are as follows, and there is a tendency to choose a free zone suitable for their specific purpose of entry.
For example, JAFZA is selected for logistics activities near Dubai's Jebel Ali Port or for large warehouses.
Silicon Oasis is preferred by manufacturing or IT companies, and Dubai Airport Free Zone is suitable for handling cargo near the airport.
In the case of DMCC Free Zone, various types of licenses and office spaces are provided, and relatively low-cost packages for startups and small businesses are also available.

Additionally, the list of major free zones by Emirates are as follows:

3) Procedures and Precautions for Establishing a Company in the Free Zone

In general, the procedure for establishing a company in the free zone is as follows.
However, it's important to note that the detailed regulations may differ for each free zone, so it's necessary to reconfirm the specific regulations, keeping in mind that the following steps are general procedures.

Abu Dhabi is the richest and largest emirate.
The World Renewable Energy Association (IRENA), the headquarters of the first international organization in the Middle East, is a major oil producer and center of the federal economy.

1) Dubai

Dubai is the second largest Emirate and the most sophisticated and international hub of UAE trade.
It mainly generates economic profits in tourism and services, and is famous for Burj Khalifa, the world's tallest building today, Burj Al Arab, built along the coastline, and the Atlantis Hotel.

2) Sharjah

Sharjah is the third-largest emirate and serves as the center of UAE manufacturing.
It is renowned for its impressive buildings, museums, and traditional markets.
In 1998, UNESCO designated Sharjah as the center of Arab world culture, and the emirate continues to make significant efforts to preserve culture, arts, and local cultural heritage.

3) Ras Al-Khaimah

Ras Al-Khaimah is the fourth largest and urbanized Emirate.
Education and healthcare are major growth engines.
The beautiful harmony of the sun, sea, sand, and mountains are the pride of Ras al-Qaima.

4) Azman (Ajman)

Azman is the smallest emirate, but it is the fourth most populous and is surrounded by Sharjah.
It has continued to develop commercially since its foundation in 1803.

In general, a corporation is considered a separate entity, unlike a branch office, which functions as an extension of the parent company.
This independence allows corporations to generate profits on their own.
Companies entering the local market usually initially opt for the form of branch offices to observe market trends.
Subsequently, they establish a separate corporation to operate more independently and efficiently.

1) Overview

The jurisdiction for operating any business in the UAE can be broadly divided into the mainland and the free zones.
Each option offers different advantages depending on the type of business.
To conduct business on the mainland, it is necessary to register with the Department of Economic Development (DED) of each respective emirate and obtain a business license.
On the other hand, in the case of Free Zones, each Free Zone Management Agency serves as the higher authority.

Depending on the industry the entering company intends to operate in, obtaining a Department of Economic Development license may permit all activities.
However, in certain cases, separate permission from the federal government or other departments in the respective emirates may also be required.
Companies operating in industries that necessitate additional permission must fulfill the conditions specified by the relevant institution, such as the location of the business, technical staff requirements, and minimum capital regulations.
The procedures, fees, and regulations related to this process can be found on the websites of the related institutions.
The key institutions responsible for each major industry are as follows:

2) Registration procedure

3) Company Name Selection

In order to establish a company, a company must first be registered with the Ministry of Economic Development in the Emirates, and the name of an already active company, government projects, or government agency must not be used.

4) Initial Approval

The initial approval certificate does not dispute the start of the applicant's business at the Ministry of Economic Development, and is a document intended to move on to the stage of obtaining the license.

5) Partner / Service Agent Agreement

Under existing laws, contracts with partners or service agents must be signed depending on the type of company.
However, under the November 2020 revised law, the appointment of agents will be unnecessary except for government-owned companies from April 1, 2021.

6) Office Lease

Just before obtaining full-fledged business permission, you must sign an office lease contract and obtain a transfer report card.

7) Obtain a Separate Business License (if applicable)

In the case of industries that require separate licensing, approval of project permits is required at each competent authority and competent department.
However, in the case of General Trading (a kind of trading company specializing in various products), it is not necessary to issue licenses by industry, but an additional fee must be charged.

8) Payment of Commission

If you are granted a payment certificate or transaction number, you must pay within 30 days to obtain a business license.

1) Overview

The branch of a foreign company does not have an independent legal personality because it does not possess a separate legal identity from its parent company.
In other words, conducting separate for-profit activities is restricted in the UAE.
However, obtaining licenses and engaging in activities in specialized fields, certain manufacturing industries, and commercial sectors is still possible for foreign company branches.

2) Registration Procedure

It is the same as the corporate registration process, but in the case of branches, business licenses issued differently from corporations and liaison offices must be separately registered with the Ministry of Economy.
However, this does not apply to the Free Zone branch.

The liaison office can only operate with the name of the parent company, and support activities such as marketing and promotion of the headquarters are possible, but commercial activities are prohibited.

1) Overview

2) Registration Procedure

It is the same as the corporate registration process.

Public Joint Stock Companies are known to be a type of company favored by both local and foreign investors due to their ability to attract large capital.
These companies can obtain licenses and engage in various activities, including those in manufacturing, commerce, and specialized fields.

• Ownership: At least 10 founding shareholders (limited liability) are required, except when established by the government.

• Liability: Each member shall be responsible within the limit of the value of shares owned by each member.

• Management: The company is managed by a board of directors consisting of 3 to 15 directors.

• Minimum Capital: 10 million dirhams
  - 25% to 45% of capital may be listed

To establish a Private Joint-Stock Company, it is necessary to obtain permission from the Ministry of Economy.
These companies can obtain licenses and engage in activities within the manufacturing and commercial sectors.
Furthermore, if the fiscal year exceeds two years, the Private Joint-Stock Company has the option to convert into a listed stock company.

Ownership: At least three founding shareholders (limited liability) must own the entire company's capital in installments and at least 51% by UAE nationals.
- Shares cannot be opened to the public.
Liability: Each member shall be responsible within the limit of the value of shares owned by each member.
Management The company shall be managed by a board of directors consisting of 3 to 15 directors, and the chairman shall be a UAE citizen.
Minimum Capital: More than 2 million dirhams

A Limited Liability Company is the most preferred form for foreigners as it allows them full management jurisdiction over the company.
However, companies engaged in for-profit banking, insurance, and investment business activities cannot establish limited liability companies.
Additionally, it should be noted that it is possible to establish a one-person limited liability company, and in such cases, the founder is only liable for the capital indicated in the company's articles of incorporation.

Limited Liability Companies in the business sector can obtain licenses and engage in a wide range of fields such as manufacturing, commerce, consulting, and tourism.
Many companies in the UAE have also established and operated this type of corporation.

Ownership: Partners are allowed at least 2 and up to 50 people, and shares can be transferred to a third party.
A public offering of shares for the purpose of capital increase is not possible.
Liability: Each shareholder is responsible within the scope of their own stock capital.
Management: Foreigners can become managers and perform company business management exclusively.
There may be no more than five managers, and each manager's work method shall be detailed.
Minimum Capital: None

All documents required for the company's establishment must be prepared (translated) in English, notarized in each county, and certified by the Chamber of Commerce and the UAE Embassy in each country.
The certification process usually takes around three days, and it is known that obtaining an LLC-based business registration certificate in Dubai takes approximately 15 days.
Following the company's establishment, commercial registration must be completed with the Federal Ministry of Economy within two months from the date of establishment before commencing actual business operations.

(1) Company Name Selection: In order to establish a company, a company must first be registered with the relevant Emirate's Licensing Authority.
- Mutual-related regulations are similar across the UAE, and the company's mutual registration conditions are specified in detail on the website of the relevant government office.
* A fee must be paid for mutual registration, which is somewhat different for each emirate.

(2) Obtaining a Business License: After selecting the legal form of the company, the business license must be obtained from the Ministry of Economic Development of the Emirates.
- Commercial licenses, industrial (manufacturing) licenses, professional licenses, tourism licenses, etc

(3) Initial approval submission document (for limited liability companies):
- A copy of the passport of the applicant for the certificate of mutual registration (submission of residence permit and visa if not a person of GCC nationality)
- Family tree (Khulsat Al Qaid or Family Book) if the applicant is UAE national
- No Objection Certificate (NOC) received from the applicant's current sponsor if the applicant is not a GCC nationality
- If the manager is not a partner, a copy of the manager's passport
- an application for a business license

(4) Office Lease: Prior to final approval, an office lease contract must be signed and a transfer report (Ejari) must be issued and submitted.

(5) Final approval submission document:
- Initial approval receipt
- All documents previously submitted for initial approval
- a valid copy of the lease
- the original copy of the notarized articles of incorporation
- Approval documents of the relevant government agencies according to the performance

(6) Obtaining a separate business license (if applicable): A separate license in the case of industries that require permission, approval of project permission is required at each competent authority and competent department.

(7) Commercial Registration: In order to conduct actual commercial activities after the establishment of the company, a commercial registration must be made with the Federal Ministry of Economy within two months from the date of the establishment of the company.

A private business operator is a business license issued to an individual business owner, not a general company, in their own name, and it is a method of running their own business in the UAE.
For foreigners, they are allowed to become private business owners in only five areas: medical service provision, engineering advice, legal advice, computer consulting, and similar services, as well as non-trade activities.

• Ownership: 100% ownership by one person (infinite liability).

• Liability: The single owner is responsible for all the company's debts and other incurred debts.

• Management: A single owner manages the overall management, and foreigners can also become managers.

• Minimum Capital: None

For a joint venture, only licenses and activities in the manufacturing and commercial sectors are available, and the capital must be divided into transferable stocks of the same face value.
Unlike other company types, a supervisory committee should also be established.

• Ownership: One or more general partners (joint unlimited liability) and one or more participating partners (limited liability) have ownership andoverseetriction on the share ratio of the partners.

• Liability: General partners are jointly and severally responsible within the scope of their assets, and participating partners are only responsible within the scope of their shares in the capital.

• Management: General partners oversee management.

• Minimum Capital: 500,000 dirhams

For a joint venture, only licenses and activities in the manufacturing and commercial sectors are available, and the capital must be divided into transferable stocks of the same face value.
Unlike other company types, a supervisory committee should also be established.

Like a joint venture, only licenses and activities in the manufacturing and commercial sectors are possible to be listed as a general partnership company.

• Ownership: One or more general partners (infinite liability) and one or more limited liability partners are owned, and the stake must be 100% owned by UAE nationals. General partners should be UAE nationals.
  - The shares of a general partnership company cannot be disclosed to the general public.

• Liability: The general partner is individually and jointly responsible for the corporate debt within the scope of his or her assets, and may not enter into a contract with a third party contrary thereto.

• Management: Unless the management is delegated to one partner or another under the contract, the general partner is in charge of the management.

• Minimum Capital: None

1) Onshore

• Allows for access to the domestic market in select sectors.

• Under the 2018 FDI law, up to 100 percent foreign ownership in a company will be permitted in many sectors.

Business Activities and Licensing

The nature of the economic activity identifies the legal form of the company and the type of license that may be required.
There are six types of license, which may include more than one business activity:

• Industrial

• Commercial

• Crafts

• Tourism

• Agricultural

• Professional

Emirate-level Authorities

Within each license there are more than 2000 various economic activities to select from.
It should be noted that the legal form or company structure must be consistent with the economic activity.
For the requirements of each economic activity and its legal form, investors should consult the following, which can be provided on request:

• Abu Dhabi Chamber: Trade Licenses Guide

• Dubai Economy: Start your Business

• Sharjah Investment and Development Authority (Shurooq): Procedures and Requirements

• Department of Economic Development in Ajman: Issuance of economic licenses

• Department of Economic Development in Ras Al Khaimah: Issuance of licenses

• Fujairah Government: Establishing companies in the Emirate of Fujairah

• Dibba Al Fujairah Municipality: Procedures of establishing companies in Dibba Al Fujairah

Onshore Company Structures

Within each license there are more than 2000 various economic activities to select from. It should be noted that the legal form or company structure must be consistent with the economic activity.
For the requirements of each economic activity and its legal form, investors should consult the following, which can be provided on request:

• Limited Liability Company (LLC):
  Made up of a maximum of 50 members and a minimum of two members. The most popular form of incorporating onshore in the UAE.

• Private Joint Stock Companies:
  In this structure, shares are held privately, with a required minimum of three founding members, and a minimum capital of AED 2 million.

• Public Joint Stock Companies:
  A company whose capital is divided into publicly subscribed shares. This structure requires a minimum capital requirement of AED 10 million, and a minimum of 10 founding members.

• Joint Participation (Joint Venture):
  An association between a minimum of two partners, one of whom must necessarily be licensed in the UAE. Business is conducted in the name of one partner and partners share in the profits and losses as per a contractual arrangement. This structure allows a foreign investor to hold a share in the capital of the company and be involved in operational and managerial decisions, while simultaneously benefitting from the advantages that are enjoyed by local entities. The foreign investor would be exempt from obtaining the necessary permits and licenses, as the local partner has the necessary permits and licenses in place.

• Branch or Representative Office (Local Agent Required):
  The types of activities allowed are dependent on the licensing rules and the list of activities approved by the Department of Economic Development of each emirate. Branch Offices offer investors an opportunity to enter the market and conduct initial scoping studies and build relationships in advance of market entry.

• Sole Proprietorship (Local Agent Required):
  Owned by an individual who controls all operations and receives 100 percent of all profits. This entity must necessarily be owned by an individual, and not by a company. While a sole proprietorship for professional services can be owned by an individual of any nationality, the same is not true for carrying out industrial or trading activities, where such sole proprietorships can only be owned by UAE or GCC nationals.

Additional Steps

Before obtaining initial approval and taking the next step towards starting your business, some additional approvals might be required:

• Foreign investors must obtain the approval of the General Directorate of Residency and Foreigners Affairs before obtaining the initial approval.

• Certain activities require additional approvals, such as:

  • Activities relating to legal affairs, which are regulated by the Ministry of Justice.

  • Activities regulated by the Securities and Commodities Authority.

Additionally, further approvals may be needed in certain sectors after initial approvals are granted:

• Ministry of Interior: Approvals for public transportation services, driving centers, fire extinguishing equipment, alarm and protection systems, used cars, spare parts, and car dealerships.

• The Municipality Department in the relevant emirate: Approvals for engineering and architectural activities.

• Telecommunication Regulatory Authority: Approvals for telecommunication activities.

• Executive Council: Approvals for tourism and travel, public services, trading, charter, shipping and marine agencies, car clubs, air transport charter, branches of foreign companies.

• Health Authority in the concerned emirate: Approvals for health related activities.

Being part of the Business Community

After a company is registered and has received all relevant approvals, membership of the chamber of commerce of the relevant emirate might be required before proceeding with carrying on the economic activity.

Where to Start?

Get in touch with the Invest Emirates team! Or, if you know your requirements, the Federal Government provides ‘Basher’, a service for establishing businesses online. Basher is an integrated e-Service which enables investors to establish companies in the UAE through an online platform which is linked with the local and federal government entities concerned with licensing of economic activities. Basher gives investors a fast, easy and safe procedure to begin their investment journey, without being required to visit any government authority.

2) Offshore (Free Zones)

• Free zones allow for 100 percent foreign ownership in all sectors.

• Each free zone is usually focused on a particular sector or industry.

• All free zones have their unique laws and incentives, which offer additional tax and financial advantages.

• Most free zones have VAT exemption, as well as an exemption on all import and export duties.

Offshore Company Structures

• Free Zone Establishment:
  Free Zone Establishments (FZE) are akin to onshore Limited Liability Companies. FZEs may be established with one shareholder who may be either an individual or a legal entity.

• Free Zone Company:
  The main distinction between an FZE and a Free Zone Company (FZCo) is with respect to the number of shareholders. An FZCo is an entity similar to an FZE with two or more shareholders who may be either individuals or entities. Some free zones impose a maximum number of shareholders.

• Branch Office:
  Branch Offices set up within a free zone are similar to those found onshore, where the branch is merely an extension of the parent company and does have not its own legal identity. One advantage of a free zone Branch Office is that it is not required to appoint an agent to carry out its business activities. However, it cannot carry out business within the UAE's domestic 'onshore' market.