Doing business in the UAE

by benetc

Doing business in the UAE

by benetc

by benetc


Country overview

The United Arab Emirates (UAE) is a federation of seven different emirates (jurisdictions of rulers known as Emirs) which together comprise the third largest economy in the Middle East behind Saudi Arabia and Iran.

Varying in size and resources, the seven emirates are Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm al Quwain.

The country has experienced considerable economic growth and development since its formation in 1971 and 1972, due primarily to its production of substantial quantities of oil and gas.

The following information is provided on the basis of in-house data for a preliminary reference. An appropriate investigation should be made at a later stage in order to confirm the present assumptions.

Business and investment environment

To attract investments of expertise and capital, the government of the individual emirates seek to provide an attractive business environment.

The following are some of the principal features of the economic and business environment in the UAE:

  • A co-ordinated infrastructure that provides all essential utilities to the major centres;
  • Excellent communication systems;
  • A virtual absence of taxation;
  • A well-structured financial sector with virtually no exchange-control regulations;
  • Free-trade zones that ensure ease of registration and efficient operating facilities; and
  • An attractive social environment, including modern educational, medical and recreational facilities.

Foreign investments

Exchange Controls and Debt-to-Equity Requirements

The UAE imposes virtually no foreign-exchange restrictions. Equity capital, debt capital, interest, dividends, branch profits, royalties, management and technical service fees and personal savings may be remitted freely abroad.

Restrictions on Foreign Investment

Under the Commercial Companies Law, Federal Law No. 8, UAE nationals must own a minimum of 51% of all public and private shareholding companies and limited liability companies. In practice, many public and private shareholding companies, especially those engaged in insurance and banking, are expected to be wholly owned by UAE nationals. The Commercial Companies Law also states that non-UAE nationals may not be general partners in partnerships.

The Commercial Agencies Law restricts commercial agencies to UAE nationals.

Investment Incentives

In general, the government seeks to provide a free-market economy with minimal regulatory restrictions. To attract foreign and local investment, the federal government and the governments of the individual emirates have developed a modem and sophisticated infrastructure and provide a business environment largely tree of taxation and exchange controls. in addition, the UAE in recent years has signed double tax and investment protection treaties with several countries.

The UAE has created several free-trade zones. Foreign companies establishing businesses in the free-trade zones are offered special concessions, including exemption from the requirement of having local ownership or a local sponsor.

Sources of Finance for Foreign Investors

A well-structured network of local banks and branches of foreign banks provides a full range of banking services. Commercial banks are the principal source of short-, medium- and long-term credit.

Importing and Exporting


Importers must obtain appropriate trade licences. Special licences are required for certain classes of goods, including alcohol, firearms, narcotics and explosives.

Exports are not restricted and are not subject to export duties.

Imports into free-trade zones are duty-free; however, normal rates of duty are imposed if the imports are resold subsequently in the UAE.

Customs Duties and Procedures

The UAE has a unified customs duly rate of 4% on dutiable imports. The duty is levied on the basis of the cost, insurance and freight (CIF) value of the imported goods as evidenced by the manufacturers’ or suppliers’’ invoices.

A number of commodities are exempt from duty, including foodstuffs, certain raw materials, manufacturing equipment, educational materials and communication and medical equipment.

The following documents are required to release imports: trade licence, invoice and shipping documents, fulI description of goods, and certificate of origin.

Offset Programme

Offsets are required for all purchases of overseas-sourced goods or services by the UAE government if the duty-free price of the import exceeds US$10 million. Currently, offset is required for procurements by the UAE Armed Forces. Offset is intended to apply to civil purchases on a case-by-case basis.

The UAE Offset Programme requires foreign suppliers to commit to an Offset Agreement to qualify for selection. The following items are specified in an Offset Agreement:

  • The value and percentage of planned offsets;
  • The agreed period for fulfilment of offset obligations; and
  • Liquidated damages for non-fulfilment.

The value of any offset obligation may not be less than 60% of the value of the imported content of the contract. Value is expressed in the currency of the primary contract unless otherwise specified.

The UAE Offset Group (UOG), which is based in Abu Dhabi, is responsible for negotiating and assessing contractors’ offset proposals.

Structure of business entities

The provisions of Federal Commercial Company Law no. 8 that apply to public and private shareholding companies and limited liability companies are described below.

Public Shareholding Companies

A public shareholding company must have a minimum of 55% share participation by the general public. Shareholders’ liability is Limited to the nominal value of their shares in the company’s capital. The minimum capital of a public shareholding company is AED 10 million, and at least one-fourth of the amount must be paid in on subscription. Contributions to capital may be made in cash or in kind.

Shares may not be issued at a price below their nominal value and must be registered in a share register. Ali shares have equal rights unless the Articles of Association stipulate otherwise.

The board of directors must have at least 3 members and no more than 15. The majority of the directors, as well as the chairman, must be UAE nationals.

Private Shareholding Companies

Private shareholding companies must have a minimum of three shareholders. in general, these companies are subject to the same statutory provisions applicable to public shareholding companies. The minimum capital of private shareholding companies is AED 2 million.

Limited Liability Companies (LLC)

A limited liability company may be formed by a minimum of two and a maximum of 50 persons whose liability is limited to the value of their shares in the company’s capital. The minimum capital of a limited liability company prescribed by Federal Commercial Company Law No. 8 is AED 150,000, although, in practice, a higher figure may be required in certain emirates.

The following steps are required in establishing a limited liability company in Dubai (similar provisions apply in other Emirates).

  1. Select a commercial name for the company and have it approved by the Licensing Department of the Economic Development Department;
  2. Draw up the company’s Memorandum of Association and have it notarised by a Notary Public in the Dubai Courts;
  3. Seek approval from the Economic Development Department and apply for entry in the Commercial Register;
  4. Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce’s Bulletin. The licence will then be issued by the Economic Development Department;
  5. The company should then be registered with the Dubai Chamber of Commerce and Industry.

Labour issues

Expatriate and TCN personnel (third country nationals) will be hired by the local joint venture company (JVC) under a contract registered in the UAE.

Labour Law in the UAE is loosely based on the ILO’s model. UAE Law no. 7 governs most aspects of employer/employee relations such as: hours of work, leave, termination rights, medical benefits and repatriation.

The labour law is protective of employees in general and overrides conflicting contractual provisions agreed under another jurisdiction, unless they are beneficial to the employee.

The Ministry of Labour issues a model form for labour contracts in Arabic, which is widely used, but other forms of contract are enforceable, provided they comply with the Labour Law.

Trade Unions do not exist. Strikes and lockouts are forbidden.

In the case of a dispute between employer and employee or in interpretation of the Labour Law the Ministry of Labour and Social Affairs will initially act as an adjudicator. If a party wishes to appeal such decision, it can take its case to Court.

Essential data:

  • maximum working hours: 8 hours per day, 48 hours per week
  • public holidays: 10 days per year
  • leave: 2 days per month initially, then 30 days/year after the first year of employment
  • terminal bonus: 21 days pay for every year in the first five years of service; 30 days for every year thereafter.

The weekend for office workers has traditionally been Thursday afternoon and Friday but a number of organisations have changed to a 5 day week with Friday and Saturday as the weekend.

Individuals are not subject to income tax in the UAE. Taxes on labour may be summarized as follows:

  • Individual income tax rate 0%
  • Capital gains tax rate 0%
  • Net worthtax rate 0%
  • Estate and Gift Tax rate 0%


Corporate taxes may be summarized as follows:

  • Corporate income tax rate 0%
  • Capital gains tax rate 0%
  • Branch tax rate 0%
  • Withholding tax 0%

The only taxes are municipal taxes imposed on hotel services and property rental.

No foreign exchange controls are imposed by either the federal government of the UAE or the individual emirates.

Tax treaties are in force with the following countries, amongst others: China, Czech Republic, Egypt, Germany, Finland, Germany, India, Italy, Malaysia, Pakistan, Poland, Singapore and Turkey.

Financial reporting

The Commercial Transactions Law (Federal Law No. 18 of 1993) provides that a business enterprise must keep such commercial books as the nature and scope of its business requires in a manner that accurately reflects its financial position, including assets and liabilities.

Free zones

The Jebel Ali Free Zone Authority (JAFZA) has published implementing regulations for Dubai Law No. 9, which permits the incorporation of 100% foreign-owned limited liability entities known as “Free Zone Establishments” (FZEs) in the Jebel Ali Free Zone. The regulations provide that an FZE may conduct activities inside the free zone in accordance with the terms of a special licence issued by JAFZA and outside the free zone in accordance with applicable Laws and regulations. An FZE must maintain a registered office in the free zone.

An FZE is a separate legal entity to which a minimum capital requirement of AED 1,000,000 applies. An FZE may have one shareholder only. It must have at least one director and a secretary, who must reside in Dubai. The offices of director and secretary may be held by a single person. An FZE must appoint a locally licensed auditor and submit audited financial statements to JAFZA within three months of the end of its financial year. The FZE must maintain net assets at a level of at least 75% of its share capital.

The Free Zones of the UAE of concern for industrial operations are:

  • Khalifa Industrial Zone Abu Dhabi (KIZAD)
  • Abu Dhabi Airport Free Zone (ADAFZ)
  • Ajman Free Zone (AFZ)
  • Fujairah Free Zone (FFZ)
  • Hamriyah Free Zone
  • Industrial City of Abu Dhabi (ICAD 1 and 2)
  • Jebel Ali Free Zone
  • Khalifa Port and Industrial Zone (KPIZ)

Other free zones are dedicated to different sectors (e.g. healthcare, software, media, logistics).

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