Last year, Dubai was deemed 1st in Arab world in terms of Economic Performance, the Best City for Expats in the MENA region, as well as the third most resilient economy for post COVID-19 recovery. Prior to that, in 2019, it was also recognized as the World's Leading Business Travel and MICE Destination. In addition, Dubai attracted 523 Foreign Direct Investment (“FDI”) projects in 2018—over 40% higher than the previous year.
Time and again, Dubai has proven its ability to fortify its business activities, even in the midst of economic cycles and crises. It has successfully steered towards new directions in an effort to reactivate the economy and come out more resilient in the international arena. It has given an astute approach in terms of trade, which has allowed it to become one of the few nations to successfully thrive in the new era.
Keep reading to find out why so many foreign investors are coming to Dubai to set up their businesses. You definitely do not want to miss out on the opportunity to establish your company in this emirate!
Corporate Benefits for UAE Set Up of Foreign Investments
Not only does the UAE have 0% corporate income tax for most businesses, but these other taxes are non-existent:
· Capital Gains Tax
· Withholding Tax
· Dividend Tax
· Personal Income or Payroll Taxes
· Import and Export customs duty within Free Zones (with exceptions)
· Stamp Duty on contracts
It’s also important to note that as of 2021, 117 countries have Double Tax Treaties with the UAE.
Quick and Confidential Application Process
Recently, Dubai Crown Prince Sheikh Hamdan bin Mohammed noted Dubai’s position as a global investment hub after the city was ranked third in the latest Global Cities of the Future list. According to FDI Intelligence, Dubai moved up three places since 2018/2019, to achieve third place in this year’s ranking. It is now easier and faster than ever to establish a business in Dubai, indeed!
Any new applications for foreign investment projects require a response from relevant authorities within five days. If your application is denied, there is also an appeal mechanism provided by Federal Law No. 19 of 2018 on Foreign Direct Investment.
The FDI Law also ensures the confidentiality of all applications. Harsh penalties, including jail time and fines up to AED 10 million, are enforced for sharing sensitive information about investment projects.
Favorable Business Regulations
In UAE Free Zones, foreign investors may hold 100% ownership of companies in UAE Free Zones. Aside from that, non-Emiratis are now also allowed to fully establish their own company in the Mainland under the amended Commercial Companies Law, which came into effect on June 1. Under this law, these business owners are now allowed full ownership without the need for citizens as sponsors—the one major requirement for forming a business in the country. These UAE nationals are required to own 51% of the shares of the company.
With the new legislative changes in the ownership rules, Dubai and the rest of the UAE are set to be an attractive destination for Foreign Direct Investment.
Non-Corporate Benefits for UAE Set Up of Foreign Investments
Location, Location, Location!
The UAE is one of the safest countries in the world, where 92% of UAE residents feel safe to walk outdoors at night in one of the surveys. It’s no secret that over 200 nationalities call it home, especially when you consider the eight months of beautiful summer weather.
In addition, there are also plenty of things to do in Dubai. Many cultural events and international sports tournaments are held there, and tourists can also enjoy the luxurious lifestyle and endless shopping possibilities.
So, if you’re interested in traveling, Dubai is definitely the place to be! It is well-connected to destinations around the globe, and there are over 140 direct flights to various locations across the world via its official airline, Emirates.
Thousands of law firms, consultants and PROs can assist you in the establishment of your business in Dubai. In addition, the online platforms of the different licensing authorities are extremely easy to use, as if you can do it with eyes closed!
The catch though, and this is what the majority of foreign investors find challenging, are the location and compliance.
The UAE has over 40 free zones, and 30 of those are in Dubai. Each jurisdiction has its own regulation and is usually used for different business activities. Are you setting up a distribution center? A manufacturing plant? If yes, where are your customers located? Is it in the Middle East? Are you setting up a service center or a headquarters?
Every type is unique and should be looked at individually in order to determine the best location for a foreign investor.
Compliance is also essential in Dubai, and lack of it may lead to material “avoidable” penalties if not taken seriously. It is also important to note that different locations and jurisdictions in Dubai mean different compliance rules and regulations.
The main two areas of compliance that we always see gaps in are Value Added Tax (“VAT”) as well as import and export regulations.
Compared to other countries, the VAT is a new system for the UAE. Having an Arabic speaking Accredited Tax Agent with direct contact with the UAE Federal Tax Authority is critical to ensure accurate treatment of VAT for your business.
Import and export compliance regulations are also missed most of the time. The UAE has thousands of practitioners who unfortunately lack the regulatory touch of transactions.
Here are some of the things to consider when it comes to import and export compliance:
- Availability of inventory system based on HS codes and declaration reference number, etc.
- Issuance of accurate certificates of origin
- Value added for national products for free trade agreements purposes
- Consumption of goods in free zones
- Movement of goods from free zones to the local market and vice versa
Want to be compliant for the long-term? Speak with trusted advisors and experts and reach out to us now!