The UAE's new residency and foreign ownership rules in local firms

PUBLICATIONS / Articles / 2018 / The UAE's new residency and foreign ownership rules in local firms
The UAE is an exciting white listed destination.
 
Favourable legislation for foreign investors, entrepreneurs and people looking to relocate to Dubai for various reasons sees the light of day all the time.
 
That is why since 2006 we helped hundreds of entrepreneurs and investors to do business in the UAE.
 
A truly International financial and banking centre and an ever increasing business hub.
 
New residency and foreign ownership rules
 
The changes are one example in a number of strategic reforms and initiatives being implemented by the UAE as part of the UAE Vision 2021 to attract global talent to the region and cement its position as a key hub for international investment as the efforts to diversify and strengthen its economy gather pace as we approach Expo 2020.
This announcement comes in anticipation of the UAE's long-awaited investment law which is anticipated to be issued by the last quarter of this year and will, amongst other reforms, liberalize foreign ownership in sectors ranging from the manufacturing industry, including pharmaceuticals, to the services sector.
 
Wait, what are the changes?
 
Two fold basically. Although these new rules are being drafted and agreed upon they are in summary the following:
 
A.     Foreign investment rules regarding UAE companies
 
Foreigners are allowed to hold up to 49 percent only in companies registered in the UAE.  The restriction applies to all types of commercial companies except those registered in a free zone or in an offshore company. 
In the future, foreign investors will be granted the right to enjoy a higher investment threshold.  The ruler of Dubai and vice president of the UAE, his highness the Sheikh Mohammed bin Rashid Al Maktoum instructed the Ministry of Economy to coordinate with the relevant authorities to implement the new decision by the end of this year. 
 
B.      Change to UAE resident visa rules
 
In the UAE residence visas are generally linked to the employment status of an individual and the validity is for a period of two years in mainland UAE and three years in the free zones.  Currently the UAE does not grant any long term residence visas to expatriates.
The new decision will enable specialists in medical, scientific, research and technical fields, as well as for all scientists and innovators, entrepreneurs and innovators to obtain up to ten-year residence visas.  In addition, students studying in the UAE can obtain a five-year residency visa and a ten-year visa in the case of exceptional students.
 
Could you please elaborate more, or rather in plain English so I can understand? 
 
Sure.
 
In a nutshell.
 
Baby steps if you prefer.
 
Presently, foreigners can fully own a company if it’s located in a free zone or offshore company. However, these companies are not permitted to conduct business within the UAE, outside of their specific free zone. In order to conduct business in mainland UAE, foreign investors must either appoint a local agent or establish a company under the UAE Commercial Companies Law (Federal Law No 2 of 2015) which requires that any such company must have a UAE National Company or individual holding at least 51% of the share capital.
 
So in plain English; mainland companies in the near future may be 100% foreign owned and can freely conduct business in Dubai and the United Arab Emirates in general.
 
It remains to be seen how the decision to relax the local participation requirements will be implemented and what criteria will be used to determine eligible foreign investors, for example, whether the new rules will be applied on a sector basis.
 
The second important development is the decision to provide 10-year visas to certain sections of the expatriate population will provide them with confidence in their long-term prospects in the UAE, which in turn should encourage them to consider investing in property here.
 
Fair enough, how can I get a benefit out of this?
 
That depends on your circumstances.
 
If you have an existing business in the UAE or relocated yourself there or perhaps contemplating of getting one.
 
Either way it is always good to know at least.
 
A great benefit is that you can enter the UAE market without having to have a local sponsor or your ownership restricted to 49%. That is a big plus. Why? Well basically you will be entering a market that enjoys strong and sustainable growth. Which is regulated of course and can be extremely lucrative for your products or services.
 
A second benefit could be that it gives you a better prestige than before. Furthermore, with a local establishment you can access to government contracts as well. That will surely entail more work. And with that comes more financing as well, government and private.
 
Another benefit is that there are no restrictions on the number of employees you employ as in Freezone companies. As much as your business needs in order for it to grow and flourish.
 
Likewise; a 10-year visa sounds perfect. You do not have to renew every 2-3 years. Simple. Saves time. Saves added costs. Efficient.
 
What is the rationale for the UAE government to do this? Surely is there a catch somewhere?
 
No catch.
 
The country is not bankrupt or in dire straits. Or has a debt problem or an ageing population and a bulging healthcare bill. Or governments last for a maximum of 2 years. It has well diversified from dependence on oil as well.
 
Moody’s/ Standard and Poor’s rate/ Fitch (the credit rating folks) rate it very highly with a stable growing outlook as healthy economic growth tempers debt. And this despite the fact that is an area where geopolitical tensions are at an all-time high.
 
The government is eager to sustain Foreign Direct Investment and make entrepreneurs life much easier. They wish to retain talent and help it grow. That is why the UAE is a multicultural country. Talent from all corners of the earth.
 
Great how can you help me? I need advice!
 
How Freemont Group Can Assist You

Let us explain how Freemont group can help you. We are a European managed company that has been setting up UAE companies since 2006.

We know the right persons in the UAE and we have set up hundreds of companies in the UAE. So you will experience setting up your business the most cost effective and time efficient manner. We also have experts that can advice you on international tax planning, assets protection and estate planning. That makes us unique in the UAE.

Feel free to contact us for a free consultation or call. 

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