Tuesday 21 September 2021
100% Foreign Ownership of Business in UAE: Explained
June 8, 2021 | By - Neelam Motwani

100% Foreign Ownership of Business in UAE: Explained

As some might call it a new dawn for the business community in UAE, the new rules for the Ministry of Economy will now allow 100% foreign ownership of companies in the country. However, there are various segments that one must understand before one plans to cut the cost of the operations in their business. 

The UAE Commercial Companies law allowed the amendment to come into effect from 1 June, many business owners are still struggling to get a clear image about the same. Do they have to pay their Emiratis counterpart an advance? Is the amendment approved for all business types in every Emirate? How do you need to apply for the new amendment? Is your agent providing you with the necessary information about the newly passed law? Let’s understand the same in a little detail.

The Announcement

The UAE Ministry of Economy allowed foreign investors and entrepreneurs to fully own onshore businesses and companies. The Amendment in Commercial Companies Law of 100% foreign ownership came into effect from 1 June 2021. 

100% Foreign Ownership

Abu Dhabi Department of Economic Development (ADDED) also announced a list of 1,105 registered industrial and commercial activities open for legal non-citizens ownership. These commercial sectors can be fully or partially owned by companies to practice industrial activities in the Emirate. 

Abdulla bin Touq Al Marri, Minister of Economy, said, “The amended Commercial Companies Law aims at boosting the country’s competitive edge and is a part of UAE government efforts to facilitate doing business.”

Click here to check the complete list of activities available for foreign ownership in Abu Dhabi. The decision is in line with Federal Decree-Law No. (26) of 2020 that amends to provisions of Federal Law No. (2) of 2015 permitting 10% foreign ownership in Abu Dhabi. This amendment will allow the existing companies to have the right and adjust their status, provided that they comply with the regulations on the business activities and restrictions, if applicable. 

100% Foreign Ownership

Sharjah Economic Development Department (SEDD) also issued a similar decree that implements a full foreign ownership policy of commercial and industrial companies in the Emirate. This will allow foreign companies branches to conduct their commercial activities in Sharjah without any agent required of a foreign company. 

Does the law apply to all the Emirates?

Yes, according to the UAE Ministry of Economy, foreign investors and business owners can renew or apply for a new business mainland licence with complete ownership in certain industrial activities. However, the local government of each Emirate will also have a final authority to decide the actual foreign ownership percentage, which goes up to 100%, depending on the type of business. Currently, the mainland licence includes a 51% share of the local national and 49% of the foreign legal non-citizens operating the business. 

100% Foreign Ownership

In case your renewal date is close or planning a new business model to operate in the Emirate, you must speak with the Department of Labour and Human Resource to receive the entire circular on the same. You will be asked to submit your business proposal and documents supporting your business model and industrial activity for a final decision on ownership percentage.

Is your agent asking for advance payment on behalf of your Emirati owner?

As many companies and foreign investors are registering for 100% foreign ownership licence, the confusion about the licensing process is still under scrutiny. Many expatriate community agents who were handling the renewal process of many industrial sectors are now asking for advance payment on the behalf of their local Emirati owner. As explained by the agents, the advance payment of the next three years incentives must be paid to the local to proceed further with the renewal of 100% foreign-owned business. 

However, no such statement has been made by the Ministry of Economy or Economic Department of any Emirate. It is highly advised to the foreign owners to strictly follow the protocols of the Economic department before making any transaction to the ‘claimed’ or ‘unclaimed’ agents. You can contact the Economic Department in each Emirate on the following numbers:

  • Ministry of Economy: 8001222
  • ADDED: +971 2 815 8888
  • DED:  600 545555
  • SEDD: +971 6 512 2222

Clarifications provided by Dubai Economic Department

Just after the announcement of 100% foreign ownership in the UAE, Dubai Economy issued various guidelines to clarify the procedures. As many businesses reported queries due to unclear matters, Dubai economy released certain protocols to be considered while renewing or applying for a business licence in the Emirate. Some of them are:

  • Investors can complete their procedures through service channels of Dubai Economy or digitally through the ‘Invest in Dubai’ platform.
  • The status of the existing business licenses in Dubai will remain unchanged including an Emirati partner as per the MOA signed with the partner
  • The reduction in percentage share or complete withdrawal of Emirati partnership from 51% will be possible according to the legal procedures followed
  • Full ownership of the business will not bring any change to the followed procedures and requirements
  • Dubai economy also confirmed that there are no additional fees, capital or any guarantees required for full foreign ownership. For many investors, it is important to understand this protocol is strictly given by Dubai Economy, so do not fall for the agents, in case they ask for any additional fees
  • To change the company legal form from LLC to a Sole Proprietorship will not be possible, though the existing licence can be transferred to a single person company with limited liability, according to the new existing laws
  • The complete ownership will not be applicable for commercial agencies, as they are regulated by Commercial Agencies Law

How will Emiratis benefit from 100% foreign ownership in business?

As the UAE opens itself for the world, the country is aiming to boost its economy and welcome more foreign investment. As the country is hosting Expo 2020 this year in 2021, the eyes of the major investment giants are looking for a better opportunity to invest in the UAE. In order to pursue the same, 100& foreign ownership amendment was put into consideration. However, many residents and nationals of the UAE questioned how it will benefit the citizens of the country as they lose the partnership held in foreign companies registered in UAE.

To understand how it works for UAE nationals, it is vital to consider the industrial activities that will be open to foreign ownership. Most of the commercial and banking sectors will still be running under the federal decree like before. UAE still holds the credibility segment of the industrial activities, which favours more to the locally owned companies that are aiming to benefit from the UAE government. 

Meanwhile, the Emirates are also increasing the minimum wage for UAE nationals. The recent announcement of the Sharjah Media Office confirmed that the minimum wage for nationals has increased from AED17,000 to AED25,000, which is approximately 40% higher than most of the western economies. ‘Emiratisation’ being one of the crucial aims for the country, such decisions by the Emirates will help in resolving unemployment issues among the nationals. 

UAE is one of the highest paying wages countries for their nationals in the world. The country also offers leverage to the nationals by providing every monetary support for their education and entitlements within the UAE. Along with highly paid minimum wage, the employment benefits are highly favourable for the citizens in terms of opportunities, leaves, paid leaves mark, and more. 

How will business owners and the government benefit from the same?

A ‘Master stroke’ plan is already made! Many foreign investors and company owners are already leveraging the amendment. But how does it benefit the investors and the country? Following is the list of benefits explaining the same: 

  • 100% foreign ownership will boost more investment in the UAE and contribute to the local economy of the Emirate
  • This decision will also enhance UAE’s position in the global investment map where industrial activities can be conducted with complete ownership by a foreign and legal non-citizen
  • This strategy will enhance and advance UAE’s position as an ideal investment destination globally
  • While COVID-19 pandemic created havoc in the rest of the world where major economies saw a dive, with this announcement UAE gave a ray of hope for the foreign investments to open their possibilities in the GCC region
  • This strategy will help UAE to attract more foreign investments in industries other than the oil and gas sector
  • As Expo 2020 is around the corner, the strategy is expected to enrol more businesses within this year itself
  • It will increase the confidence of the investors in the Middle East market while reducing the cost of business operations too
  • The significant impact will also be seen in the trade activity of the country, as it will help boost more imports in UAE

While foreign investors await more information on the same, many companies have already started registering for the 100% foreign ownership status already. In order to get the latest updates on the same, keep reading AlShorts: Short News in 30 Seconds.

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