The United Arab Emirates (UAE) has become a global magnet for investors, entrepreneurs, and business owners, with its international appeal drawing individuals from across the world. Remarkably, the country’s population is currently composed of nearly 90% foreign citizens.
Historically, foreigners were permitted to establish businesses in the UAE, but they faced restrictions on maintaining 100% ownership when operating within the mainland. However, recent developments have altered this landscape significantly. In this article, we will delve into the recent changes and the reasons behind them.
Recent Changes Allowing 100% Ownership in Dubai Mainland
Until recently, entrepreneurs looking to establish their businesses in the UAE mainland faced a significant limitation – they could only retain a 49% stake in their companies, while the remaining 51% had to be held by a local sponsor.
These sponsors could either be individuals or corporate entities. In the case of individuals, they were required to be Emirati nationals with professional standing. These sponsors provided their services in exchange for an annual fee but held no decision-making authority or claim to company profits.
However, there were some exceptions to this rule. Professional services companies could be wholly owned by foreign nationals. International entrepreneurs also had the option of setting up their businesses in free zones, where they could enjoy 100% ownership in all cases, along with additional advantages such as freedom from currency restrictions, 100% customs tax exemptions, and the ability to repatriate both profits and capital without restrictions.
The new regulations, as officially stated, have brought about a significant change:
“Foreigners are now permitted to establish companies with 100% full ownership, in accordance with the provisions of Federal Decree-Law No. 26 of 2020, which amends the provisions of Federal Law No. 2 of 2015 on Commercial Companies.
This legal amendment eliminates the requirement for onshore commercial companies to have a major Emirati shareholder or agent, thereby granting full foreign ownership rights to individuals of all nationalities who establish onshore companies in the UAE.
Additionally, for companies seeking to become joint stock entities, subject to approval from the relevant authorities, they can now offer up to 70% of their shares through initial public offerings (IPOs), as opposed to the previous limit of 30%.”
Eligibility Requirements for 100% Ownership of Businesses in the UAE
The recent change in ownership regulations in the UAE has had a substantial impact on entrepreneurs looking to establish or relocate their businesses to Dubai. Approximately half of the business activities approved by Dubai’s Department of Economic Development (DED) now allow for 100% foreign ownership.
However, it’s crucial to note that there are exceptions to this rule, particularly in industries like oil and gas, telecommunications, and transportation, where 100% foreign ownership is not permitted.
Outside of Dubai, the ownership rules vary. In some cases in Abu Dhabi, foreign business owners are allowed 100% ownership, but more often, they must adhere to the traditional 49/51 rule, requiring them to partner with a local sponsor. Meanwhile, other emirates, such as Sharjah and Umm Al Quwain, have yet to provide comprehensive guidelines regarding 100% foreign ownership, leaving the specific regulations for these areas yet to be defined.
Advantages of 100% Foreign Ownership of Businesses in the UAE
The recent reforms in foreign ownership laws in the UAE were implemented with the aim of enhancing the country’s appeal to international investors. By permitting 100% foreign ownership in most cases, the UAE aligns itself with numerous other global business hubs, significantly improving the already remarkable ease of conducting business within its borders.
These changes are poised to bring about several key benefits:
- Increased Attractiveness: The UAE becomes an even more enticing prospect for foreign investors, attracting a wider range of businesses and entrepreneurs. This can lead to greater foreign investment inflows into the country.
- Global Competitiveness: Aligning with international standards for business ownership enhances the UAE’s global competitiveness. It places the country on a level playing field with other major business destinations, making it more appealing for multinational corporations.
- Market Competition: The introduction of 100% foreign ownership fosters competition within the UAE market. This competition can drive innovation, improve service quality, and create greater choices for consumers.
- Economic Diversification: By encouraging foreign investors to establish and expand their businesses in various sectors, the UAE can diversify its economy. Reducing dependence on specific industries, such as oil and gas, helps ensure long-term economic stability.
- Administrative Efficiency: Foreign investors now have the legal framework to exercise complete control over their businesses without the complexities associated with local partnerships or sponsorship arrangements. This streamlines administrative processes and reduces bureaucratic hurdles.
- Stimulated Growth: The reforms are expected to stimulate economic growth and job creation as more businesses are established or expanded, contributing to the overall development of the UAE.
How to Establish a UAE Business with 100% Ownership
If you’re considering starting a business in UAE with 100% foreign ownership, the following steps can help guide you through the process. Collaborating with experienced professionals, such as Company Setup Consultants, can streamline your journey. Here’s a four-step overview:
1. Identify Your Business Activities:
- Begin by defining the nature of your business activities. Ensure that your chosen activities align with the list of permitted activities published by the Department of Economic Development (DED) and allow for 100% foreign ownership. Your chosen activities can also influence the location and type of setup that best suits your needs.
2. Select and Register Your Company Name:
- Choose a name for your business. Keep in mind that UAE naming conventions are strict, so avoid offensive or blasphemous language. Additionally, refrain from using names of well-known organizations and opt for full names instead of abbreviations when naming your company after yourself (e.g., “Dave Mann Consulting” instead of “D Mann Consulting”). company setup can assist in registering your chosen trade name.
3. Apply for Your Trade License:
- Proceed to apply for your UAE trade license. This application is typically submitted to the local DED or equivalent authority in your selected emirate. Many times, this process can be completed online. Company Setup can manage the entire application process on your behalf.
4. Obtain Residency Visas:
- To work in the UAE, you’ll need a residency visa. The visa application process involves several steps, including biometric scanning, blood tests, medical examinations, and chest X-rays. As the holder of a UAE trade license, you can also sponsor others for their visas, including family members or domestic workers like housekeepers.
5. Open a Corporate Bank Account:
- Finally, establishing a corporate bank account is essential for conducting business in the UAE. Non-Gulf Cooperation Council (GCC) citizens may encounter challenges in securing banking services, making it advisable to partner with a local expert, such as company setup, to navigate this stage of the process.
Why Opt for the Services of Company Setup Consultants?
Recent regulatory changes have made the prospect of establishing a business in Dubai with 100% ownership remarkably straightforward. Yet, when you choose a reliable partner like Company Setup Consultants, the process becomes even more seamless.
Our dedicated team of company registration experts is well-equipped to navigate you through the entire LLC company formation process in Dubai. We go the extra mile by facilitating visa applications and aiding in the opening of your bank account. Moreover, we offer valuable insights to help you select the most suitable financial institution that aligns with your specific requirements.
In essence, our proficient team can shoulder the responsibility of setting up your company, handling the complexities of license and visa applications, and managing all essential administrative tasks on your behalf.