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100% Business Ownership in the UAE: Fundamentals of the New law
Expatriate entrepreneurs in the UAE can now breathe a sigh of relief. Recently, the Arab emirates have released business-friendly news to foreign nationals by declaring 100% ownership of commercial companies with effect from 1 December 2020.
Before the amendment, expatriates needed the assistance of a local sponsor to set up a business enterprise in the UAE. The current move serves to be a favourable announcement making the company setup process trouble-free.
Hassle-free trade can promote the UAE business world by inviting foreign nationals to the terrain of the UAE with a goal to bring a global exposure and alliance to improve the economy. The new amendment is a silver bullet for expatriates. To make effective use of the new law and understand the jurisdiction of the amended ruling, here are some key points.
Practicalities of the Amended Ownership Law
49:50 was the business ownership ratio in the UAE, foreign expatriates were 49% shareholders of the business enterprise, and local sponsors enjoyed 51% shares of the onshore company. With the removal of this law, budding entrepreneurs can involve in a trouble-free trade through self-motivated innovation and liberty.
The amendment is going through its making stage. The Ministry of Economy is still brainstorming to frame a complete blueprint of the new law. The primary concern of the new law is to
- Promote the investment culture
- Expand the production and manufacturing base
- Invite global markets to the mainstream of the UAE
There are some criteria and licensing entitles to be considered to enjoy the perks of complete ownership or direct investment policy.
- The foreign companies interested in direct investment should be the sole contributor to the research, development and manufacturing sectors of the UAE.
- The enterprise should imbibe the trends of modern technology to promote business ideals.
- The company should have a minimum share capital as per the ministry guidelines
The share capital requirements, conditions and benefits vary according to the domain of investment and the emirate jurisdiction under which your company falls. Also, the direct investment policy should fall under any of these two legal forms mentioned below
- A limited liability company
- A private joint-stock company
Though the new law gives legalised complete ownership to the onshore company, some key sectors are exempted from the current ruling. The Ministry of Economy has created a positive list and a negative list to separate the activities included under the new law and activities exempted. At present, there are 122 sectors included in the positive list.
- 19 ventures from agricultural-based sectors
- 51 industrial-based activities
- 52 service-based sectors (hospitality, medical, renewable energy, etc.)
The business activities excluded from the current listing include
- Oil, gas, water and electricity sectors
- The investigation, security and military activities
- Financial and insurance sectors
- Pilgrimage and other transport services
- Postal and some digital services
- Toxin centres and medical-retail services
If your company falls under the positive list issued by the UAE cabinet, you can enjoy a lot of benefits and security through the foreign direct investment (FDI) policy. Let’s flip through some of it.
Merits of Foreign Direct Investment
Foreign Direct investment proves to be a beneficial economic policy that imparts favourable outcomes to the foreign proprietor and the country in which s/he invests the hard-earned money. Some key benefits of the new law include
- A licensed FDI company will get all the perks enjoyed by UAE national companies
- FDI license gives you autonomy to change partners, transfer ownership and change legal form
- Allows to invest and make project returns from outside the country
- Allows to modify business policies
- No direct taxation of corporations or of individuals
To gain all these benefits of 100% company ownership in the UAE mainland, you need to complete some crucial procedures as per the guidelines put forth by the federal authority or the emirate authority.
Procedures to obtain an FDI License
From 1 December 2020 onwards, the law has come into effect. Now it is your turn to complete the necessary legal procedures involved to attain an FDI license. Here you will find the essential guidelines to get a valid license under the Ministry of Economy
- Select a business activity from the positive list
- Contact the respective emirate authorities in charge of FDI to submit the application and get the initial approval
- Pay required license fee, and obtain the sanction from the respective emirate
- Register the license under the Ministry of Economy
- Submit the trade name by adhering to the regulations and the emirate laws
- Join Tawteen Partners Club under Ministery of Human Resource and Emiratisation to get incentives and perks
- Open a bank account under the company name and deposit at least 20% of your capital
Understanding the essential procedures and legal framework is imperative to start a business in the UAE mainland. The UAE is known for its strict adherence to law and legal framework. Slight negligence can ruin your goodwill in the UAE market. Hence, understand and research the trends and regulations of the UAE trade zone to set up a business.
Being an expatriate and promising entrepreneur, the new law and complete ownership might perplex you. You might be thinking about the tons of paper works and legal procedures. Marque Way can assist you in the entire journey to stamp your footprint in the UAE business world.