Free zones are a pillar of the United Arab Emirates’ successful economic diversification strategy and a major draw for U.S. companies to operate in the country. By providing 100% foreign ownership, tax-free periods of up to 50 years, full repatriation of profits, world-class infrastructure, and friendly business services, these free zones have helped make the U.A.E. an advantageous place for American companies to conduct business in the wider Middle East and South Asia region.
That said, companies operating in free zones have traditionally been restricted from engaging in certain activities “onshore” in the U.A.E. mainland. Free zone entities may generally only conduct trading activities outside the U.A.E., unless a mainland-based commercial agent is appointed. If trade does occur within the mainland, customs duties will be applied.
Should companies not wish to establish in free zones, they can establish “onshore” in the U.A.E. However, companies licensed by the economic departments of each Emirate have traditionally been subject to at least a 51% U.A.E. ownership requirement.
In line with national efforts to incentivize investment and maintain a high ease of doing business, the U.A.E. government has implemented new policies to increase investment opportunities for foreign companies outside of free zones. Notably, in September 2018, the U.A.E. issued Federal Law by Decree No. 19 of 2018 Regarding Foreign Direct Investment, which opened up certain business sectors in the U.A.E. mainland to the possibility of 100% foreign ownership. In July 2019, the U.A.E. cabinet approved a total of 122 economic activities across 13 sectors-including renewable energy, space, agriculture, and manufacturing – that are eligible for up to 100% foreign ownership. In November 2020, the U.A.E. further amended its FDI framework, making even more businesses eligible for 100% foreign ownership.
The U.S.-U.A.E. Business Council has created forums for businesses to engage with the U.A.E. Ministry of Economy and other relevant authorities such as Dubai FDI, the Sharjah Investment and Development Authority (Shurooq), and Abu Dhabi Investment Office (ADIO) regarding reforms to the U.A.E.’s foreign ownership regulations and opportunities for U.S. businesses in the U.A.E. Moreover, it has served as a direct liaison between the business community and U.A.E. authorities.
At the same time, the Business Council provides vital information about these laws and regulations through its regular media digests and publications such as its June 2018 report on the U.A.E.’s Changes to Foreign Ownership, its January 2019 update on the U.A.E.’s New FDI Law, and its May 2020 third edition Guide to Doing Business in the U.A.E.