UAE FDI Law – 100% foreign ownership and what it could mean to businesses in the UAE
In 2019 the UAE Government took steps to relax the foreign investment law, allowing 100% foreign ownership in a number of sectors. The measure was introduced with the aim of liberalising and strengthening the investment environment and it is seen as a critical step in the development of new sectors and industries in the UAE.
The government announced a list of 122 economic activities across 13 sectors including renewable energy, space, agriculture, manufacturing, transport, logistics, hospitality, food services, information and communications, with a goal to open and expand economic sectors, attract new investors and cement the global competitiveness of the national economy.
Like many GCC countries, which have traditionally relied upon hydrocarbons, the UAE implemented reforms to strengthen and diversify amid a period of lower oil prices, looking to stimulate the economy and encourage more investors to bring fresh capital into the country.
On 17 March 2020, the UAE Cabinet issued Cabinet Resolution No. 16 of 2020 containing the full Foreign Direct Investment Positive List and the requirements for establishing FDI companies in the UAE mainland. This included the minimum capital requirement for each activity, the Emiratisation thresholds, it outlined specific conditions for certain business activities, contribution requirements for research and development, as well as employee headcount.
For most of the 122 activities, the minimum capital requirement varies from AED 2m to AED 100m and so it may preclude many smaller firms from being apply to apply for the option of 100% foreign ownership. It remains to be seen how many big investors will be comfortable to tie up their funds in a local UAE bank. Many may prefer to continue to engage with a local sponsor arrangement to continue to free up money for cash flow.
Cabinet Resolution No. 16 of 2020 will undoubtedly transform the foreign ownership landscape in the UAE. The legislation provides foreign investors with greater flexibility and more options for shareholding and ownership structures and introduced greater business enablement measure to the country, further reinforcing the UAE’s appeal as a regional investment hub.
How can we help?
If you need assistance in setting up a company in the UAE and applying for 100% foreign ownership, or if you have an existing company in mainland UAE and would like to apply for 100% ownership, then please get in touch with us and a member of the team will be able to assist you and advise you on your organisation’s eligibility and next steps in the process. Please get in touch with us on consultants@linksgroup.com or +971 (0) 4 446 3900.
