In November 2018, the UAE enacted the Foreign Direct Investment Law. This law was enacted to help boost the UAE’s investment environment and to attract foreign direct investors. The law helped the UAE set guidelines for which sectors and activities of the economy would be eligible for 100% foreign ownership.
While the law was originally issued in 2018 to open up the UAE mainland market, the UAE issued a resolution in March 2020 that contained the complete FDI Positive List and the requirements for establishing FDI companies in the UAE mainland. The original law laid out 122 business activities that included manufacturing, agricultural and services categories that now had relaxed foreign ownership restrictions, making the UAE a desirable destination for foreign investment.
The recent resolution from March 2020 lays out a full FDI positive list. These include 122 activities in the following sectors. The breakdown includes 51 industrial sector activities, 19 agricultural sector activities, and 52 service sector activities.
- Transport and Storage
- Hospitality and Food Services
- Information and Communications
- Science and Technology
- Art and Entertainment
With this law, foreign investors can incorporate a single-member limited liability company and retain 100% ownership. However, those under this law must follow certain rules under the UAE guidelines, including:
- generation and adding of value to the UAE economy (for example, as illustrated by way of a comprehensive business plan);
- a minimum percentage of employment of Emirati nationals (as specified by the Ministry of Human Resources & Emiratisation);
- use of modern technology;
- adding to research and development; and
- meeting the requirements of the licensed activities.
This FDI Positive List requires a minimum investment requirement that varies from sector to sector. It also allows each Emirate and its relating authorities and regulators to provide certain rules to companies that are owned 100% by foreign investors.
Firstly, the agricultural sector needs a minimum investment that starts at AED 7.5 million and ranges up to AED 10 million. Moving on, the industrial sector requires a minimum capital that ranges between AED 20 million to AED 100 million but there are a select few activities that require the capital to be between AED 2-3 million. Finally, the service sector requires a minimum capital ranging from AED 70 million to AED 100 million.
Once you have the capital, here are the steps you need to follow to obtain and register the FDI license:
- Select the relevant business activity mentioned in the Positive List
- Register the FDI Capital
- Submit the FDI application
- Fix the business trade name. It should include the expression “Foreign Direct Investment (FDI)
- Obtain the required set of approvals from the respective government authorities
- Present a Proof of Submission with the required set of fees
- Obtain the FDI License
- Open a corporate bank account in the UAE to carry out business transactions.
- Register the obtained license with the Ministry of Economy (MOE), UAE.
An existing company may change into an FDI company provided the following:
- The legal form of the existing company shall be one of the forms specified for FDI companies.
- If the legal form of the existing company is different from those forms specified for the FDI companies
Here are the steps for needed for an existing company to change into an FDI company
- Obtain the approvals of the organization organizing the activity
- Bring evidence of the application to join the Emiratization Partners Club
- Obtain approval and receive the license after paying the fees
- Deposit at least 20% of the capital
- Register of the license with the Ministry of Economy
Apart from just 100% ownership, the benefits of FDI include the right to use real estate, no property expropriation, no project fund seizures, foreign financial transfers, and much more. Here is a full list of privileges.
- Ensure that the property is not expropriated except for the public benefit
- Not to seize or confiscate project funds unless declared by the court
- The licensed FDI companies will be given the status of national companies
- Flexibility to hold complete ownership of the business entity
- Proceed with financial transfers for project returns dealing outside the country
- Ensure the confidentiality of the technical, economic, and financial information and investment initiatives
- Include a business partner at any point of the business cycle
- The business owners can be transferred to a new investor at ease
- Higher opportunities for mergers, acquisition or company liquidation
To know more about Foreign Direct Investment in the UAE and see how it can benefit your business, contact our team of expert advisors.