Can foreign nationals own 100% of a business in Dubai?

Foreign nationals interested in doing business setup in Dubai can indeed own 100% of a business in certain areas and under specific conditions, largely due to the United Arab Emirates’ (UAE) efforts to foster a more inviting investment environment. This represents a significant shift from previous regulations that required foreign businesses to have a UAE national as a sponsor owning at least 51% of the business. This change is part of the UAE’s broader strategy to diversify its economy beyond oil and increase its attractiveness as a global business hub. The following sections delve into the specifics of this policy, including its background, the legal framework, the types of business ownership available to foreign nationals, and the sectors and areas where 100% foreign ownership is permitted.

Background and Legal Framework

Historically, the UAE Commercial Companies Law mandated that UAE nationals or companies wholly owned by them must hold at least 51% of the shares in any company established in the UAE, outside of free zones. This regulation applied across the board, from small retail shops to large industrial ventures. However, recognizing the need to attract more foreign investment, the UAE government has gradually amended its laws to make the country more investor-friendly for foreign nationals.

The Decree-Law No. (26) of 2020 amended the UAE Commercial Companies Law, allowing foreign nationals to own 100% of their business in certain sectors outside the free zones. This move was further solidified by specific resolutions and regulations detailing the implementation of this law, specifying the sectors and activities eligible for 100% foreign ownership and the conditions that must be met.

Types of Business Ownership for Foreign Nationals

1. Free Zone Companies: Dubai is known for its numerous free zones, which are designated areas where foreign investors can retain full ownership of their companies. Each free zone caters to specific business activities and offers various incentives, including tax exemptions, full repatriation of profits, and no currency restrictions. Free zones have always allowed 100% foreign ownership.
2. Mainland Companies: Following the recent reforms, foreign investors can now own 100% of mainland companies in many sectors. Previously, this was limited to professional services firms, which could operate with a local service agent instead of a sponsor but still faced ownership restrictions in commercial and industrial sectors.
3. Offshore Companies: Offshore companies registered in jurisdictions like the Jebel Ali Free Zone are also available for foreign investors wanting to hold assets or conduct business outside the UAE. These entities allow 100% foreign ownership but are restricted in their operations within the UAE.

Sectors and Areas Allowing 100% Foreign Ownership

The UAE government has identified several sectors and activities where 100% foreign ownership is permitted on the mainland. These typically include cutting-edge technology, space, renewable energy, artificial intelligence (AI), and other sectors considered vital for the country’s strategic development goals. The specific list of activities and sectors is subject to change and periodic updates by the relevant authorities, aiming to align with the UAE’s economic diversification plans and respond to global economic trends.

Conditions and Considerations

While the law permits 100% foreign ownership in many sectors, there are conditions and considerations that foreign investors must take into account:

• Regulatory Approvals: Certain activities may require additional approvals from relevant federal or local authorities.
• Licensing Requirements: Businesses must comply with licensing requirements, which vary depending on the nature of the business activity and the jurisdiction within which the company operates.
• Local Partners: For some sectors not covered by the 100% ownership law, having a local partner or sponsor might still be necessary. The specifics depend on the nature of the business and the regulatory environment of the sector.
• Cultural and Legal Compliance: Foreign investors must ensure their business operations comply with UAE laws, including those related to employment, customs, and business practices.

Conclusion

The UAE’s move to allow 100% foreign ownership in Dubai and across the country marks a significant shift in its economic policy, aimed at attracting foreign investment and diversifying its economy. This policy change opens up new opportunities for foreign investors but also comes with its set of requirements and considerations. It’s crucial for potential investors to thoroughly understand the legal and regulatory framework governing foreign ownership in the UAE and to seek professional advice when setting up their business. This dynamic landscape is indicative of the UAE’s ambition to position itself as a leading global business destination, reflecting its adaptability and forward-looking approach to economic development.

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