By Uglobal Staff
As an oil-based economy and one of the richest countries in the world, the United Arab Emirates is recognized as a powerful economic hub in the Middle East. Made up of seven emirates – Dubai, Abu Dhabi, Sharjah, Ajman, Fujairah, Ras al-Khaimah, and Umm al-Qaiwain – the country has put itself on the map as an investor’s paradise.
The UAE, particularly Dubai, is recognized worldwide as a thriving metropolis and popular tourist destination. The country is home to more than 150 nationalities, many of whom are drawn to its high-quality lifestyle, safety, developed banking and financial sectors, and world class healthcare facilities.
“The UAE has attracted a lot of foreign investment over the last 10 to 20 years, as it has developed into a global aviation hub and [Dubai] a major city in the region,” said Gordon Drakes, partner, Brand Development - Franchising and Commercial at Fieldfisher, a United Kingdom-based multinational law firm.
Drakes said most of the transactions he is involved in are cross border and the Middle East is a regular destination for the brands he represents. He said UAE is strengthening its institutions to better develop the rule of law and commerce, which gives foreign investors more confidence to invest.
The country’s free trade zones with 100 percent ownership, zero taxes, highly developed infrastructure, and geographical location are viewed as attractive factors for foreign investments. The World Bank’s Ease of Doing Business 2018 report ranks UAE 21st globally. Investment has been an attractive route for investors to achieve UAE residency.
“There has been an increase in participation for becoming a resident of UAE through investment,” said Abdultaiyab Bahrainwala, senior lawyer at Khairallah Advocates & Legal Consultants in Dubai.
While citizenship in UAE can only be attained through birth, descent, or marriage to a UAE citizen, residency can be achieved through investment.
“Foreign nationals can become a UAE resident through investment by opening a company in UAE or by investing in an existing company based in UAE or by investing in UAE real estate subjected to fulfilling requirements, for example, minimum amount requirement for obtaining investor visa by investing in UAE real estate is AED 1 million,” said Bahrainwala.
The visa allows investors and their families to stay in the UAE as residents, and it is valid for three years and is renewable. The time frame for issuance of a residence permit is typically under a month. Residency in UAE requires the holder to visit the country every 180 days, has no minimum stay requirement, and is exempt from income, wealth, gift, and inheritance tax.
“UAE provides economic and social benefits to its residents including safety, security, and a cosmopolitan lifestyle,” said Bahrainwala.
Yann Mrazek, managing partner at M-HQ legal services in Dubai, said his firm has seen generally steady numbers in terms of participation, with a slight increase.
“The UAE program stands out in that it does not mandate an investment per se. Setting up a light corporate structure with a low paid up capital suffices to qualify for residency. Where investors use the real estate investment route – one client out of 20 in the firm’s experience – they usually invest in yield generating properties rather than trophy assets,” said Mrazek.
The UAE is an attractive international destination and annually draws millions of tourists with attractions such as the Dubai Shopping Festival and the annual Omega Dubai Desert Classic golf tournament. The UAE is a hub for global commerce and will host the World Expo in Dubai in 2020, the first time it will be held in the Middle East region.
Bahrainwala said the UAE government has launched several programs to develop health, education, tourism, energy, transport, water, and technology sectors.
“UAE’s policymakers are moving forward to execute the vision of its founders. The country is working hard to achieve objectives of UAE Vision 2021,” Bahrainwala said, referring to UAE’s goal to transition into a sustainable and knowledge-based economy.
Meanwhile, the country is working on new measures to boost investors’ confidence. Sultan bin Saeed Al Mansouri, UAE’s minister of economy, announced that the UAE investment law, which seeks to allow more than 49 percent ownership to foreign investors in specific business sectors, is set to be introduced in the first quarter of 2018.
Drakes said the new rules are expected to create significant growth opportunities by drawing more foreign direct investments, particularly into the non-oil sectors. However, he said it is not yet clear which sectors of the economy will be affected by the new law. He said the main thrust of the new law is to loosen restrictions on foreign ownership of UAE companies.
Drakes said for foreign companies/investors looking to do business, which might involve leasing or acquiring property through UAE companies, the main impact should be that they can take full ownership of these assets without the requirement for local majority joint venture partners, or arm’s length licensees or franchisees.
“Most foreign brands/investors doing business in UAE in the retail, hotel and leisure, education, and F&B (food and beverage) sector have done so through JVs (joint ventures) or pure arm’s length franchising, and this relaxation will be attractive to some brands, particularly the large multi-national brands,” said Drakes.