100% Foreign Ownership – Positive List Released

100% Foreign Ownership – Positive List Released

- Greg Hastings

>> Pathway to 100% foreign ownership in the UAE

UAE FOREIGN INVESTMENT LAW - 100% Foreign Ownership – Positive List Released

Following the release of the UAE Federal Law No. 19 of 2018 on Foreign Direct Investment, the UAE Cabinet has now announced the Positive List of activities covered by the FDI Law.

The cabinet has approved 122 economic activities across 13 sectors that will be eligible for up to 100% foreign ownership. These sectors are as follows:

  1. Administrative and support services
  2. Agriculture
  3. Art and entertainment
  4. Construction
  5. Educational activities
  6. Healthcare
  7. Hospitality and food services
  8. Information and communication
  9. Manufacturing
  10. Professional, scientific and technical activities
  11. Renewable energy
  12. Space
  13. Transport and storage

This will open up 100% ownership for international companies and investors looking to explore the UAE market particularly with a focus on sectors involving renewable energy, green technology, biotechnology, solar hybrid and green technology production, research and development, logistics and supply chain and e-commerce.

What are the criteria for FDI applications?

General criteria include the size of the investment in the UAE, share capital requirements, and the number of employees to be hired by the business. These criteria will be reviewed on a case by case basis by the relevant authorities in the Emirate where the company is based.

For activities in manufacturing a guideline minimum share capital requirement of between AED 3million and 100milion has been given. Hospital and Hypermarkets guidance has been given at AED 100milion share capital requirement. Other sectors such as construction, engineering, transport, education, medical and dental clinics guidance has been given that share capital should be in line with applicable local laws. Companies applying for 100% foreign ownership will need to appoint a UAE National (or a 100% UAE owned company) to act as a National Service Agent (NSA) for Immigration and Ministry of Labour matters

For companies that are not on the positive or negative list sectors - such as retail, real estate activities, F&B and hotels, the process is not yet clear. It is still likely that approvals may be granted to these sectors on a case-by-case basis at the discretion of the relevant authorities.

The UAE Cabinet has further confirmed that it will be left to the discretion of the local Emirate governments decide on the percentage of foreign ownership for each sector/ activity. Note that the guidance states that its is up to 100% ownership this any mean that lower percentages than 100% are allowed, but over the 49% currently allowed - for example 70% foreign ownership may be given in certain cases.

At this stage only Dubai Department of Economic Development (DED) has accepted applications made by businesses under this FDI Law. The Dubai DED has already registered new companies and converted existing companies to become 100% foreign owned. Applications at Dubai DED in Dubai have been assessed on a case-by-case basis. We expect this will now extend to Abu Dhabi and other Emirates soon.

This announcement represents a much-awaited step towards the development of foreign investment regulations in the UAE. It is expected to considerably boost the level of FDI in the UAE as a whole and cement the role of the UAE as a global business hub for foreign investments.

For companies awarded increased foreign ownership as an FDI Company the benefits are extensive and include the following:

  1. FDI Companies licensed under the FDI Law shall be treated as UAE National Companies under UAE and international agreements.
  2. FDI Companies shall be guaranteed confidentiality of technical, economic and financial information compliant with UAE laws and international treaties.
  3. FDI Companies may transfer their earnings and proceeds outside the UAE.
  4. Employees of FDI Companies may transfer their salaries and entitlements outside the UAE.
  5. FDI Companies, subject to approval, can add shareholders, sell the business, change their legal form or enter into a merger without losing the privileges awarded to them under the FDI Law.

For existing UAE Companies looking at the new FDI it may be prudent to review current arrangements with local partners to ensure that they can facilitate the process and share transfers when required.

How can we help?

PRO Partner Group is the leading company formation support specialist in Abu Dhabi and Dubai. We specialise in setting up and supporting foreign businesses in the UAE providing secure Local Partner, National Agent and PRO services - establishing companies and assisting in managing their staffing, visas and back office needs and operations.

Where PRO Partner Group acts as the local shareholder we will always ensure that there is and exit / sale strategy for companies where we act as the 51% shareholder ensuring that companies can acquire an increased percentage of their shares at no penalty if they are awarded FDI status. Additionally, PRO Partner Group can continue to act as the Local National Service Agent (NSA) to continue to assist with Labour and Immigration matters.

PRO Partner Group can assist with FDI applications for existing partnered companies and new companies looking to apply for up to 100% ownership.

For more information please contact a member of the team on info@propartnergroup.com in Abu Dhabi +971 (0)2 448 5120 ,or Dubai +971 (0)4 456 1761, or contact Greg Hastings direct on greg@propartnergroup.com or +971 (0)56 991 1278.

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