UAE - USEFUL INFORMATION & DOING BUSINESS

Capital: Abu Dhabi

Population: 9.4 million (2017)

Currency: United Arab Emirates dirham

  • The United Arab Emirates was established on 02 December, 1971
  • The UAE is a federal state made up of seven emirates: Abu Dhabi , Dubai , Sharjah, Ajman, Ras Al Khaimah , Umm Al Quwain , and Fujairah while Abu Dhabi is the capital
  • The permanent constitution, which was passed in 1995, clarifies the primary rules of the political and constitutional organization of the state and the components and objectives of the Union
  • The constitution specifies five Federal authorities, namely: the Federal Supreme Council, President and vice president , the Cabinet, the Federal National Council , and the Federal Judicial Authority
  • The Federal Supreme Council is the highest constitutional authority in the country and is made up of the rulers of the seven emirates.
  • The total area of the United Arab Emirates is 83,600 km²
  • The UAE shares borders with Qatar, Saudi Arabia and Oman
  • The UAE is an active leading country in the field of clean and renewable energy worldwide. Its immense efforts culminated by choosing Abu Dhabi to host the headquarters of the International Renewable Energy (Irena)
  • The UAE produces 2.7 million barrels of oil per day and has the seventh-largest oil reserves in the world.

Sources:

https://www.government.ae/en/about-the-uae/fact-sheet

Culture

  • The UAE has a rich culture and heritage that reflects traditional Arab and Islamic values. Environment and terrain also influenced the lifestyle. Read to know about the different aspects of the Emirati culture and their inspirations then and now.
  • The UAE is blessed with a rich heritage that encompasses architecture, sports, occupations, traditions, arts, crafts, food, places of historical and archaeological importance, lifestyle and values imbibed in Islam. This page attempts to give you a peek into the UAE's glorious heritage and the UAE's efforts to preserve it amidst the modern changes.
  • Some of the distinct features of the Arab and Islamic heritage are hospitality, tolerance, family cohesion and solidarity among members of the society along with honour and pride associated with being part of this heritage.

Sources:

https://www.government.ae/en/about-the-uae/culture/arab-and-islamic-heritage

 

Economy

GDP

The GDP of the UAE for 2018 in real prices amounted to approximately AED 1.6 trillion or in (US dollars: 435.70 billion) i.e an increase of 3.4%, compared to 2017.Strategic location, strong financial reserves, large sovereign wealth fund, promising investor home economies, consistent government spending, progressive policy of economic diversification, free zones and increased foreign direct investment contribute to the UAE’s robust economy.

Creating and maintaining a sustainable and diversified economy is a component of 'United in Knowledge, a pillar of Vision 2021. Vision 2021 states: (By the year 2021,) The UAE will benefit from a sustainable and diversified economy, flexible in adopting new economic models, and capitalising on global economic partnerships to guarantee long-term prosperity for current and future generations of Emiratis.

Developing a 'competitive knowledge economy' is one of the pillars of National Agenda in line with Vision 2021. The Government is focusing on the UAE becoming the economic, touristic and commercial capital for more than two billion people. To achieve this, the Government has set 12 Key Performance Indicators (KPIs). They are:

  • Non-oil real GDP growth
  • Gross National Income (GNI) per capita
  • Net Inflow of Foreign Direct Investment as a percentage of GDP
  • Global Competitiveness Index
  • Share of UAE nationals in the workforce
  • Ease of Doing Business Index
  • Emiratisation Rate in the private sector
  • SME's contribution to non-oil GDP
  • Global Entrepreneurship and Development Index (GEDI)
  • Global Innovation Index
  • Share of 'knowledge workers' in the labour force
  • Research and development expenditure as a percentage of GDP.

Economy in the past and present

Before the discovery of oil in the 1950s, the region's economy was driven mainly by nomadic farming, date palm cultivation, fishing, pearling and seafaring.

Since the discovery of oil, the economy has been influenced mainly by the following sectors:

  • extraction of crude oil and natural gas
  • wholesale and retail trade
  • repair services
  • real estate
  • business services
  • construction
  • manufacturing.

Sources:

https://www.government.ae/en/about-the-uae/economy

Value Added Tax (VAT)

Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. The rate of VAT is 5 per cent. VAT will provide the UAE with a new source of income which will be continued to be utilized to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Read more about VAT on the websites of:

VAT guidelines

Check more guides, references and public clarifications from the Federal Tax Authority.

VAT laws

View UAE tax laws and procedures (VAT and excise) on the website of the Federal Tax Authority.

Useful links:

Sources:

https://government.ae/en/information-and-services/finance-and-investment/taxation/valueaddedtaxvat

https://www.tax.gov.ae/en

 

Banking

Central Bank

Central Bank of the UAE regulates the following:

  • commercial banks
  • investment banks
  • Islamic banks
  • moneychangers
  • financial and monetary intermediaries
  • financial investment companies
  • finance companies.

Commercial banks

There are several locally established banks and branches of foreign banks offering commercial banking services in the UAE. Locally established banks are public shareholding companies licensed in accordance with provisions of Federal Law No. 10 of 1980 and branches of foreign banks are licensed by Central Bank to operate in the UAE as per the same law. Some foreign banks have representative offices in the UAE to assist customers with administrative formalities.

Investment banks

As per Federal Law No. 10 of 1980, investment banks cannot accept deposits whose maturities are less than two years, but may borrow from its head office, from local or foreign banks, or from financial markets. Investment banks are licensed under the Regulation No. 21/2/88 dated 14/6/1988.

Refer to the:

Islamic banks

The UAE offers Islamic banking services. It is governed by Shari'a law and Federal Law No. 6 of 1985 regarding Islamic banks, financial institutions and investment companies. According to Article 3 of the law, Islamic banks have the right to carry on all or part of banking, commercial, financial and investment services and operations. They have the right to engage in all types of services and operations practised by banks and referred to in Federal Law No. 10 of 1980.

In October 2013, H. H. Sheikh Mohammed bin Rashid Al Maktoum launched a strategic plan for developing the Islamic economy sector. The plan includes 7 key pillars and 46 strategic initiatives. One of the initiatives is the establishment of Islamic banking centre in Dubai.

Sources:

https://www.government.ae/en/information-and-services/finance-and-investment/banking

https://www.government.ae/en/information-and-services/finance-and-investment/banking/laws-and-regulations

 

Imports and exports

  • The non-oil foreign trade (direct trade and free zones) amounted to 1.527.8trillion dirhams during 2017. The breakup is as follows:
  • Imports: 946.5 billion dirhams
  • Non-oil exports: 181 billion dirhams
  • Re-exports: 400.3 billion dirhams

Sources:

https://www.government.ae/en/information-and-services/finance-and-investment/banking

 

Money & Currency rate

  • The Emirati Dirham is the official currency of the UAE, abbreviated officially as AED. Unofficial abbreviations include Dh and Dhs.
  • The dirham is divided into 100 fils.
  • Coins are in the following denomination: AED 1, 50 fils and 25 fils.
  • Notes or bills are in the denomination of AED 5, 10, 20, 50, 100, 200, 500 and 1,000.
  • The UAE Dirham is pegged to the USD. 1 USD = AED 3.6725

Sources:

https://www.government.ae/en/information-and-services/finance-and-investment/banking

Leasing a property in the UAE

You can search for available accommodation using local newspapers and magazines, or through registered real estate brokers (agents) or through private property websites. You can also find properties rented directly from the owner.

Related links

Rent rates

Rent rates depends on the location and size of the property to be rented. Tenants can pay the rent in one payment or through multiple payments as agreed with the broker/landlord.

 

In addition, some brokers may require a commission fee, up to 5 per cent of the total amount of rent.

 

To conclude a lease contract with the landlord and/or real estate agent, the tenant must provide identification documents which include a copy of his passport, a valid residence visa and Emirates ID, in addition to post-dated cheques covering payments for the agreed lease period.

Registering lease agreements

Lease agreements between landlords and tenants must be registered by the respective authority in each emirate. Registration of lease contracts is compulsory to connect the utility services needed for the rented property. This includes water, electricity and gas and telecommunications services.

 

In Abu Dhabi, landlords have to register lease contract in the Tawtheeq system, which is the city’s register for tenancy contracts. Once the lease contract has been registered, a housing fee of 3 per cent of the value of the annual rent will be levied equally across 12 months. This amount will be added to the monthly water and electricity bill of the tenant.

 

In Dubai, landlords must register lease agreements with RERA's online portal, Ejari. Tenants must pay housing fees to Dubai Municipality, which is calculated at the rate of 5 per cent of the yearly rental charges. The housing fees are added to the monthly electricity and water bills.

 

As per local Law No. 43 of 2013 of Dubai, rental increases in the emirate can be applied when compared with the average rent in the area as per RERA increase calculator.

 

In Sharjah, lease contracts are registered with Sharjah Municipality.

 

Read more about:

Sources:

https://www.government.ae/en/information-and-services/moving-to-the-uae/leasing-a-property-in-the-uae

 

Planning to set up a business on the mainland

Key government entities

Generally, you need to contact Department of Economic Development of the respective emirate to seek the 'initial approval' and register the trade name. You can do that either by visiting their office or through their eServices. It is only after seeking the initial approval that you can proceed for additional approvals of other authorities which is required in case of certain business/trading activities.

Refer to the Department of Economic Development in the emirates of

In exceptional cases, such as setting up a private joint stock company (PrJSC), approval of Ministry of Economy is needed at first.

Where to begin?

If you are planning to start a business on the mainland, you need to know the following in order to know where to start.

Cost of setting up a business

Setting up a business involves raising capital investment, paying for licences and employee visas. The cost of setting up a business depends on:

  • The nature of the activity and licence required; whether it is commercial, industrial or service-oriented
  • The legal form of the company; whether it is an establishment, a company, or a branch of a company.

Capital requirements for a company on the mainland

Capital requirements for a company on the mainland vary according to the legal form of business. For a PJSC, the minimum capital is AED 30 million. For a PrJSC, it should not be less than AED 5 million paid in full.

For other type of businesses, the UAE Commercial Companies Law did not specify a minimum capital. But, it stated that the minimum capital:

  • should be mentioned in the Memorandum of Association
  • must be a 'sufficient capital' to achieve the purpose of the business incorporation.

For foreign companies wishing to establish a Limited Liability Company (LLC) in the UAE, they should seek guidance on the current practice of the relevant emirate regarding minimum share capital.

Nationality of partners

The nationality of partners is important to determine what type of business they can set up on the mainland. Only UAE nationals may set up the following types of companies:

  • Joint liability companies (partners must be UAE nationals)
  • Simple commandite companies
  • An industrial or commercial type sole proprietorship
  • Licence for home-based businesses
  • SME licence (in Dubai).

People of other nationalities (other than those of the other GCC countries) can conduct the other types of businesses. However, they need to involve a UAE national as a sponsor. The UAE national could be:

  • A partner with at least 51 per cent ownership of the business or
  • A local service agent (LSA), with the investor having a 100 per cent ownership of the business.

Company types that require a UAE national partner:

  • LLC companies
  • Public Joint Stock Companies (PJSC) - it must have at least 5 founding members who are UAE nationals, owning between 30 per cent and 70 per cent of the capital shares
  • PrJSC Companies
  • Civil company with an engineering activity

Company types that require LSA:

  • A professional type sole establishment
  • Civil company with no engineering activity
  • Foreign Company Branch

Note that a GCC national can be a partner in any form of business except:

  • A representative office
  • Simple commandite companies.

Benefits of setting up a business on the mainland

There are many benefits of setting up a business on the mainland. Some of them are:

  • Flexibility to do business in any part of the UAE
  • No limit on number of visas
  • More business activities available for licensing
  • No business or personal taxes.

Sources:

https://www.government.ae/en/information-and-services/business/planning-to-set-up-a-business

 

Planning to set up a business in a free zone

If you do not wish to partner with a UAE national or you do not know any UAE national to partner with, you can set up a business in a free zone. Free zone offers 100 per cent foreign ownership of the enterprise.

What is a free zone?

According to the website of Dubai Multi Commodities Centre, a free zone or free trade zone or free economic zone, is a designated geographical area where certain taxes or restrictions on business, employment or trade do not apply in the same manner that they apply to the country in which the zone is located.

In a free zone, goods may be landed, handled, manufactured, reconfigured or re-exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing customs duties.

A free zone is often organised around major seaports, international airports, and national frontiers - areas with many geographic advantages for trade.

Benefits of setting up a company in a free zone

Some of the other benefits of setting up a business in the free zone include:

  • 100 per cent import and export tax exemptions
  • 100 per cent repatriation of capital and profits
  • No corporate tax
  • No personal income tax
  • No import/export tax
  • Easy start-up and licensing procedures

Benefits can vary with respective free zone authorities. Twofour54 provides 30 per cent cash rebate on international film and TV production spending.

FAQs

What are the benefits of setting up a business in a free zone?

You do not need to tie up with a UAE national. Apart from that, you need minimum paperwork and time to start a business in a free zone. In addition, you are exempt from customs duties.

What are the types of businesses I can do in a free zone?

You can do any business in the fields of financial, educational, retail, hospitality and media to name a few. Check with respective free zone authority for businesses permitted on their premises.

Sources:

https://www.government.ae/en/information-and-services/business/planning-to-set-up-a-business

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