Changes to full foreign onshore ownership laws: June 2021
The UAE’s rainbow nation is well documented. Estimates vary, but we can be sure that the expatriate population out here exceeds 80% of total residents. Workers, business owners, and solo entrepreneurs come from all over the world to make a life in the Emirates.
While there are well-trodden, straightforward paths to living and working out here, setting up in the UAE mainland has traditionally been a more complex route to take. The need for extra approvals and local sponsors has set it apart from business as usual in many other parts of the world.
On June 1, that is officially set to change. Following the easing of foreign ownership restrictions announced last year, non-GCC nationals are now permitted to retain ownership of 100% of their companies.
Dubai onshore company law – out with the old
The above presents a huge opportunity for the Emirates and the thousands of entrepreneurs around the world who wish to call it home.
There have long been two common types of company model in the UAE: free zone and mainland. The latter is otherwise known as onshore.
Free zone models offer a range of benefits, from 100% customs tax exemption and zero currency restrictions to capital and profit repatriation and coworking facilities. However, free zone businesses are only permitted to trade freely from within their designated free zone.
To trade directly with the local UAE marketplace, entrepreneurs had two choices, work with a distributor or local agent, or set up in the mainland.
This is where the quirk of the UAE ownership model kicked in. To run an onshore business, non-GCC entrepreneurs had to partner with a local Emirati sponsor who would hold a 51% stake in the company.
Profit was not shared down these lines, and decision making remained in the hands of the original business owner. Local sponsors are usually paid an annual fee for their service. Despite this, handing over such a significant stake can seem daunting and even off-putting to overseas investors, particularly those new to the UAE.
Other ownership rules stipulated a requirement for Emirati chairs and Emirati board members.
Enter the new Dubai onshore company law
As of June 1, 2021, the 51%/49% rule is no longer a requirement. But it won’t come into effect immediately – changes will take up to six months from the publication of the official gazette to be formally rolled out.
From this date, non-GCC entrepreneurs and business owners can now set up freely in the UAE without the need to hand over a stake to an Emirati agent or appoint Emiratis to board positions.
However, local authorities must approve any ownership models, with industries of national importance, such as gas and oil exploration are exempt from the changes.
Under the full foreign onshore ownership law in Dubai, UAE, international entrepreneurs can now benefit from the freedom to set up anywhere in the country, the ability to take on government contracts, and 0% corporate and personal tax rate while remaining in total control of their enterprise.
When it is officially all in place, one of the questions on many people’s minds is the issue of liability. Currently, when an entity is 51% owned by an Emirati citizen, the liability is limited, whereas a professional or civil company owned by an expatriate is unlimited in nature. So when we remove the 51% sponsorship, what then happens?
At present it is a bit of a wait and see situation. But as the rule evolves, we will be in a better position to understand what happens if all commercial, professional, and civil companies can be owned 100% – that is, will the liability clause change here as well? If not, do expats still have that option of hiring corporate or individual sponsors for their businesses?
Corporate shareholder can own 100% shares in any activities falling under 100% foreign ownership list as commercial or Industrial LLC legal type.
What does this mean for the UAE and for you?
The onshore ownership law change is the latest in a line of initiatives aimed at sustaining and protecting the long-term growth of the UAE economy.
Coupled with the introduction of citizenship schemes and renewable 10-year visas, full foreign ownership allows non-GCC nationals to plan for the long-term in the UAE. This greater scope will encourage more foreign investment into the country, creating jobs, boosting the economy, and promoting further stability of our business infrastructure.
Removing the 51% framework also offers entrepreneurs coming into the country greater flexibility, increased ease of doing business, and lower startup costs for onshore setups. All of which have previously been seen as significant barriers to foreign investment.
How to start a mainland business in UAE
If you’re looking to take advantage of the latest changes in UAE onshore ownership law, you’ll need to set up a mainland company.
With the help of the expert team at Business Incorporation Zone (BIZ), the process of doing so is fast, affordable, and incredibly straightforward. We are a team of company registration professionals who are passionate about bringing the dreams of aspiring entrepreneurs and SMEs to life.
We’ll start by helping you outline your business activities so that you’re fully licensed to operate in the UAE. Next, we’ll help you choose your company name – keeping in mind that it must comply with the UAE’s strict set of naming conventions.
From here, we’ll handle every aspect of your license application and assist with the opening of corporate bank accounts. We can advise and arrange meetings with the most appropriate financial institution to suit your specific needs.
Finally, we also offer visa and immigration services and can handle all government formalities, permissions, work permits and visas applications that are required to trade in the UAE.
In short, our experts can establish your company on your behalf, make your license and visa applications, and take care of all the necessary admin – leaving you free to get on with running your business.