Successfully investing in the United Arab Emirates

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last updated on 16 June 2023 | reading time approx. 3 minutes

 

 

 

How do you assess the current economic situation in the UAE?

The United Arab Emirates (UAE) is constantly striving to create an investor-friendly climate through new pro­jects that promote the economy. They show a steady growth potential. 
 
The emirate of Dubai in particular is very investor-friendly, as it is not directly dependent on the oil sector and the local market is highly diversified. New visa facilitations and the new investment law show the government's efforts to attract new investors to the country and the market in the future and make it easier for them to enter the market.
 
According to official data, the non-oil sector in the UAE grew by 4.3 percent in real terms in 2022. This growth can be attributed in particular to the positive impact of Expo 2020 in Dubai and the recovery in global travel. The World Cup in Qatar from 20 November to 18 December 2022 further accelerated travel and transit through the UAE. The non-oil sector is also expected to perform well in 2023.

How would you describe the investment climate in the UAE? Which sectors offer the largest potential?

The existing de facto tax exemption in the national territory of the Emirates, its neighboring states as well as in the individual free trade zones, continues to offer a great incentive for foreign investors.
 
Following the strategic package worth 30 billion dirhams to provide financing for more than 13,500 SMEs and create more than 25,000 jobs, the government has now launched another reference auction volume of 1.1 billion dirhams to strengthen the local economy and build a forward-looking investment infrastructure. As a result, the industrial and creative sectors in particular hold great potential, in addition to the fundamentally interesting sec­tors such as finance, logistics and real estate.
 
The UAE recorded a strong inflow of foreign direct investment (FDI) last year. According to experts, this positive development is expected to continue in the current year 2023 and is likely to be related to the amendment of the Investment Law. For some time now, this has enabled foreign investors to set up an independent company in most sectors and business areas outside the free trade zones – without the need for a local shareholder. 

What challenges do German companies face during their business ventures into the UAE?

German companies can enter the local market in a variety of ways. In order to get a feel for the market situation in a cost-effective and time-effective manner, it can be advantageous to cooperate with a trade representative. However, this is no longer absolutely necessary. To introduce or promote a company and its products or ser­vi­ces, it may be advisable to set up a representative office. A joint venture can be promising to benefit from the network of business partners and experience in the market.

The UAE Ministry of Finance published a law on the taxation of companies and corporations on 9 December 2022. The law, which applies nationwide, with specific implementing regulations, will be effective from 1 June 2023, after which a tax of 9 percent will be levied on profits exceeding AED 375,000. The changes will not apply retroactively but will apply to profits earned in correspondingly beginning fiscal years. The purpose of intro­ducing a federal corporate tax system is to maintain the UAE as a competitive and productive economy and to encourage and support growth.

How does the UAE differ from its neighboring countries?

The UAE is at the forefront of the Middle East when it comes to combining Western and Middle Eastern culture. There is probably no other place in the world where people from different backgrounds and cultures live and work together peacefully in a comparable manner.

The UAE is also leading the way from an economic perspective. For example, Saudi Arabia is following the Emirates in establishing free trade zones, a new investment law, and new visa opportunities for foreign inves­tors, employees, and donors, as well as tourists.

In your opinion, how will the UAE develop?

The United Arab Emirates is a promising market for the future, especially for foreign investors. The government of the Emirates is constantly striving to strengthen economic development and make market entry attractive for foreign investors.

For example, in April 2022, the UAE Cabinet approved new regulations on liberalized entry and residency re­quir­ements aimed at attracting and retaining global talent and skilled labor from around the world and strength­ening the UAE's competitiveness in the tourism, business and education sectors. The new regulations came into effect in September 2022.

The recent labor law reform also aims to maintain the competitiveness of international companies in the UAE by allowing more flexibility in local labor relations.

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