Successfully investing in the United Arab Emirates

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last updated on 29 September 2022 | reading time approx. 4 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, business-promoting projects. Basically, and despite the Corona crisis, 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 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 3.2 percent in real terms in 2021. This growth is due in particular to the positive impact of Expo 2020 in Dubai. In addition, Dubai International Airport recorded the busiest 4th quarter since the outbreak of the Corona pandemic. A positive development of the non-oil sector is also expected for 2022 and 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.
 
Recently, the government launched a strategic package worth 30 billion dirhams to finance more than 13,500 SMEs and create more than 25,000 jobs. 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 likely to continue in the current year 2022 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, even outside the free trade zones – without the previously mandatory local shareholder. 
    

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

German companies can enter the local market in many ways. In order to get a feel for the market situation in a cost-effective and time-effective way, it can be advantageous to cooperate with a commercial agent. However, this is no longer absolutely necessary. In order to present or promote a company and its products or services, it may be advisable to set up a "representative office". A joint venture can be a promising way to benefit from the business partners' network and experience in the market.
 
The UAE Ministry of Finance announced earlier this year that a federal corporate tax system will be introduced in the UAE. A nationwide law with specific implementing regulations is to be issued soon. According to initial information, a 9 percent tax will be levied on profits exceeding AED 375,000. It is expected that the corporate income tax will come into force on or after 1 June 2023 and will apply to profits earned in financial years starting consecutively. The purpose of introducing a federal corporate tax system is to maintain the UAE as a competitive and productive economy and to promote and support growth.
   

How does the UAE differ from its neighboring countries?

The United Arab Emirates play a pioneering role in the Middle East when it comes to combining western and oriental culture. It is hard to find another place in the world where people from different backgrounds and cultures live and work together peacefully in a comparable way.
 
The UAE is also leading the way from an economic perspective. For example, Saudi Arabia is following the Emirates with the establishment of free trade zones, a new investment law, and new visa opportunities for foreign investors, employees and employers, 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, the UAE Cabinet recently approved new regulations on liberalized entry and residence permits aimed at attracting and retaining global talent and skilled workers from around the world and strengthening the UAE's competitiveness in tourism, business and education. The new regulations are expected to come into effect from September 2022.
 
The recent labour law reform also aims to maintain the competitiveness of international companies in the UAE by allowing more flexibility in local labour relations.

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