New regulations on foreign ownership – UAE

New regulations on foreign ownership – UAE

Tilal City in Sharjah, does not require investors to have a visa in order to invest in business, according to legislation that was enacted in 2017. The UAE has announced more legislation that gives investors 100 percent ownership in some business sectors. The newest legislation, which was supposed to take effect earlier this year is not expected to take effect until the end of 2018.

Past Legislation

Though investors expected the 2017 legislation to amend the limit of 49 percent ownership of companies that are incorporated locally, it did not. The UAE Commercial Companies Law was passed allowing investors and developers in Sharjah to buy property without a residency visa. This legislation gave the city's market a significant step up by making the ability to invest easier and with significant lower risk. Even without the 2017 legislation, foreign direct investment increased by 15 percent – about AED 1 billion, thanks to transparency, information, competitive advantage and government support.

2018 Legislation

With the new legislation that is expected to be in place by the end of 2018, the foreign direct investment is expected to see another dramatic increase. If the company is incorporated in a free zone, foreign investors may own 100 percent. Also, if the company is a public joint stock company, there is not a 51 percent UAE ownership, but there is a 51 percent GCC stake-holding requirement. Investors are hoping the new rules and regulations will nullify the ownership requirements.

The new legislation will have an excellent long-term effect, making the UAE even more progressive than it already is. Not all of the specifics regarding the new legislation have been released, so the specific business sectors, other than those in Sharjah and Tilal City are unknown.

Details of the complete legislation have not been released as of yet, though the legislation is expected to be enforced at the end of 2018. Known changes include:
   • Waiver of corporate taxes;
   • 100 repatriation of profits and revenue;
   • Exemption from personal taxes;
   • Long-term lease options;
   • Less documentation;
   • Faster incorporation; and
   • 100 percent free transfer of funds.

Additional details regarding the legislation will be available after it goes through the final review.

According to Sultan Al Mansoori, the Economy Minister, the new legislation will free up many areas of investment, including real estate developments, the manufacturing industry, pharmaceuticals and the services sector. The legislation's final draft is before the Cabinet.

With the combination of past legislation, free zones in Sharjah and the new legislation, real estate investors will find it easier and more lucrative to invest in the UAE. Investors and developers will have a longer period to allow their projects to bring in cash flow from rentals, thus allowing the properties to go into equity prior to the sale of the development or project.

Stability, Safety and Long-Term Visibility

According to Phillippe Yvergniaux, the director of the International Cooperation, Business France, foreign investors want stability, safety and long-term visibility. The new legislation now provides for that by allowing 100 percent ownership.

Sharjah also has three of the 47 free zones in the UAE for business owners, which encourages venture capitalists to invest. Sharjah's free zones include Hamriya Free Zone Authority, Sharjah Airport Free Zone Authority and the USA Regional Trade Center Free Zone. The city offers security, political stability, low labor and energy costs, and low custom duties.

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