06 Jun 2018

A new dawn for foreign investment into the UAE?

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The latest resolution of the Cabinet of Ministers has been reported as an era of opportunity for foreign investors looking to own a business in the UAE. 

On 20 May 2018, HH Sheikh Mohammad bin Rashid Al Maktoum announced (on Twitter and LinkedIn) that the Cabinet had ruled to allow 100% foreign ownership of companies in the UAE in the future – a significant shift from the current regime, which limits foreign ownership of most UAE companies to only 49%. The announcement was enthusiastically welcomed, as it suggested that international investors would be permitted to incorporate wholly-owned companies anywhere in the UAE, as is already the case in the country's economic free zones. However, the initial excitement has been tempered by news reports that the application of such reforms will be limited to certain, yet to be determined, industries and companies.

As part of its decision, the Cabinet also announced plans to grant those investors (and their dependents) UAE residency visas that will be valid for up to 10 years (as compared with the current 2-year validity period). However, this extension is limited, and will only apply to individuals (and their dependents) working in specific sectors, including medical, scientific, research and technical fields (such as engineering), but also more generally for all innovators, entrepreneurs and exceptional students (typically those with grade A results). A key consideration in assessing the impact of such plans will be the thresholds for the granting of such visas and whether they are tied to employer sponsorship or will be valid independent of employment status.

We understand that the current residence visa scheme for students will also be reviewed, with plans to issue student visas that will be valid for up to 5 years and to allow the extension of student visas (and those of any dependents) after graduation to give them the opportunity to look for jobs and settle in the UAE.

As HH Sheikh Mohammad stated on Twitter, the UAE's "open society, tolerant values, excellent infrastructure and flexible legislation offer the best environment for international investment and exceptional talent". Relaxing the ownership and residency visas in this way would no doubt make the UAE a more attractive option for international investors. It could also encourage those already established here to re-visit their current arrangements and make longer-term decisions about their future in the UAE, such as investing in real-estate.

There have been reports in the past about opening up the foreign investment of up to 100 percent outside the free zone. In that context, this resolution is by far the most concrete step in this direction and is very encouraging. While this announcement has caused a lot of excitement in the region, the true impact can only be assessed once more details are available. It is anticipated that the plans and more details will emerge in the third quarter of 2018.

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