United Arab Emirates: UAE Allows 100% Foreign Ownership And Long Residency

Last Updated: 3 July 2018
Article by Oneworld Ltd

The UAE is abandoning decades of restrictions on foreigners owning companies and settling in the Gulf country to help attract money and talent in the economy. The changes were approved by the cabinet and will take effect by the end of 2018.

The surprise announcement that it will allow full foreign ownership in all companies in the UAE including local and grant long term visas to select investors and professionals is set to have far reaching effects. They range from the encouragement of foreign investment and helping the UAE become a magnet for highly skilled professionals to providing a positive boost to the country's real estate sector.

The new rules will allow for residency visas of up to 10 years for specialists in scientific, medical, research and technical fields, and are a long awaited departure from the previous regulations that called for the establishment of businesses to have a local partner owning 51 percent of the venture. Additionally, the new rules provide for 5 year visas for students and 10 year visas for "exceptional" students.

While the 2 main Emirates in the UAE - Abu Dhabi and especially Dubai - have thrived on tourism, financial services and as airline hubs, the UAE government is now turning to science and technology to ensure the country will keep its high momentum and the economy expand. The growth rate in the economy is expected to grow significantly and the recent glut in the real estate market to be turned around.

Attracting FDI

The UAE's decision to allow full foreign ownership comes at a time when the country is in the midst of an ambitious diversification effort as it aspires to become even less dependent on oil. Among the main benefits of the change is that it will boost growth by attracting more foreign direct investment (FDI), primarily into non oil sectors, as well as encouraging foreigners to set up more businesses in the country. It is the biggest recognition yet that the second largest Gulf economy is more reliant than ever on foreign investment and an expatriate workforce at a time when the oil dependent region faces many challenges today.

"Many people held back from investing here as they felt there was no long term tenure and they were dependent on a short term visa", Chavan Bhogaita, the head of market insights and strategy at First Abu Dhabi Bank told news agencies. "Now, with a 10 year visa and 100 percent permitted foreign ownership, investors and people looking to set up and grow businesses here will have more confidence".

Changes to ownership rules are a significant departure from the policy of restricting foreign ownership outside free zones. Expatriates seeking to establish businesses outside the zones had to seek partnership with UAE citizens owning 51 percent in the ventures.

"We expect a significant positive effect on foreign direct investments – 100 percent ownership will help spur FDI outside the existing free zones", said the managing director and head of equity research at investment bank Arqaam Capital in Dubai.

Long Term Residency

The new rules will offer residency of up to 10 years to specialists in medical, scientific, research and technical fields, as well as 5 year visas to students and 10 year visas to exceptional students.

Like in most other Persian Gulf states, a majority of the UAE's population of 8 million consists of expatriate workers and families who are expected to leave once their employment ends.

Unable to set roots in the UAE, many send earnings abroad. In 2017 alone, expatriates remitted 164 billion dirhams ($45bn).

A relaxation of residency rules follows legislation in neighbouring Qatar last August that granted some foreigners the right to remain indefinitely. The decision was taken amid a crisis in relations between Qatar and a bloc of Arab states led by Saudi Arabia.

Beyond employment, the residency will give more cushioning for freelancers and researchers to reside in the country without the need to depend on employment. The local ownership laws are more interesting than the residency permit laws actually, because they will reduce dependence on free zones and free zone real estate which is inflated relative to the onshore market.

Boom for Real Estate

Real estate is one of the sectors that stands to benefit most from this move, as the changes should encourage the UAE's expatriate population to remain in the country for longer periods. The announcement was positively received by real estate professionals and construction executives as a genuine turning point for the industry.

Longevity of residence for expatriates is going to be a game changer as the population's historically transient nature gives way to semi permanency. "The move will clearly go some way to stemming the loss of human talent from the UAE and will also contribute to more stable and sustainable demand for residential and commercial property from domestic buyers. This privileged group of expatriates "who benefit from the changes to the rules" will undoubtedly feel a greater sense of belonging, which will facilitate the emergence of stronger and deeper communities.

It is expected to be a boost to both supply and demand in the property sector by way of attracting and retaining long term investors and also skilled professionals. Direct and indirect effects are expected to come into play, such as population stabilization and growth, renewed confidence in the property market and an increase in expatriate end user purchases, who are likely to invest in their own homes within the UAE instead of repatriation to their home markets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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