UAE Leads The Way In Attracting Foreign Investment

BSA Ahmad Bin Hezeem & Associates LLP


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Legislative strides catapult the UAE to the vanguard of progressive economies in the Middle East.
United Arab Emirates Government, Public Sector
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Legislative strides catapult the UAE to the vanguard of progressive economies in the Middle East.

The UAE stands as the foremost destination for foreign direct investment (FDI) in the Middle East, securing its position as the top-ranking nation in West Asia and the MENA region in 2022.

According to the UNCTAD report, FDI inflows surged from over US$21 billion in 2021 to an impressive US$23 billion in 2023, underscoring the country's magnetism for global investors.

The UAE's allure spans across diverse sectors, including financial services, energy, industrial, IT, agri-tech, tourism, and manufacturing.

In recent years, the government has embarked on a progressive journey to bolster investor confidence and stimulate business growth through sweeping legal reforms. A pivotal milestone was the enactment of UAE Federal Decree Law No. 32/2021 on Commercial Companies, empowering non-local investors with full ownership of their enterprises—a significant departure from previous norms where ownership was predominantly confined to designated free zones.

This legislative stride catapults the UAE to the vanguard of progressive economies in the Middle East, expanding the horizons of economic freedom and fostering a conducive environment for foreign investment. Moreover, the government's proactive approach extends to forging free trade agreements and treaties, aimed at fortifying commercial ties within the UAE and beyond. Such agreements including multiple double taxation treaties which can equally benefit individuals as well as corporations.

Underlining its commitment to sector-specific growth, the Abu Dhabi government launched the 'ROWAD' program, targeting investors in the industrial and manufacturing domains. Notably, this initiative spurred a 16.6% surge in industrial licenses from 2022 to 2023, highlighting the program's efficacy in nurturing strategic sectors.

The UAE's regulatory landscape continues to evolve, exhibiting a penchant for flexibility and alignment with international standards. Striving to assuage investor apprehensions, regulatory bodies offer robust support, minimal bureaucracy, and heightened transparency, fostering an investor-friendly climate unparalleled in the region.

The UAE underwent an intricate amendment to some of its Federal Laws and this has included more than 13 laws over the past three years including Commercial Companies Law, UAE Penal Code and the E-commerce Law. All of these are important for foreign investments and for creating a proactive and advanced environment for investors.

In tandem with burgeoning FDI, the government has instituted stringent regulatory frameworks, including Anti-Money Laundering (AML) regulations, Economic Substance Regulations (ESR), and Ultimate Beneficial Owner (UBO) policies.

Further to the above, the introduction of corporate tax in June 2023, despite initial skepticism, emerged as a catalyst for FDI, positioning the UAE as an even more attractive investment destination. Notably, personal income tax remains nonexistent, further augmenting the country's appeal to investors.

In addition to the above, the UAE implemented ESR regulations, introduced by the government as a commitment to the Organisation for Economic Co-operation and Development (OECD) framework, These require businesses that fall under certain activities to demonstrate an adequate amount of economic presence in the UAE, relevant to any activities that they undertake. All of these regulatory and legal changes are extremely important for multinational corporations who are increasingly leveraging the UAE's strategic advantages, establishing operational hubs, and reinforcing their presence in the region. Such regulations ensure that entities operating in the UAE, including holding companies, adhere to corporate tax and compliance obligations, fostering a culture of transparency and accountability.

By curbing the proliferation of shell corporations and instilling a culture of fiscal responsibility, the UAE bolsters its reputation as a global business hub committed to international best practices. These regulatory measures not only bolster transparency but also engender trust among investors, thereby catalysing sustainable economic growth and genuine investment inflows into the country.

In conclusion, the UAE's trajectory as a beacon of economic resilience and regulatory dynamism underscores its unwavering commitment to fostering a vibrant ecosystem conducive to foreign investment and sustainable development.

This article was originally published by Law Middle East.

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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