ARTICLE
12 November 2024

Repeal Of Anti-Fronting Law: The UAE Continues To Optimize Its Reputation As An Investor Friendly Destination

BA
BSA Ahmad Bin Hezeem & Associates LLP

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BSA is a full-service law firm headquartered in Dubai, UAE, with 9 offices across the region. We are deeply rooted in the region, offering a competitive advantage to clients seeking advice that works in the real world and is truly in tune with the market. We have rights of audience in every country where we have an office, means that we can litigate all the way from the boardroom to the courtroom.
On 30 September 2024, the Federal Government of the United Arab Emirates ("UAE") enacted Federal Decree-Law No. 26 of 2024, titled "Repealing Certain Federal Laws" (the "Law").
United Arab Emirates Government, Public Sector

On 30 September 2024, the Federal Government of the United Arab Emirates ("UAE") enacted Federal Decree-Law No. 26 of 2024, titled "Repealing Certain Federal Laws" (the "Law"). This decree includes a notable repeal of Federal Law No. 17 of 2004 on Combating Commercial Concealment, commonly known as the "Fronting Law."

The Fronting Law, initially implemented in 2004, restricted foreign nationals from engaging in "fronting," which was defined as "enabling a foreigner – whether a natural or artificial person – to undertake any economic or professional activity that is otherwise prohibited under the laws and regulations of the UAE, either independently or in partnership with others, thus allowing them to evade applicable obligations." Violations of the Fronting Law came with stringent penalties, including:

  • Fines not exceeding AED 100,000,00 (one hundred thousand dirhams) (per fronting activity);
  • Imprisonment for up to 2 (two) years and the above fine for a recurring offence.
  • Deportation.
  • Revocation of the commercial license in question and the barring of the person from carrying out the activity which the person concerned had been carrying out for the period of between 2 (two) – 5 (five) years.

In recent years, however, the UAE has passed significant legislative reforms to relax the requirement for UAE national ownership of "onshore" companies. These regulatory adjustments have opened the doors to a more substantial inflow of foreign investment, further solidifying the UAE's reputation as a globally recognized, investor-friendly destination.

The repeal of the Fronting Law marks a continued evolution in the UAE's business landscape, reflecting the nation's commitment to creating a flexible, investor-friendly environment for foreign businesses. This regulatory change is in line with the UAE's vision to attract global investors by providing an appealing combination of geographic advantage, tax incentives, and a robust regulatory framework designed to foster business growth.

As a result, foreign investors can now operate in the UAE with increased confidence, assured that the legal framework supports their ventures and aligns with the UAE's ongoing initiatives to enhance economic diversification, transparency, and business accessibility. The UAE's strategic regulatory reforms signal its commitment to bolstering its global competitiveness and ensuring a business environment that welcomes and empowers investors from around the world.

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