Among the key advantages of doing business in the Emirates are a favourable tax policy, a well-developed banking system, stable economic and political situation in the country, and a convenient international payment system. The government supports entrepreneurs and offers various state programmes and incentives, making business operations in the UAE easier than ever, as well as providing numerous opportunities.
Tax incentives
Since 2018, the UAE has implemented a Value Added Tax (VAT). Enterprises and individuals with a turnover exceeding AED 375,000 (USD 102,000) during the previous 12 months are required to register with the Federal Tax Authority (FTA). If the total turnover is over AED 187,500 (USD 51,000), business registration is voluntary.
The standard VAT rate in the UAE is 5%, which applies to most goods and services. However, there are certain cases where a 0% rate is applicable. For more detailed information, you can consult our tax advisor.
Starting from 2023, the UAE has implemented a federal corporate income tax for companies. The standard tax rate for companies is 9%. Oil and gas companies are subject to a progressive scale corporate tax rate of up to 55%. Branches of banks and insurance companies have a tax rate of 20%.
The corporate tax will be levied on the profits of companies as stated in their financial statements. The financial statements must be prepared in accordance with international accounting standards.
Corporate tax does not apply to income derived from:
- Employment activities
- Real estate and other investments
- Non-commercial activities
Companies and individuals can obtain a Tax Residency Certificate from the Federal Tax Authority (FTA) in the UAE. This certificate helps in avoiding double taxation on income earned in the Emirates.
100% ownership rights
New legislation came into effect on June 1, 2021, allowing foreign business individuals to own 100% of the capital in local companies. This applies to over 1,000 types of activities, including:
- agriculture
- arts and entertainment
- construction
- educational activities
- healthcare
- hospitality and catering services
- professional and scientific-technical activities
- transportation and storage
Currently, the requirement for a service agent or partner is only necessary for limited types of activities.
Another way to maintain 100% ownership rights in a business is to register the company in one of the free zones. Here, the involvement of a local partner is also not required.
Full Profit Repatriation
Repatriation implies the return of capital to one's home country. A foreign entrepreneur can repatriate 100% of their foreign investments to the country where they hold citizenship.
Developed banking system
In its UAE Bank Datawatch report, the international rating agency, Fitch Ratings Inc.,, has declared the high indicators and stability of the banking system in the UAE in 2022 and projected its further development. This is supported by the following facts:
- The UAE dirham has maintained a stable exchange rate with the US dollar for over 25 years, with a fixed rate of 3.65 dirhams to the dollar.
- The majority of entrepreneurs can become clients and account holders of UAE banks.
- Thanks to advanced internet banking services, entrepreneurs can conduct banking operations quickly from anywhere in the world.
- UAE banks have a high level of security.
- Bank clients/users can benefit from a wide range of high-tech services, such as contactless payments, fingerprint authentication, and more.
Loans
The criteria for obtaining a business loan in the UAE are individual and largely depend on:
- the industry in which the entrepreneur operates in
- financing needs
- the business plan provided by the client
The loan amount primarily depends on the company's turnover. For example, Abu Dhabi Commercial Bank offers business loans of up to AED 1,500,000 (USD 408,000) with a flexible repayment period of up to 48 months. Another example is Rakbank, which provides unsecured loans with flexible repayment terms of up to 60 months and loan amounts of up to AED 3,000,000 (USD 816,000). The bank requires proof of the company's financial stability, which includes providing a package of documents, including financial audits for the past 1-2 years.
Islamic banks operate extensively in the UAE and they follow the principles of Islamic finance, which prohibit the charging of interest on loans. The largest institutions include:
- Dubai Islamic Bank
- Abu Dhabi Islamic Bank
- Emirates Islamic Bank
- Al Hilal Bank
Important! Islamic banks may refuse to cooperate if the entrepreneur's activities are related to pork, alcohol or tobacco.
Support for Startups and Businesses
The UAE government considers small and medium-sized enterprises (SMEs) as the backbone of the country's economy and actively supports them. There are numerous funds and systems in place to assist entrepreneurs.
Funds and Centres
One of the most popular funds is the Khalifa Fund for Enterprise Development, which creates opportunities for the development of the entrepreneurial ecosystem in the UAE and implements various programmes, such as:
- Khalifa Fund Membership Programme - helps establish business connections, organize participation in local and international exhibitions, and more.
- Mohammed Bin Rashid Establishment for SME Development - provides assistance with business financing, trade licenses, product promotion, and more.
Assistance to Startups
The Ministry of Economy for the UAE has launched Entrepreneurial Nation to support startup development. The platform helps companies gain access to new markets, investors and capital. Among the Entrepreneurial Nation programmes are:
Huawei Cloud Startup Programme. Entrepreneurs receive Huawei Cloud vouchers worth up to AED 550,000 (USD 150,000), training, and assistance from leading industry experts.
ADIO. A programme for entrepreneurs looking to expand their business in Abu Dhabi, and offers informational sessions, investor services, and more.
Convenient International Payment System
UAE banks support the international IBAN system, enabling entrepreneurs to quickly exchange payments with their clients from Europe.
Stable economy
In 2022, the UAE ranked first in the world in the Global Entrepreneurship Index (GEI) for economic activity, and was named the best place to start a business. The World Bank forecasts a 4.8% economic growth for the country in 2023, driven by manufacturing, tourism, real estate, construction, and transportation sectors.
The UAE maintains a low inflation rate. From January 2022 to September 2022, it had the lowest inflation rate in the world, at just 5.5%. As of July 2023, the inflation rate in the UAE is 3.05%, while in the European Union, this stands at 7.1%. Lower inflation attracts more investments, ensures economic stability, and provides greater financial opportunities for entrepreneurs.
High standard of living
In 2023, the World Bank ranked the UAE seventh in the world for per capita gross national income. According to the Julius Baer Lifestyle Index 2023, which tracks consumer prices and lifestyles, Dubai secured the 7th position.
Each year, the UAE earns prestigious ranks in global ratings due to its developed infrastructure, high level of safety, quality education and healthcare, and a thriving and stable business environment. For instance, in the latest report by the Economist Intelligence Unit on Assessment of the Best Countries for Business, the UAE received the highest score. The Global Entrepreneurship Monitor also awarded the Emirates first place in the 2022 Global Entrepreneurship Index.
Stable political environment
According to the BTI Transformation Index, the UAE is rated as a country with high political stability. This enables entrepreneurs and investors to assess risks and make long-term strategic decisions with confidence.
The United Arab Emirates places significant importance on openness in its policies, fostering trust among both the local population and foreign entrepreneurs. Transparent policies contribute to combating corruption and creating a fair business environment.
Favourable Geographical Location
The United Arab Emirates is situated between Europe, Asia and Africa, making it an ideal location for conducting international business. It is also close to major markets in Africa and Eurasia.
There are many ports and airports in the country that are connected to key global transport hubs. This allows you to deliver goods from anywhere in the world.
Conclusion
The Emirates is considered to be the best place to start a business. In the UAE, there is no VAT on certain goods and services, and the standard VAT rate is only 5%. Foreign entrepreneurs can own 100% of the capital in local companies, repatriate profits, access favourable credit facilities, and rely on government support for their businesses. The country has a stable banking system and fast international settlements.