UNITED ARAB EMIRATES: An Introduction
General Overview
The United Arab Emirates (UAE), a rapidly evolving nation on the Arabian Peninsula, has transformed remarkably since its establishment in 1971. This transformation reflects a harmonious fusion of tradition and modernity, solidifying the UAE’s status as a significant global player where English is the primary language for business and commerce.
Comprising seven distinct emirates, with Abu Dhabi as the influential capital, the UAE showcases a rich tapestry of cultural diversity and uniqueness within each emirate. Economically, it has thrived by wisely investing its oil wealth, particularly in Dubai and Abu Dhabi, renowned for their skyscrapers, free zones and international connectivity.
The UAE has also emerged as a global leader in innovation and technology, excelling in fields such as renewable energy and space exploration, positioning the nation at the forefront of cutting-edge advancements. It is not only a hub for tourism but also a thriving centre for technology and business. World-class attractions and luxury experiences cater both to visitors seeking leisure and to entrepreneurs and professionals looking for growth opportunities. The emirates offer a rich cultural heritage preserved in museums and historic sites, alongside high-end shopping and dining, including Michelin-starred restaurants. The country’s business-friendly environment and technological advancements make it an attractive destination for those seeking to invest and innovate.
The UAE has made substantial progress in promoting inclusivity and gender equality, and in embracing expatriates, fostering a cosmopolitan society where various nationalities and faiths coexist harmoniously. Politically, the UAE follows a federal system of governance, with dedicated leadership focused on ensuring the nation’s prosperity and stability.
In recent months, the UAE has undertaken strategic initiatives to diversify its economy, enhance social welfare and bolster infrastructure. Notably, it achieved historic milestones in space exploration with the “Hope Probe” mission to Mars, and normalised diplomatic relations with Israel through the Abraham Accords. The UAE’s official membership in the BRICS group underscores its commitment to long-term economic prosperity and balanced global relations. The country has also introduced significant legislative reforms to enhance its appeal for foreign investment and expatriate living, aligning with global best practices and harnessing the impact of technology.
Economic Overview
As of today, the UAE maintains its position as the second-largest economy in the Middle East and North Africa. While successfully diversifying its economic landscape towards trade, logistics, banking, tourism, real estate and manufacturing, these efforts have significantly reduced its reliance on oil-based GDP.
The UAE actively presents itself as the “United Global Emirates”, persistently seeking to attract foreign investment and talent. It continues to assert its role as one of the world’s most dynamic, competitive and innovative business hubs, offering world-class capabilities, services, infrastructure, legal frameworks and resources to international investors, entrepreneurs and professionals. The country remains dedicated to becoming a preferred launch platform for entrepreneurs, start-ups and investors of various sizes and stages.
In the context of the ongoing global geopolitical situation, the UAE has maintained its focus on economic growth and diversification. The nation has navigated through challenges presented by global events, such as the situation in Ukraine, by strengthening its economic fundamentals and continuing to attract investments.
Regarding the situation in Gaza, the UAE has actively engaged in humanitarian efforts and aid initiatives to alleviate suffering and promote stability in the region. While the region’s geopolitical dynamics remain complex, the UAE has consistently pursued a foreign policy that emphasises diplomacy, co-operation and humanitarian assistance.
The UAE has also expanded its international trade relationships by entering into new trade agreements with countries such as the United Kingdom, India and South Korea, fostering economic partnerships that enhance the country’s trade capabilities and further diversify its economy.
Despite global economic challenges, the UAE’s economy remains resilient and is expected to exhibit robust growth in key sectors, especially those core to Dubai. The hosting of the World Expo from October 2021 to March 2022 marked a significant milestone, with Dubai witnessing record hotel occupancy and a surge in real estate prices. In 2023, the expectation is for Dubai’s economy to expand by over 6.5% within its core sectors, demonstrating its ongoing economic vitality.
Over the past 24 months, the UAE’s economy has regained substantial positive momentum, driven by investor-friendly laws and regulations, strong oil prices, and the full easing of COVID-19 restrictions. This resilience in the face of global challenges underscores the UAE’s commitment to sustainable economic growth and stability.
Doing Business and Investing in the UAE
As of today, the UAE remains a highly attractive destination for business and foreign direct investment (FDI). It currently ranks 16th out of 183 countries for the overall “ease of doing business” benchmark. Recent legislative developments have further enhanced the business environment in the UAE.
One significant change is that foreign nationals can now fully own and operate companies onshore. In addition to this, the UAE’s famous “offshore” free trade zones still allow 100% foreign ownership. The country maintains a very minimal 5% VAT tax and imposes no income tax whatsoever. Its world-class infrastructure and highly favourable geographical location continue to make it a top choice for FDI and foreign investments.
However, it's important to note that the UAE has introduced new corporate tax rules. Under Federal Decree-Law No 47 of 2022 on the taxation of onshore corporations and businesses (the “Corporate Tax Law”), businesses will become subject to UAE corporate tax beginning with the first financial year that starts on or after 1 June 2023. It is important to be aware that free-zone companies are currently exempt from this taxation.
The UAE’s attractiveness for FDI is further emphasised by the presence of many of the world’s largest and most prominent companies. This has led to the country attracting a highly skilled workforce, which is employed by the rising number of international companies and financial institutions operating within its borders.
The legal framework in the UAE continues to support free trade zones, which are governed by independent regulatory authorities. Each free zone has its own industry-focused rules and regulations, tailored to specific sectors and designed to be pro-business.
The regulations for establishing and operating a business within these free zones are extremely straightforward. Businesses can be set up quickly, and the process is cost-effective compared to many other jurisdictions. The registration requirements are simple and similar across various free zones. The specific capital requirements may vary among the different free trade zones, so it is essential for businesses to research and choose the one that best suits their needs.
In summary, the UAE’s business environment remains highly favourable both for local and for foreign investors, with recent changes such as the introduction of corporate tax rules signalling the country’s commitment to maintaining its position as a hub for international business and investment.
Future Challenges and Opportunities
The UAE remains a global leader in business and innovation, known for its dynamic economy and modern outlook. Recent legislative reforms in commercial companies’ law, onshore labour law and FDI regulations have further strengthened the country’s business environment.
The COVID-19 pandemic posed significant challenges, impacting on the UAE’s economy. However, as mentioned earlier, the nation is on a trajectory of recovery, with GDP growth expected to exceed 7% in 2023. Nonetheless, the domestic market faces persistent challenges, including subdued demand from businesses and local consumers, as well as a real estate market that has been negatively affected.
To better facilitate international stakeholders’ access to the onshore legal system, the UAE government has taken significant steps. In specific cases, legal proceedings can now be conducted in the English language, a move that represents a significant step towards internationalising the traditionally Arabic-based onshore court structure. This development has been well-received by many international litigants.