Everybody recognizes the fact that in the past 10 years, the United Arab Emirates has turned into a hub for international trade and commerce. It has become a preferred destination for numerous successful international companies looking to expand. Official figures reveal that in the first three quarters of 2023 alone, Dubai saw the registration of 48,616 new companies, marking a significant increase of more than forty percent compared to the previous year.
There has been a substantial rise in the number of businesses from Great Britain, Japan, Hungary, and Kyrgyzstan establishing their presence in the UAE. This surge begs the question: What is it about the UAE that draws foreign entrepreneurs in such large numbers?
As of early 2024, major global corporations including IBM, Deutsche Bank, Amazon, Ernst & Young, Google, and Cisco established their offices in Dubai. There are several compelling reasons why foreign companies opt to set up operations in the UAE, which we will outline below.
UAE: a tale of non-oil trade triumph
Renowned for its strong economy and reliable financial system, the UAE creates an appealing environment for foreign investors who have confidence in the nation’s governance.
In its recent report, the World Bank has revised the UAE’s GDP growth projection for 2024 upward from 3.7% to 3.9%, while S&P has adjusted its forecast to 5%. The Central Bank of the United Arab Emirates is even more positive, predicting a growth rate of 5.7%, based on data from non-oil economic sectors. In October 2023, the Purchasing Managers’ Index, which measures manufacturing sector activity, peaked at 57.7, the highest since June 2019.
The Central Bank’s March 11, 2024 report on the UAE’s financial system performance states that the integration of modern technologies across all economic sectors has rendered the financial system more secure and efficient than ever. By the close of 2023, the count of local banks stood firm at 22, excluding investment banks, although their branch offices saw a reduction to 489. The foreign bank tally also remained at 22, with a total of 66 branches. What is more, nearly 200 other financial entities are operational in the UAE.
It is important to highlight the UAE Government’s diligent efforts in advancing the Projects of the 50, an initiative aimed at transforming the nation into a prominent global financial and economic hub.
Tax-smart investing in the UAE
Foreign companies operating in the UAE benefit from a minimum fiscal burden, allowing them to allocate the capital saved from low tax liabilities toward business growth.
The UAE has recently implemented a 9% corporate income tax. It applies solely to companies with an annual turnover exceeding AED 375,000 (approximately USD 102,000). Besides, the country maintains a relatively low VAT rate of 5%.
UAE’s Free Zones and their strategic advantages
As of 2024, the UAE boasts 46 specialized Free Zones, with new ones emerging periodically. These are strategically located across Dubai, Abu Dhabi, Sharjah, Fujairah, Ajman, Ras Al Khaimah, and Umm Al Quwain, offering significant fiscal advantages for businesses.
This is what the primary benefits of the Free Zones include:
- Zero or Low Taxes: Businesses enjoy a 50-year exemption from corporate income tax, no personal taxes, and no taxes on capital repatriation.
- Full Foreign Ownership: Foreign investors fully own their company shares.
- Streamlined Registration: The process of company registration in Free Zones is typically straightforward and minimally bureaucratic.
- Customs Duty Exemption: Companies in UAE Free Zones are exempt from customs duties when not exporting to the mainland UAE.
- State-of-the-Art Infrastructure: Local Free Zones provide access to advanced infrastructure, including high-speed Internet, transport networks, logistics centers, and more.
In the UAE, each Free Zone is tailored to a specific sector. Dubai Media City, for example, hosts the media industry, with prominent companies like CNN, Reuters, and ITP. Similarly, Dubai Internet City Free Trade Zone caters to the IT and high-tech sectors, with industry giants like IBM, Microsoft, Canon, HP, Philips, and Google establishing a presence there.
DTAs and fiscal transparency initiatives
The UAE has made Double Taxation Avoidance (DTA) agreements with numerous countries, ensuring that internationally operating companies are not subject to dual taxation in different jurisdictions simultaneously.
By early 2024, the UAE had entered into DTAs with 142 countries. Committed to fiscal transparency, the UAE engages in the exchange of fiscal information with other nations.
UAE’s journey to economic prosperity
The UAE is a gateway to the markets of the Middle East, South Asia, and Africa, which makes it a prime destination for entrepreneurs targeting business opportunities in these regions.
Strategically positioned at the crossroads of major global trade routes, the UAE is a crucial transit hub for numerous companies. Its seaports rank among the world’s most active and well-furnished, offering effective logistical solutions and facilitating the global distribution of goods.
A meeting is set for May 15, 2024, to deliberate on establishing a maritime and railway transport corridor that would interconnect the Middle East, South Asia, and Europe. The proposed corridor aims to integrate rail networks and link ports across a route from India to Europe, passing through the UAE, Saudi Arabia, Jordan, and Israel. The UAE’s involvement in China’s One Belt, One Road initiative has been instrumental in achieving a trade turnover of USD 95 billion in 2023. The bilateral goal is to escalate this figure to USD 200 billion by 2030.
The UAE is consistently enhancing its status as a premier global business center. It offers unparalleled opportunities for growth and advancement to international firms. Thanks to the nation’s economic benefits, favorable tax policies, prime geographical positioning, and forward-thinking business practices, it remains a magnet for investors and entrepreneurs globally. Suffice it to say that by March 2025, the cumulative investment in the UAE had soared to USD 2.5 trillion.
Are you ready to embark on your entrepreneurial journey in the UAE? If that’s the case, request a personal consultation regarding company registration in the UAE from International Wealth! Our specialists are eager to share with you the myriad of benefits and prospects available in the nation. Seize the opportunity to join the rapidly expanding business ecosystem in the UAE! It may well become the chance of a lifetime for your business.