1. What is the legal system (civil law, common law or a mixture of both)?
The United Arab Emirates (UAE) is a civil law jurisdiction. The Federal Constitution apportions powers between the federal government (based in Abu Dhabi) and the seven constituent emirates. Certain areas are regulated federally (such as immigration and labour), some at the emirate level (such as natural resources within each emirate, including petroleum), and some are regulated at both the federal and emirate levels (such as company formation and registration).
2. Are there any restrictions on foreign investment (including authorisations required by central or local government)?
A foreign company can establish a presence in the UAE by setting up a branch or forming a company.
A branch of a foreign company is required to have a sponsor (termed a national agent). Branch sponsors have no ownership rights in the branch. The sponsor must be a UAE national or a company wholly owned by UAE nationals. A UAE company must be at least 51% owned by UAE nationals, with the following general exceptions:
- Certain sole proprietorships and professional partnerships can be wholly foreign owned.
- A UAE company may be 100% owned by nationals of the Gulf Co-operation Council (GCC) nations, the other GCC members being Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.
In each case, the branch or company must obtain a licence from the federal and/or municipal authorities to carry on its proposed activities.
For activities of national interest, such as those relating to telecommunications or petroleum, there may be restrictions on foreign ownership and/or additional licensing requirements. In addition, certain industries face heightened regulation, such as banking, insurance and investment.
3. Are there any exchange control or currency regulations?
There are no currency exchange controls and no restrictions on the remittance of funds except for restrictions on transactions involving Israeli parties or currency.
4. What grants or incentives are available to investors? Are any of these aimed specifically at foreign investors?
The UAE has established various free zones, each of which is governed by the relevant free zone authority. Free zones are subject to their own respective company laws, independent of the company law of the UAE. Foreign companies are permitted to establish wholly owned branches or incorporate wholly owned subsidiaries in each of the free zones, without the need to appoint a UAE national sponsor or have any UAE national ownership.
Free zones attempt to distinguish themselves by appealing to a particular type of business, by offering an environment attractive to those businesses in terms of infrastructure, location and other factors such as guaranteed tax holidays. Even outside the free zones, there is presently no corporate or personal income tax (except on foreign banks and courier companies operating in the UAE).
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