UAE implements full foreign ownership of companies on June 1st, 2021

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June 1st, 2021 / Haroon Juma / News Updates

Annual compliance and key actions

The UAE recently took another step towards establishing itself as a global leader by enacting significant amendments to the Commercial Companies Law in the UAE. The new law in the UAE allows 100% ownership of companies for foreign investors and entrepreneurs. The Ministry of Economy has announced that this 100% foreign ownership in the UAE will come into effect from 1st June 2021.

The landmark changes to the 100% UAE foreign ownership laws will help attract foreign investors and entrepreneurs and further improve the ease of doing business in the country.

With effect from 1 June 2021, foreign shareholders in the United Arab Emirates (UAE) are entitled to hold 100% of the share capital in an onshore limited liability company, unless a restriction exists (full details below).

While the UAE government is still in the process of issuing the implementation regulations, it is an opportune time for shareholders to assess their current corporate structure and consider foreign ownership of their entity in the UAE.

What Are The Changes?

Under the UAE commercial companies Law No.2 of 2015, all onshore companies were required to have a UAE National or Emirati-owned company as a partner or sponsor.

Foreign shareholders were allowed to own up to 49% of a limited liability company (LLC), while the local sponsor holds the 51% majority.

The new UAE company rules have removed the need for a local sponsor for companies operating as onshore UAE businesses. These amendments also supersede the Foreign Direct Investment Law (FDI Law) of 2018. The FDI Law had allowed 100% foreign ownership of businesses of certain categories, on a case-by-case basis.

Companies conducting economic activities that have a ‘strategic impact’ will not benefit from 100% foreign ownership and require a local sponsor. A Cabinet Decision will be issued setting out the scope of these ‘strategic impact’ activities.

Based on earlier announcements, it is expected the following sectors qualify for 100% foreign ownership (a provisional list with activity codes is appended to this article):

Administrative and support services;
Agriculture;
Art and entertainment;
Construction;
Educational activities;
Healthcare;
Hospitality and food;
Information and communication;
Manufacturing;
Professional, scientific, and technical activities
Renewable energy;
Space;
Transport and storage.

This announcement is a major step forward for the UAE to create a more favorable legislative environment to attract inward investment and talent to grow the economy.

Considerations

The change in the law provides more opportunities for foreign investors to establish a presence and conduct business in the UAE. Some immediate actions that can be undertaken include:

Assessing your existing corporate structure and whether you are entitled to 100% ownership
Foreign investors can explore the option of a fully owned Limited Liability Company in the onshore (mainland) in addition or as an alternative to a free zone set up

Affected Sectors

1. Agricultural Sector

Serial No	ISIC4	Business Activity	Minimum Capital	Conditions and controls for foreign direct investment
1	01111	Grain Cultivation (wheat, corn, barley, etc)		– Use of modern technology – Achievement of high added value – Contribution in the research and development field – Satisfaction with the requirements of the licensing entities in the state.
2	01112	Cultivation of bean crops
3	01113	Cultivation of vegetables, melons, roots, and tubers
4	01114	Cultivation of sugar cane
5	01116	Cultivation of fiber crops
6	0119001	Flowers and flower buds cultivation
7	0121	Growing of grapes
8	0123001	Fruits and Citrus cultivation
9	0124	Growing of pome fruits and stone fruits
10	0125	Growing of other tree and bush fruits and nuts
11	0126	Growing of oleaginous fruits
12	0127	Growing of beverage crops
13	01289	Growing of aromatic, drug, and pharmaceutical crops
14	0161	Support activities for crop production	10
15	0162	Support activities for animal production
16	0163	Post-harvest crop activities
17	0164	Seed processing for propagation
18	0210	Silviculture and other forestry activities
19	0240	Support services to forestry

2. Manufacturing Sector

Serial No	ISIC4	Business Activity	Minimum Capital	Conditions and controls for foreign direct investment
20	10	Manufacture of food products (except): 1071 – Manufacture of bakery products 105 – Manufacture of dairy products 108 – Manufacture of prepared animal feeds	15	– Use of modern technology – Achievement of high added value – Contribution in the research and development field – Satisfaction with the requirements of the licensing entities in the state.
21	10	Manufacture of beverages (except): 1101 – Distilling, rectifying, and blending of spirits. 1102 – Manufacture of wines 1103 – Manufacture of malt liquors and malt	15
22	14	Manufacture of wearing apparel (except): 14109 – Tailoring and sewing of wearing apparel. 1410122 – Military garments manufacturing	15
23	15	Manufacture of leather and related products	15
24	`16	Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials	15
25	2012002	Straight or complex fertilizers manufacturing	15
26	2013	Manufacture of plastics and synthetic rubber in primary forms	15
27	2021	Manufacture of pesticides and other agrochemical products	15
28	2022	Manufacture of paints, varnishes, and similar coatings, printing ink and mastics	15
29	2023	Manufacture of soaps and detergents, cleaning and polishing preparations, perfumes, and toilet preparations	15
30	2029006	Glues and prepared adhesives Manufacturing	15
31	2029008	Manufacture of dyestuffs and pigments	15
32	2029009	Textiles and leather finishing used	15
33	2029013	Manufacture of photographic plates, films	15
34	2029019	Gelatine and its derivatives Manufacturing	15
35	2029021	Essential oils manufacturing (essence)	15
36	2029022	Extracted natural aromatic products manufacturing	15
37	2029023	Aromatic distilled waters manufacturing	15
38	2029024	Matches manufacturing	15
39	2029025	Welding power and pastes manufacturing	15
40	2030	Manufacture of man-made fibers	15
41	2100	Manufacture of pharmaceuticals, medicinal chemicals, and botanical products	15
42	22	Manufacture of rubber and plastic products	15
43	23	Manufacture of other non-metallic mineral products	15
44	24	Manufacture of basic metals (except): 242 – Manufacture of basic precious and other non-ferrous metals. 2432 – Casting of non-ferrous metals	20
45	25	Manufacture of fabricated metal products, except machinery and equipment (except) 2529 – Manufacture of weapons and ammunition	15
46	26	Manufacture of computer, electronic and optical products	15
47	27	Manufacture of electrical equipment	20
48	28	Manufacture of machines and equipment n.e.c. (except) 28259 – Tobacco Processing Machinery Manufacturing	100
49	29	Manufacture of motor vehicles, trailers, and semi-trailers	100
50	3011101	Building of commercial vessels	100
51	3011103	Ships and Floating structures sections Manufacturing	100
52	3011905	Construction of drilling platforms, floating or submersible	100
53	3011906	Construction of floating structures	100
54	3011907	Building of Hovercrafts	100
55	3012	Building of pleasure and	15
56	3020	Manufacture of railway, locomotives, and rolling stock	20
57	3030	Manufacture of air and spacecraft and related machinery (except): 30300006 – Military Ballistic and Guided Missiles Manufacturing	100
58	3090	Manufacture of transport equipment n.e.c	20
59	31	Manufacture of furniture	15
60	3220	Manufacture of musical instruments	2
61	3230	Manufacture of sports goods	3
62	3240	Manufacture of games and toys	3
63	3250	Manufacture of medical and dental instruments and supplies	20
64	3290	Other manufacturing n.e.c.	3
65	3312001	Repair and maintenance of train engines	15
66	3312002	Repair and maintenance of engine ships	15
67	3315001	Repair and maintenance of ships	15
68	3315004	Repair and maintenance of trains and railway equipment	15
69	3315005	Maintenance and Repair of Aircraft engines	15
70	3315006	Repair and maintenance of aircraft	15

3. Service Sector

Serial No	ISIC4	Business Activity	Minimum Capital	Conditions and controls for foreign direct investment
71	6910002	Legal Consultancy Offices	As per the applicable regulations	– Not to advocate before the UAE courts – Not to carry out any judicial procedure before courts, arbitral tribunals, and judicial and administrative committees – Not to carry out attestation activities – To obtain the approval of the relevant entities in charge of licensing such activities in the State – To be a natural or legal person known for their excellence in this field
72	692	Accounting, bookkeeping, and auditing activities; tax consultancy	As per the applicable regulations	Only permissible for tax planning for business and consultancies, preparing and reviewing taxes on businesses
73	711	Architectural and engineering activities and related technical consultancy	As per the applicable regulations	To be a natural or legal person known for their excellence in this field.
74	862	Medical and dental practice activities
75	75	Veterinary activities
76	620	Computer programming consultancy and related activities	As per the applicable regulations	To provide a technical team of no less than 5 specialized programmers by the end of the first year of the company
77	72	Scientific research and development	As per the applicable regulations	As per the applicable regulations
78	7730-77300	Renting and leasing of other machinery, equipment, and tangible goods
79	471	Retail sale in non-specialized stores (except Cooperative Societies 4711001)
80	731	Advertising
81	732	Market research and public opinion polling
82	702	Management consultancy activities
83	712	Technical testing and analysis
84	331	Repair of fabricated metal products, machinery, and equipment (except ships or aircraft and other transport equipment)
85	8121-81210	General cleaning of buildings
86	742	Photographic activities
87	8292-82920	Packaging Activities
88	823	Organization of conventions and trade shows
89	741	Specialized design activities
90	7490005	Legal Translation services
91	7490006	Translation services, movies, and television programs
92	7490012	Translation publication services
93	8299002	Translation Services
94	41	Construction of buildings	As per the applicable regulations	Only permissible for large-scale infrastructure projects such as airports, highway roads, sports facilities, and projects whose value exceed AED 450,000,000
95	42	Civil Engineering
96	432	Electrical, plumbing, and other construction installation activities
97	433	Building completion and finishing
98	431	Demolition and site preparation
99	439	Other specialized construction activities
100	7730009	Construction and Building or Demolition Machines and Equipment renting
101	851	Pre-primary and primary education	As per the applicable regulations	Public education is excluded. To obtain the approval from the entities in charge of education to license such activities and to comply with such standards and controls as may be determined by them. To comply with the conditions and standards of school facilities and to ensure a high level of education quality.
102	852	Secondary Education
103	853	Higher Education
104	854	Other Education
105	370	Sewerage	As per the applicable regulations	As per the applicable regulations in this regard
106	382	Waste treatment and disposal
107	3900001	Pollution consequences treatment and environmental protection
108	861	Hospital Activities	100	Subject to the approval of the relevant authorities in light of the economic need taking into account the number of hospitals, medical and health centers in a specific area. Dubai Health Care City is excluded from the above condition.
109	869	Other human health activities	70	As per the applicable regulations
110	8211001	Hotel Management	As per the applicable regulations
111	8211004	Restaurant Management
112	90009	Creative activities and presentation of art drama (theatre)	Permissible only for theatre activities and live bands. As per the applicable regulations
113	9000104	Music Band
114	9000110	Circus
115	8130002	Landscape and gardening services
116	9103 – 91030	Botanical and zoological gardens and nature reserves activities	Permissible only for public garden services and specialized garden services
117	5012 – 50120	Sea and coastal freight water transport	As per the regulations applicable
118	5022001	Internal water transportation of goods
119	7730016	Commercial ships rental
120	5222002	Ship piloting and towing
121	5222007	Marine towing of boats and jet skis
122	New	Activities of holding companies in intellectual properties

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UAE implements full foreign ownership of companies

by Haroon Juma | Jun 3, 2021 | UAE News Updates