Foreign Direct Investment Law in line with the UAE Innovation Mission
The United Arab Emirates is known to have one the of most advanced technological infrastructure on the global level. This enables the country to adopt the latest innovations in all sectors. In turn, foreign investors can guarantee that they avail sophisticated, innovative, cutting-edge technologies playing in their favor when venturing into the UAE. This includes telecommunication, transportation, sustainable energy and much more. Hence, it is important to introduce advanced investment legislations to make the best out of the advantages that the UAE offers as an investment hub.
In order to encourage foreign investment in the country, the UAE has lately introduced the new “Federal Law by Decree No. (19) of 2018 Regarding Foreign Direct Investment”, also known as the “FDI Law”. With this initiative, the UAE asserts its position as a major attraction for foreign direct investment, which will have a positive impact on the overall economic performance of the country as a key player in both the regional and international arenas.
One of the most important privileges of the newly introduced law, is the fact that it granted foreign investors the ability to hold up to 100% shareholding percentage in companies that are established in mainland UAE, which was previously limited to companies established and operating in UAE free zones only.
Furthermore, even though the “Foreign Investment Companies” will be labeled as such in their incorporation documents, they will be treated the same as the national companies as per Article (8) of the law, to the limit permitted by UAE legislations and the relevant international conventions and treaties to which the UAE is a party.
Moreover, there are additional advantages for direct foreign investors to establish new companies in the UAE granted by the same Article no (8) cited above, including, but not limited to, (subject to all applicable legislation in force in the UAE) the right to transfer the returns of their investment outside the UAE, including:
• the annual net profits
• the proceeds resulting from the investment’s liquidation
• the proceeds resulting from selling a part or the whole investment.
Additionally, employees of a foreign investment company shall have the right to transfer their salaries, compensations, and entitlements outside the UAE (subject to all applicable legislation in force in the UAE).
However, the law excluded a list of sectors and activities from its scope (Negative List), such as, petroleum production & exploration, military related services, banking & finance activities, insurance services, road & air transportation, printing & publishing services, in addition to other sectors further stipulated in Article No (7) of the law. The Council of Ministers of the UAE will issue a resolution of the approved sectors and activities (Positive List) available for foreign direct investment, including the allowed ownership percentage for foreign investors in each sector, and the minimum share capital of the foreign investment company.
The introduction of Federal Law by Decree No. (19) of 2018 Regarding Foreign Direct Investment is one of many steps that the UAE has taken over the decades to become the pioneer country that it is at present. It is also a step further in the right direction towards attracting global investors and providing them with an adequate platform which serves the mutual interests of the country and the foreign investors. This is surely in line with the country’s innovation plans and the hosting of the EXPO 2020, which is one of the most important events that presents the latest in the fields of research, innovation, sustainable growth and futuristic developments and the gathering place for the most innovative minds that will shape the future of our planet.