Executive Summary

The Government of the United Arab Emirates (UAE) is pursuing economic diversification and regulatory reforms to promote private sector development; reduce dependence on hydrocarbon revenues; and build a knowledge economy buttressed by advanced technology and clean energy.


The UAE serves as a major trade and investment hub for the Middle East and North Africa, as well as increasingly for South Asia, Central Asia, and Sub-Saharan Africa. Multinational companies cite the UAE’s political and economic stability, excellent infrastructure, developed capital markets, and a perceived absence of systemic corruption as factors contributing to the UAE’s attractiveness to foreign investors. The UAE seeks to attract foreign direct investment (FDI) by i) not charging taxes or making restrictions on the repatriation of capital; ii) allowing relatively free movement into the country of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) offering FDI incentives.


In January 2023, the UAE Federal Cabinet set out the five priorities of the UAE for 2023, focusing on strengthening national identity, advocating for the environment and sustainability, strengthening the education sector, boosting Emiratization policies, and expanding economic partnerships across the globe.


The UAE has emerged as an attractive destination for both Russians and Ukrainians following Russia’s further invasion of Ukraine. Russians in particular have been a key customer segment supporting higher sales and rental prices in Dubai’s property market. Russian and Ukrainian firms have also moved to the UAE since the invasion. The UAE prohibited exports of Indian-origin wheat for several months in 2022 to protect against domestic food shortages, but otherwise has not suffered notable adverse economic impacts from Russia’s war on Ukraine. UAE inflation rates have been consistent, if not lower than, global inflation rates.


The UAE and the country’s seven constituent emirates have passed numerous initiatives, laws, and regulations to attract more foreign investment. Recent measures include visa reforms to attract and retain expatriate professionals, a drive to create new international economic partnerships, major investments in critical industries, and policies to encourage Emirati entrepreneurship and labor force participation. These economic development projects offer both challenges and opportunities for foreign investors in the coming years. In January 2022, the UAE changed its work week for government bodies from Sunday to Thursday to Monday to Thursday with a half day on Friday in order to more closely align with world markets. To reinforce the UAE’s position as an attractive destination for expatriate workers, the UAE updated the personal status laws for all non-Muslim foreigners in December 2022 to align regulations relating to civil marriage, divorce, and child custody with Western legal frameworks.


Additionally, the UAE approved a comprehensive reform of the national legal system which, among other aims, developed the legal frameworks around data privacy, investment, regulation and legal protection of industrial property, copyrights, trademarks, and residency. The first-ever federal data protection law regulates how personal data are processed across the UAE, with separate laws on government, financial, and healthcare data to follow. The 2020 Commercial Companies law removes restrictions to facilitate further mergers and acquisition activity. The federal trademark law further expands the scope of legal protection for companies’ trademarks, products, innovations, and trade names by protecting non-traditional patterns of trademarks. The UAE introduced Federal Law No (3) of 2022, on regulating commercial agencies, which reforms a pillar of the UAE economic model by permitting international companies to operate in many sectors without the requirement for a local UAE partner. U.S. companies broadly consider these legal reforms to be positive, but investors will need to carefully consider how these changes might specifically affect their operations.


The UAE issued in December 2022 the Corporate Tax Law on business profits starting from June 1, 2023, as part of its membership in the OECD Inclusive Framework on Base Erosion and Profit Shifting. The new tax regime will impose a standard rate of nine percent on taxable profits exceeding $102,000. The law represents a complete change to the UAE tax landscape, affecting all businesses, including free zone entities. The law will include targeted exemptions for state-owned companies, extractive industries, pension funds, and investment funds. A zero rate will apply to qualifying income made in free trade zones and to tax withholding. Qualifying income has not been defined by the UAE, as of April 12, 2023.


The UAE announced in October 2021 that it would pursue net zero greenhouse gas emissions by 2050, to include an investment of $163 billion in renewable energy.


For more information, please refer to: https://www.state.gov/reports/2023-investment-climate-statements/uae/


News Briefing for March 2024

March 26     Economic and trade cooperation between China and the UAE has flourished in recent years, with China consistently ranking as the UAE’s largest trade partner. In 2023, the total volume of bilateral trade between the countries reached about $95 billion. Both China and the UAE seek to strengthen their economic relations and increase trade exchange to $200 billion by 2030.


March 18     The UAE’s Federal Tax Authority has recently revealed a surge in tax refund transactions for tourists, underscoring the nation’s growing tourism sector. With an unprecedented 14.41% uptick in 2023, totaling 4.18 million transactions, the FTA’s electronic tax refund system aligns with the UAE’s digital strategy for the smart transformation of services across all sectors, including the tourism sector.


March 11      The Sharjah Economic Development Department has released its 2023 report detailing the economic performance and achievements of the emirate. Among the most notable achievements, the department recorded an overall growth of 4.1% in the number of issued and renewed licenses, showcasing Sharjah’s growing appeal for business and investment. 


News Briefing for February 2024

Feb 27   Ministers from across the globe are convening at the World Trade Organization (WTO) Ministerial Conference in Abu Dhabi from Feb. 26-29 to try to set new rules for global commerce, including reforming its dispute system and cutting fishing subsidies.

 

Feb 23   The United Arab Emirates, home to the financial hub of Dubai, has been dropped from a global watchdog's list of countries at risk of illicit money flows, a win for the nation that could bolster its international standing.

 

Feb 22    China's Xpeng (9868.HK), opens new tab said it has established a strategic partnership with UAE-based Ali&Sons and added Italy to its Europe plans, as the electric vehicle maker ramps up overseas expansion.


News Briefing for January 2024

February 1    Workers in the UAE are likely to take home higher paycheques this year, as corporates are expected to grant salary increases of around 4.5% in 2024, recruitment specialists Cooper Fitch said. The rise in compensation will be driven by the strong performance of the country’s non-oil sectors, coupled with an increase in the UAE’s OPEC+ oil output quota and the need for employers to retain top talent, Cooper Fitch said in its report.


January 30    New economic data revealed business activity in Abu Dhabi surging in 2023, with 25,647 new economic licenses issued worth over Dh210 billion in the year, and active licences growing 10.9 percent from last year. 


January 24    The UAE has no plans to impose income tax on individuals, according to Ministry of Finance’s Undersecretary Younis Al Khouri. 


January 21    Despite a worldwide 18 percent decrease in FDI inflows in 2023, the UAE recorded a significant 28 percent increase in new foreign investment projects, positioning it second globally after the United States.