UAE clears 100% ownership rules

The UAE has released the full list of 122 categories for 100 per cent ownership in the mainland under the Foreign Direct Investment (FDI) Law.

Cabinet Resolution No.(16) of 2020 determines the 'Positive List' of sectors and economic activities in which foreign direct investment is permissible and the percentage of ownership is 100 per cent.

In 2019, the UAE Cabinet had approved a Positive List of activities under which 100 per cent foreign ownership in companies outside free zones was permitted. However, this remained subject to certain criteria being satisfied.

The list covers key sectors - agriculture; manufacturing; transport and storage; hospitality and food services; information and communications; science and technology; healthcare; education; art and entertainment; and construction.

Cabinet Resolution No.(16) of 2020 also sets condition that companies need to invest in new technologies, contribute to research and development and meet the requirements of UAE licensing entities.

The Positive List includes a number of interesting activities such as manufacturing of toys, sports goods, electrical equipment, consultancy services, advertising, photographic activities, construction of buildings, translation services, primary, secondary and higher education, hotel and restaurant management, hospitals and music bands, among others.

"Manufacturing is the backbone of any country but it has not taken off so much here due to the nature of capital intensive projects and legal ownership restrictions. The investor is a minority shareholder legally always which is a major limitation, therefore, operating a manufacturing set up is very difficult," said Raju Menon, chairman of Kreston Menon.

He noted that operating a manufacturing unit in the free zones is the options available to hold 100 per cent but operating costs in free zones now-a-days are too expensive.

"Holding 100 per cent manufacturing operations in mainland is very attractive. However, capital adequacy is a precondition which any serious industrialist would adhere to. In my opinion manufacturing is the sector more benefitted. Apart from that, Private Joint Stock Company (PSC) can be the set-up vehicle. It is fully protected with the shield of limited liability," said Menon.

Anurag Chaturvedi, managing partner at Chartered House Tax Consultancy, said the full ownership law will have a positive multiplier effect in form of creation of jobs, an increase in productive capacity, resulting in less need to import because goods are produced in the domestic economy.

"FDI will compensate for the decrease in domestic investment as a result of Covid-19, and can help 'kick-start' the process of economic development," said Chaturvedi.

He said the allowing full-ownership to PJSC and a single person company is one of the unique preposition to boost the investment in service sector with minimum capital as per the current legislation in legal, audit and accounting amongst others. The minimum investment has been set at Dh2 million for manufacturing; Dh3 million for manufacturing of sports and toy industries; Dh20 million for manufacturing activities of automobiles, metal ad medical equipment; and Dh100 million for healthcare.?

KEY SECTORS AND SELECTED SUB-CATEGORIES

Agriculture

. Cultivation of fruits and vegetables

. Growing of aromatic, drug and pharmaceutical crops

. Animal production

. Support services to forestry

Manufacturing

. Food products

. Animal feeds

. Beverages (exceptions apply)

. Wearing apparel (exceptions apply)

. Wood, furniture, etc

. Fertiliser

. Plastic and synthetic rubber

. Computer, electronic and optical products

. Electrical equipment

. Motor vehicles, trailers and semi-trailers

Services

. Legal consultancy offices

. Accounting, book-keeping and auditing; tax consultancy

. Architectural, engineering activities, and related technical consultancy

. Medical/dental practices

. Advertising

. Management consultancy services

Construction

. Construction of buildings

. Civil engineering

. Electrical, plumbing and other construction activities

Education

. Translation Services

. Pre-primary and primary education

. Secondary education

. Higher education

. Other education

Healthcare

. Hospital activities

. Other human health activities

Hospitality

. Hotel management

. Restaurant management

Arts and entertainment

. Creative activities/presentation of arts and drama

. Music band

. Circus