June 2021 / United Arab Emirates

Dubai Economy clarifies full ownership procedures for foreign investors:

• 59 investors in Dubai have benefited from the decision so far
• No additional fees, guarantees or capital required for full foreign ownership
• 100% foreign ownership is available for more than 1,000 commercial and industrial activities
• Branches of foreign companies do not require an Emirati agent

Dubai Economy has issued guidelines clarifying the procedures for full ownership for foreign investors that started from the beginning of this month in accordance with the Federal Decree-Law No. (26) of 2020 that amended some provisions of Federal Law No. (2) of 2015 regarding ownership of commercial companies. The strategic decision enhances the investment attractiveness of the UAE and its advanced position on the global business map while also reinforcing the competitive advantages that Dubai enjoys as an ideal investment destination, Dubai Economy stated. The decision will accelerate the UAE’s economic recovery and add to the gains the country has made so far. It will also help further enhance Dubai’s already high rankings in international investment indicators and leading global indices related to ease of doing business and business expansion. Dubai Economy has started implementing the new decision on foreign ownership effective 1 June. Investors seeking full ownership can complete the procedures as required through the service channels of Dubai Economy or the ‘Invest in Dubai’ digital platform. A total of 59 investors in Dubai have already taken advantage of the new decision. The commercial activities in which full ownership was sought include general trade, contracting, jewellery, gold, pearls, luxury watches, foods, as well as cars and trucks trading. In the industrial category, full ownership was sought in the metals and construction, flooring, building materials, foods, water production and paints sectors. A kindergarten, an elementary and middle school, and a hotel also sought 100% ownership. As per the guidelines published by Dubai Economy on its website, 100% foreign ownership is available for more than 1,000 commercial and industrial activities excluding economic activities with a strategic impact, which are in seven sectors only. The full list of activities open for 100% foreign ownership can be viewed on:

https://ded.ae/DED_Files/ded_other/Full_Foreign_Ownership_Activities.pdf The status of existing business licenses, where full ownership of the activities is available, and that include an Emirati partner, remains unchanged as per the Memorandum of Association (MOA) and the partners’ decision. Dubai Economy clarified that a reduction of the percentage share of the Emirati partner from 51% or his /her withdrawal from the partnership is possible according to the legal procedures followed. Full ownership does not bring any change to current procedures or requirements for licensing, except that it’s no longer mandatory to have an Emirati partner or specify a fixed quota ratio for him/her. The guidelines also state that no additional fees, guarantees or capital required for full foreign ownership. Dubai Economy also explained that though it’s not possible to convert the legal form of a company from LLC (Limited Liability Company) to a Sole Proprietorship under a foreign name as per the existing law, the license can be transferred to a one-person company with limited liability. Full ownership does not apply to commercial agencies, as they are regulated by the Commercial Agencies Law. Branches of foreign companies do not require an Emirati agent.

The UAE Federal Tax Authority (FTA) has clarified the new administrative penalties and detailed the following violations, which are specified in table 1 on violations and administrative penalties related to the implementation of federal law No. 7 of 2017 on tax procedures:

• violation 9: failure of the taxable person to settle the payable tax stated in the submitted tax return or voluntary disclosure, or the tax assessment he was notified of, within the timeframe specified in the tax law;
• violation 10: submittal of an incorrect tax return by the taxpayer;
• violation 11: submittal of a voluntary disclosure by the person/taxpayer with errors in the tax return, tax assessment or refund application (according to article 10(1) and 10(2) of the tax procedures law);
• violation 12: failure of the person/taxpayer to voluntarily disclose an error in the tax return, tax assessment, or refund application (pursuant to article 10(1) and 10(2) of the tax procedures law) before being notified by the authority that it will be subject to a tax audit; and
• violation 14: failure of the taxpayer to calculate tax on behalf of another person where the taxable person is obliged to do so under the tax law.

In addition, the FTA clarifications specify that the mechanism to determine the imposition date of some penalties is as follows:

• where the new month includes a date corresponding to the date the penalty was originally imposed on, the date on which the penalty will be imposed in the new month is the date it was originally imposed the first time; and
• where a month does not include a date corresponding to the date the penalty was originally imposed on, the date on which the penalty will be imposed for such month will be the first day of the following month. However, for the month following the month which did not include a corresponding date, the penalty shall be imposed on the date corresponding to the date the penalty was originally imposed.