It is well known that capital investments are drawn to stability, development and low taxes; in this regard, the United Arab Emirates has it all as at present and much more.
Politically stable and one of the most secure countries in the region and the world, the UAE is a booming country in every aspect. With an open and free economic system, the UAE government has set an ambitious vision that is already leading the country steadily to an advanced global position in various sectors.
Although the world’s eighth largest oil producer, the government has worked for years to diversify the UAE’s economy aiming to free it from oil reliance. This policy has started to pay off in the past few years. Oil now only accounts for the third of the GDP while the non-oil sectors contribute with an impressive 69% of the country’s GDP.
The UAE is a member of the GCC countries which have been in talks since 2007 to introduce VAT and other taxes but with no final decision yet. Despite the adoption of a draft agreement to introduce VAT by the GCC Financial and Economic Cooperation Committee in Qatar last May, there is still no consensus on this introduction as the implementation must be carried out by all GCC countries simultaneously to avoid smuggling. For the time being there are no direct, corporate or personal taxes in the UAE. Should the decision be taken to implement the VAT or any other kind of tax, the government shall give a grace period ranging between 12 and 18 months after promulgation of the law for the sectors and concerned entities to implement and fulfill their tax obligations.
Enticed by the absence of direct taxes and with considerably low custom duties with many exemptions, along with the monetary stability of the Dirham, thousands of renowned international companies and major capital investments from all over the world set up businesses in the UAE in the past two decades which made it a sophisticated global business hub.
To accommodate this fast growing economy, the UAE has developed world-class infrastructures including an extensive first-class roads network connecting the seven Emirates as well as the neighboring GCC countries. The 1,200-km Etihad Railway network, set for completion in 2018, is estimated to cost US$11 billion, while the Dubai Metro extension is estimated to cost a staggering US$14.35 billion.
However, the UAE is making sure that these developments don’t come at a high environmental cost. The government made it a priority to maintain a sustainable development. Home for the International Renewable Energy Agency (IRENA), the UAE is set to find low cost renewable energy technologies mainly solar and wind energy in addition to nuclear energy. One of the many initiatives is Masdar City. Developed by Masdar (The Abu Dhabi Future Energy Company), Masdar City is the world’s first carbon neutral, zero waste city, completely powered by renewable energy and is home for hundreds of sustainable companies dedicated to investing in a responsible economy. Another project in this direction is the Mohamed Bin Rashed Solar Park that will produce over 1000MW by 2030.
Moreover, equipped with advanced dynamic airports and two multi-awards winning world-class Etihad and Emirates airlines, the UAE is anticipating 25 million visitors for the Expo 2020. Unprecedented in the region, the Expo 2020 will be hosted by the Emirate of Dubai between October 2020 and April 2021. An astounding US$8.174 billion is to be spent on infrastructure at the Expo site and in the city of Dubai alone from now till 2020. Already prompting gradual growth in construction, tourism, transport, travel, trade and in the financial sector, the Expo 2020 will create 277,000 jobs. Accordingly, Dubai, is expecting the aviation industry alone to contribute by 32% of its GDP by 2020.
The most sought after places to start a business in UAE are its 50+ free zones. Offering lucrative incentives, the free zones of the UAE have been experiencing a rush in business set up in the past few years induced by the 100% foreign ownership and the possibility to totally repatriate the capital and profits in addition to the tax exemption on import and export.
Some of the busiest free zones in UAE are Jafza which is one of the largest Free Zones in the world, with the world’s largest man-made port and Dafza that was ranked 1st globally by the Foreign Direct Investment Magazine’s Global Free Zones & Awards 2012/2013.
According to the Sovereign Wealth Fund Institute, assets held by the UAE Sovereign Wealth Fund stand at US$919.5 billion (Dh3.374trn) with Abu Dhabi Investment Authority (ADIA), the world’s second largest SWF, holding the lion’s share. Making up to 43 % of the total SWF assets of the GCC countries, this financial cushion boosts spending on infrastructure and social welfare, eventually creating thousands of jobs and attracting investments in various economic sectors.
For more information about this article and Doing Business in the UAE including the latest regulations and commercial laws, please give A. Munim Al Rubaie a call on +971 50 622 6719 or email to his direct email at munim@arca.ae
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