Dubai, known for its economic and political stability, has become an attractive investment destination. Despite the global economic situation, the city has managed to attract numerous investors thanks to its luxury market and economic diversification. The key to investing in Dubai lies in its Free Trade Zone (DMCC), established in 2002. This zone has become a strategic business and commercial center that connects with the markets of Europe, Asia, and Africa.
Companies from all over the world are seeing the potential of investing in Dubai. An example is the American financial services company Freepoint Commodities LLC. This has moved some energy traders to the city. The country not only offers a high quality of life to live and work but also opportunities to invest in Dubai. According to Jochen Knecht, executive director of the International Free Zone Authority, Dubai “offers a high quality of life to study, work, live and invest.”
The Emirati city is attracting foreign investors with its innovations and advanced technological measures. It is estimated that by 2025 around $100 billion will have been invested in Dubai. Additionally, its Open Trade System guarantees companies access to international markets and stable business relationships, which has led to a 66% increase in business creation in 2022.
Importantly, investing in Dubai has become even more attractive due to the start of the Russian invasion of Ukraine. Many Russian traders moved their businesses to Dubai to protect them from sanctions imposed by the EU. This has led to a 70% increase in property purchases in the first months of the war. Investing in Dubai is an option increasingly considered by investors around the world.
They are homes that, currently, are within the reach of many. Among other amenities, they have green areas or a swimming pool and a large number of architectural details. In that sense, integrating location, price, and infrastructure, these homes constitute a magnificent investment opportunity. And if, in addition, they facilitate obtaining a visa, which includes the family group, this is the ideal time to invest in Dubai.
On the other hand, Dubai’s projected growth is truly impressive. He began a career of promotion in which he has not stopped growing and developing. All with intelligent investment plans and a futuristic vision, which prioritizes the care of nature and the use of renewable energies. Dubai aims to establish itself as a true world leader in the economy and technology, without getting involved in conflicts of any kind. All this makes investing in Dubai logical, as well as safe.
Of course with the great incentive of tax incentives. These are very well treated and have great advantages for investors and also, at a general level. And in Dubai, taxes on real estate are not considered, nor are taxes on rental income. The same happens with capital gains. In this sense, it is quite feasible to increase your net profitability, just by investing in Dubai.
Benefits of Investing in Dubai
This city, thanks to its sound tax policy, offers great advantages to those who wish to invest in Dubai. This, combined with ambitious development plans and an unbeatable futuristic vision, is supported by a reality built on solid foundations. Thus, there are numerous advantages to investing in Dubai. Of these advantages, the following stand out, among many.
Real Estate Offer
It provides an excellent quality real estate offering, with reasonable prices on properties, of great quality and beauty. It handles cheaper costs per square meter, compared to those of large capitals such as England or Paris.
Flexible Fiscal Policy
This emirate has an attractive tax policy, which promotes and facilitates both the acquisition of real estate and the option of investing in Dubai.
Political-Economic Situation
It stands out for its political and economic stability, which makes investing in Dubai practically good life insurance.
Future Projection
Its growth and development plans are perfectly supported and aim to make it one of the best options in terms of quality of life.
Tourism in Growth
Currently, Dubai is one of the most in-demand tourist destinations in the world. This implies that investing in that sector or real estate guarantees a high return on investment.
Immigration Facilities
Real estate investors, in addition to accessing top-quality properties at a good price in a rapidly developing city, also have facilities related to obtaining a visa.
An Excellent Strategic Location
Dubai’s privileged strategic location practically makes it one of the focal points for global business. It is the ideal connection between Africa, Europe, and Asia, which makes it a fabulous option to invest in, thus benefiting real estate investors and serving as a magnet for tourists and renters from various horizons worldwide.
Dubai: a World of Opportunities
Dubai has become a privileged destination for those looking to invest. The Middle East, Africa, and Southern Africa (MEASA) region, with a population exceeding three billion people, features growing mobile connectivity and steadily increasing levels of trade and investment. This region demands broader and more sophisticated financial services, which represents a great opportunity for innovative financial companies looking to invest in Dubai.
As trade and investment expand, so does the market for wholesale banking and capital markets. This reinforces Dubai’s position as a central hub among all major markets in the region, which is why more than $350 billion in trade flows through Dubai each year.
Much of the population is still unbanked, meaning the potential for fintech products is huge. With sustained growth, wholesale banking and capital markets will become increasingly relevant, positioning Dubai as a global hub for trade.
Dubai as a financial epicenter
The Dubai International Financial Center (DIFC) facilitates the flow of trade and investment in the south-south economic corridor, bridging the time gap between the major financial centers of London and New York in the West, and Hong Kong and Tokyo in the East. The center plans to triple its capacity by 2024 and will establish itself as a world-class financial destination by deepening and expanding its impact on constituent and global sectors and investing in innovation.
The DIFC ensures a world-class regulatory and judicial framework, comprised of the Dubai Financial Services Authority (DFSA) and various judicial bodies.
A dynamic banking and commerce sector
The DIFC is home to 17 of the world’s top 20 banks, seven of the world’s leading law firms, and 13 of the most prestigious private wealth management companies.
Additionally, some highly respected global banking institutions such as Barclays, Citibank, HSBC, and Standard Chartered operate 85 branches in the city, while Visa and MasterCard are also based in Dubai.
Taken together, this demonstrates the importance and attractiveness of the DIFC as a global financial center.
A growth market to discover
In the Middle East, Africa, and South Asia, a large proportion of adults still do not have a traditional bank account. Specifically, young people find it difficult to access banking services.
However, the use of smart mobile phones is increasing; This figure is expected to double by 2025. This represents a great opportunity for companies looking to invest in Dubai.
The financial technology of the future
With technology revolutionizing the way financial transactions are carried out, Dubai has positioned itself as a leader in the region’s fintech sector, thanks to the large number of start-ups that have set up base in the city. In the Middle East and North Africa alone, fintech startups have managed to raise more than $100 million in funding in the last decade.
Today, Dubai is recognized as one of the top ten financial technology centers globally and the largest in the region. The Dubai International Financial Center (DIFC) is at the forefront of the city’s innovation ecosystem and is perfectly positioned to drive growth. One of these initiatives is the low-cost Innovation License. This license is offered to technology innovators and is designed for companies within the FinTech, RegTech, and InsureTech sectors, as well as other SMEs interested in developing or testing new and innovative products. By investing in Dubai, companies have the opportunity to take advantage of this growing innovation ecosystem.
With a world of opportunities, thanks to its relative youth, ambitious plans, and rapid development, there are still numerous options of all kinds to invest in Dubai.
1. Construction
Constantly growing, Dubai sees new buildings and structures emerging every day. This represents a great opportunity for construction professionals and those who wish to invest in Dubai in the construction sector. Investors can establish businesses that produce or sell construction materials.
2. Oil and gas
Oil and gas have been central to the UAE economy for many years. Despite having been exploited for years, the oil sector still has room for new investors. By investing in Dubai, entrepreneurs can start their businesses or partner with existing companies in this sector.
3. Financial services
Given the large number of businesses in the UAE, there is a proportionately large demand for financial services. By investing in Dubai, professionals with a strong financial background can benefit greatly by offering financial services to businesses in the UAE.
4. Food and snacks
Food businesses thrive everywhere, and Dubai is no exception. There is always a high demand for food and snacks, so by investing in a fast food and snack business in Dubai, you can earn a good return.
5. Healthcare
People in the UAE are health conscious and show great concern for their well-being. This trend has led to an increase in demand for professional healthcare providers and facilities. By investing in Dubai in the healthcare sector, you can reap great benefits.
6. Seguridad
Although the UAE is generally safe, people and businesses do not skimp on protecting their assets. This has led to an increase in demand for security guards and security devices. By investing in Dubai, whether providing private security services or selling security devices, you can earn a good return.
7. Transportation
There are great opportunities in the transportation sector due to the increasing demand for transportation services. By investing in Dubai, investors can start a local taxi service or an intercity transportation company.
8. Environment
The rapid growth in the UAE has led to various activities such as construction and industrialization that are causing damage to the environment. However, people are becoming more aware of the benefits of protecting their environment.
9. Tourism
Dubai is one of the world’s favorite holiday destinations, opening up huge opportunities for businesses that cater to tourists. By investing in Dubai in the tourism sector, you can get a good return.
10. Energy
Dubai, with its already established energy sector, offers opportunities for companies involved in maintaining the various power generation facilities available in the country. Therefore, if you are looking to invest in Dubai, maintaining energy facilities is an option that you should consider if you have the necessary experience and capital.
11. Commercial franchises
The concept of business franchising is relatively new in Dubai. However, due to the large expat population and the varied preferences of the people living there, this concept has worked very well in recent years. When investing in Dubai, you can consider getting a business franchise in the fast food industry as it is one of the fastest growing industries in Dubai.
12. Travel agency
Since Dubai is one of the top tourist destinations in the world, starting a travel agency can be a good business. Millions of tourists travel to and from Dubai every year. Furthermore, the entire population of the place is full of expats from various countries. Therefore, by investing in a travel agency in Dubai, you can take advantage of this huge demand.
The decision to invest in Dubai in 2023 requires a deep understanding of the recent tax reform. The United Arab Emirates, previously a tax haven, has introduced a 9% corporate tax. This change has surprised many, as it was initially thought that this tax would only affect companies on land. However, its scope is broader than expected.
A large number of Dubai residents have suddenly become tax residents, meaning they are subject to expanded corporate tax. This can have significant implications for those who only spend a few weeks a year in the country.
Dubai’s modernization and liberalization have led to constant changes in laws and regulations. Although the 9% tax burden may seem low, it is comparable to many EU countries, which could make some investors reconsider their decision to set up a base in Dubai.
As of June 2023, the new corporate tax is in force. Business owners in free zones may be relieved as, in many cases, they can continue to pay no taxes. However, they must now maintain and present the accounting of their companies.
These changes are crucial to keep in mind when considering investing in Dubai. Tax reform can have both positive and negative implications for investors. It is essential to be well-informed and prepared to navigate this new tax landscape.
Dubai Tax Structure
To invest in Dubai, it is crucial to understand the new rules for tax residency in the United Arab Emirates (UAE). The UAE has introduced significant changes to its definition of tax residence. Now, it is activated if you have a permanent home in the UAE, reside for 90 days with a local residence or business permit, or stay for 183 days.
These changes can have a considerable impact on those planning to invest in Dubai. Many people may find themselves being tax taxpayers. However, they can also offer advantages. UAE residents can now apply for a tax certificate online with clear conditions, making it easier to prove your tax residency to the authorities in your home country.
Those who only enter the country once every 180 days can avoid being considered tax residents. However, this raises the question of whether it makes sense or not, as the most interesting bank accounts both locally and globally can only be opened with a UAE address, for which a residency is mandatory.
Furthermore, getting a purely individual account in the Emirates may not justify the costs and effort of obtaining the Emirates ID. The visa, which is now only valid for 2 years, may not be of much use.
The regulatory spiral will likely continue to grow: the current practice of sponsoring oneself through a dormant company could soon be restricted as well. Minimum income or actual salaries paid will then be required to obtain and maintain the Emirati ID card.
These factors are crucial to keep in mind when considering investing in Dubai. Tax reform can have both positive and negative implications for investors. It is essential to be well-informed and prepared to navigate this new tax landscape.
Double Taxation Agreements and Tax Residency in the UAE
To invest in Dubai, it is essential to understand double taxation agreements and tax residency in the United Arab Emirates (UAE). Tax residents can rely on double taxation agreements, but it is crucial to ensure that these apply to their cases. Many UAE double tax treaties exclude foreign nationals from their application.
If there is a double taxation agreement between the UAE and your country of residence, having an apartment at your disposal in the Emirates or spending 90 days in Dubai, Abu Dhabi, etc. it will not necessarily make you a tax resident in the UAE.
The regulatory spiral is likely to continue growing: the current practice of sponsoring oneself through a dormant company could soon be restricted as well. Minimum income or actual salaries paid will then be required to obtain and maintain the Emirati ID card.
If you do not wish to have a tax residence in the Emirates, you can transfer your flats to trusted people or notify them immediately. You can keep the Emirates ID, but you have to wonder what it will be used for.
The UAE’s tax reform may be more relaxed than we currently imagine, but caution is more than justified. In 2023, it can be expected that only the most striking cases will be pursued. The law will go into effect in June and will not be retroactive, so there are still a few weeks left to protect yourself from undesirable legal consequences.
These factors are crucial to keep in mind when considering investing in Dubai. Tax reform can have both positive and negative implications for investors.
The New Corporate Tax and What You Should Know about Free Zones
To invest in Dubai, it is important to understand how free zones are affected by the new corporate tax. Initially, it was assumed that the 9% corporation tax would only apply to regulated local companies, but it is now known that free zones will also potentially be affected.
All free zones are subject to the obligation to keep accounts and make tax declarations. Companies in free zones that have been tax-free until now would have to pay taxes at 9% after deducting costs and salaries, and after taking into account the exempt amount of about 100,000 USD.
This will especially affect free zones that are mere shell companies, that is, they do not have a business substrate in Dubai; that usefulness lies in invoicing its own companies; that do not comply with OECD transfer pricing standards; or that do not meet the conditions to be considered “qualified free zones” for other reasons.
The authorities have not yet defined what a “qualified free zone” would be. What is certain, however, is that only certain licenses will benefit from an unlimited tax exemption and only if the employees work in the Emirates.
All shell company owners should keep an eye on developments in what counts as eligible income, especially if they expect to far exceed the exempt amount, which is likely to be around AED375,000.
These factors are crucial to keep in mind when considering investing in Dubai. Tax reform can have both positive and negative implications for investors.
Before investing in Dubai, it is essential to understand the visa options the country offers. The United Arab Emirates (UAE) offers two types of Golden Visas: one for 5 years and another for 10 years.
5-Year Visa
The 5-year Golden Visa is available for real estate investors and entrepreneurs. For real estate investors, an investment in a property with a gross value of no less than AED 2 million (approximately $544,484) is required. Additionally, the investor must hold the property for at least two years. For entrepreneurs, this visa is aimed at those with a current project capital of at least AED 500,000 (approximately USD 136,129) or who are approved by a UAE business incubator.
10-Year Visa
On the other hand, the 10-year Golden Visa is designed for investors and entrepreneurs. This visa requires an investment that can be made in several ways. For example, you can deposit at least AED 2 million (approximately USD 544,484) in an investment fund within the country, create a company in the UAE with a capital of not less than AED 2 million, partner with a company, new or existing, with a quote of no less than AED 2 million, or have a total investment of no less than AED 2 million in all the aforementioned areas.
These visa options are crucial to consider when considering investing in Dubai. They offer flexibility for investors and can facilitate the process of establishing themselves in the country. In addition, these golden visas offer the possibility of freely entering the UAE and establishing one’s business in Dubai. It is important to note that these visas are subject to certain conditions and requirements that must be met to obtain and maintain the validity of the visa.
We know that today almost everyone dreams of investing in Dubai or establishing their business in a vast and resourceful country. Any of the United Arab Emirates. So, investors are interested to know the company formation procedure in the UAE free zone.
There are different reasons behind the growing popularity of free zones in the UAE. One of these is that when the company develops in a free zone, it is necessary to pay less taxes. Business can be done smoothly as human resources are easily available and accessible in free zones.
Also, another option to invest in Dubai is to establish an offshore company. The business creation process in the UAE free zones is relatively simple. Additionally, the requirements, costs, and time for setting up a company in the UAE are simple. These depend on the choice of the free zone and the activities of the company that is going to be started. There are more than enough premises to do business. For example, warehouses, offices, manufacturing facilities, etc. So investing in Dubai and incorporating a company in the UAE free zone can be done easily.
The UAE and its Free Zones
As we just mentioned, investing in Dubai is perfect because of the free zones. Onshore and offshore businesses can be established in different parts of the country. Company registration in the UAE free zone can be done in places like Dubai, Abu Dhabi, Sharjah, and Ajman. Furthermore, in Sharjah, Hamriyah it is also possible to establish so that clients can easily get all the necessary resources. Moreover, all modern facilities and essentials can be found easily. This helps all the investors to establish their free zone companies in the UAE.
Every aspiring entrepreneur who wants to invest in Dubai to create a business in the UAE dreams of being the owner. However, foreign investors consider the local sponsorship requirement to be an obstacle when setting up a company in the UAE. There are more than forty free zones spread across the seven emirates of the EA. This, in part, resolves this concern of foreign investors by offering 100% ownership. Furthermore, it provides additional advantages such as a favorable tax regime, full repatriation of capital, ultra-modern facilities, etc.
To invest in Dubai you should know that the free zones in the UAE are governed by their regulatory authorities. This stimulates the entrepreneurial spirit of foreign business owners as setup procedures are simpler. Additionally, there are sector-specific free zones such as DIFC, DSO, Dubai Media City, Dubai Healthcare City, Ajman Media City Dubai Internet City, etc. These constitute an additional attraction for foreign investors. For all the advantages, business creation consultants in Dubai recommend investors create their companies in free zones.
Forms of Business Structures in the UAE Free Zones
Investing in Dubai and other free zones in the UAE offers the advantage of selecting the most efficient legal structures available. Depending on the business activities and licenses held by investors, the following types of companies can be formed when investing in Dubai and other free zones in the UAE:
Free Zone Companies
A Free Zone Company (FZCO) generally has between 2 and 5 shareholders.
Free Zone Establishments
A Free Zone Establishment can be formed with a single shareholder.
Branch Offices
Local UAE companies are located outside the free zone and foreign companies can establish their branches in the free zones.
Types of Licenses Available in Various Free Zones in the UAE
When investing in Dubai and other free zones in the UAE, investors are offered a variety of licenses to choose from. The licenses cover almost all types of profitable industries in the UAE, facilitating a strong business registration when investing in Dubai. Foreign investors wondering how to get a business license in free zones should get professional assistance from the best business start-up consultants when investing in Dubai, UAE. The following are some of the main types of licenses in free zones when investing in Dubai and other parts of the UAE:
- General Business License
- Service/Consulting License
- Trade/Business License
- E-commerce license
- Educational license
- Industrial license
- Permit for self-employed workers
- Manufacturing license
Steps to Establish a Company in UAE Free Zones when Investing in Dubai
UAE free zones follow the legal rules and procedures laid down by the respective free zone authority that must be followed to start the company incorporation process in UAE free zones when investing in Dubai.
Investors who are not familiar with the legal procedures should consult with reputed company formation consultants in the UAE to avoid unnecessary delays during company registration. The following are the steps to follow to register a company in the free zones of the UAE when investing in Dubai and remember that the requirements may vary from one free zone to another.
1. Identify the business activity
Investors need to first determine the business activity they intend to carry out and select the appropriate free zone that allows such activity when investing in Dubai. Conduct extensive research on the activity and identify which free zone has suitable facilities for the activity.
2. Determine the legal structure
Depending on the number of shareholders and business activity, investors should choose the most suitable legal structure for the entity when investing in Dubai. The number of shareholders determines whether the company should be an FZCO or an FZE.
3. Choose a commercial name for the business
The next step in the process of starting a business in the UAE free zone when investing in Dubai is selecting the right business name for the company. Investors should follow the guidelines issued by the respective free zone authorities when choosing the company name.
4. Apply for commercial license
Depending on the activity, entrepreneurs can choose the appropriate license for the free zone entity when investing in Dubai. The application for obtaining a business license can be submitted to the free zone authority through reputed business consultants in UAE to quickly complete the company registration procedure.
5. Choose office space or Flexi Desk
Free zones offer co-working spaces or Flexi desks along with most of their licensing packages when investing in Dubai. For businesses with fewer employees, it is better to make use of the Flexi desktop facility. Flexi desk facilities are best suited for startups, e-commerce platforms, and freelancers. If the company has more employees, an office space with good facilities should be taken advantage of.
6. Register the company and obtain the license
The free zone authorities will verify the documents presented and, if all the documentation is valid, the license will be issued. Company registration in free zones when investing in Dubai can be completed in a short period and this is one of the reasons why most investors prefer to launch their businesses in free zones.
Today is a good time to invest in Dubai. Doing so is a smart decision, as this emirate is currently developing and offers excellent opportunities. Especially in the real estate, technology, and banking sectors, large investors and also medium ones can carry out operations that will be very profitable for them, in the fairly near future.
Being an emirate that has grown with a clear vision of those who lead it, its plans have become realities, which allows it to guarantee a quite promising future. With cutting-edge technology, financial capacity, optimal business vision, privileged geographical location, political and economic stability, and a wide range of investment opportunities, with promising profitability, investing in Dubai can be the best life business for anyone.
Additionally, its tax incentives, its magnificent real estate offering with an attractive cost/benefit ratio, its ambitious but realistic development plans, and its free zones, among many advantages, place Dubai as one of the best places to attract capital worldwide. In that sense, it can be stated that this is only the beginning of a giant that is awakening and is on its way to being one of the leaders that manages the world economy.
FAQs about Invest in Dubai
Would ownership of real estate in the UAE by a foreign person be considered a taxable permanent establishment in the UAE?
Generally, a foreign person owning property in the UAE would not be subject to UAE Corporate Tax (CT) or related compliance obligations. However, if a foreign entity invests in real estate in the UAE, it could be considered a taxable permanent establishment if the property is used as a fixed place of business.
Will the real estate sector be subject to the UAE CT?
Yes, companies carrying out real estate-related activities such as management, construction, development, and brokerage will be subject to the UAE CT.
Will a person be subject to the UAE CT for his or her real estate income?
Income earned by an individual from investing in UAE property will generally not be subject to the UAE CT.
Will investment funds be subject to the UAE CT?
Investment funds that are structured as limited companies would generally be treated as tax-transparent “unincorporated partnerships” for the UAE CT. However, those that are structured as corporate entities can apply to be exempt from the UAE CT.
How will real estate be treated for VAT?
The VAT treatment for real estate will depend on whether it is commercial or residential property. Commercial properties will be subject to the standard rate of VAT (5%), while residential properties will generally be exempt.
Can a landlord recover VAT paid in relation to a property?
The owner of a residential building cannot recover VAT for expenses related to the exempt delivery of the residential building. However, the owner of a commercial building can recover VAT relating to the supply of the commercial building.
Is it necessary for the owner of a property to register for VAT?
Owners of residential buildings who only make exempt supplies do not need to register for VAT unless they have taxable business activities. However, owners of non-residential buildings must register if the value of supplies exceeds AED 375,000 in the last 12 months or is expected to do so in the next 30 days.
Is commercial real estate subject to VAT?
Yes, all deliveries of commercial real estate are subject to VAT at 5%. This includes all buildings or parts of them that are not residential.
What is considered an offer in relation to real estate?
A delivery of real property can be the sale, lease, or transfer of rights over any real property.