Factors Influencing Companies to Establish Companies in the UAE

1. Introduction to the UAE as a Business Destination

The UAE has become a regional business hub attracting businesses internationally. The UAE is known for its strategic initiatives; additionally, the UAE boasts a robust and stable yet fast-growing and resilient economy. The UAE is the most diversified economy in the GCC, enjoys cultural diversity with modern infrastructure, and is known for its dynamic marketplace. The UAE business landscape is prominent and enjoys a strategic location linking the East and the West. The Middle East is known to have numerous free zones, which attract and are home to various specialized sectors. The UAE government is very committed to not being dependent on oil revenue, diversifying, and having a healthy investment environment. The UAE strongly believes in and invests in technology and knowledge, strengthening its position as an international business hub.

The UAE has enforced strong legal and service providers to support international entities in establishing a business in the UAE. Moreover, the quality of local talent and the competitive business environment have reinforced Multinational National Companies (MNCs) to operate in this region. The UAE is a federation of seven emirates sharing political and economic relations. Each emirate is a home and can be considered an international business hub with great infrastructure and enjoying a free-market environment. The UAE is a different business destination that has a strong market but is also known for the numerous free zone clusters that specialize in more than 600 sectors, providing a platform for international businesses to invest.

2. Economic and Political Stability

Companies look for destinations around the world to start a business. A few parameters play an important role in selecting a country as an investment target. Some of the most common factors that contribute greatly to the operation of a business are economic stability, political stability, legal regulations, cost of doing business, access to resources, return on investment, and consumption.

In the United Arab Emirates, the government’s pro-investment policies, such as no taxation on personal and business income, no trade barriers, 100% foreign ownership with no need for a local partner, no exchange controls, capital and profits repatriation, and favourable regulations for labour and industries, have played a crucial role in attracting foreign investors to the country. The economic and political stability in the country is supported by the government’s well-formulated, practicable, and executable strategies, which facilitate a safe working environment and address all international corporate concerns. The global economic crises, dwindling oil reserves, and increasing tensions in the Middle East compel the country to diversify its sources of income from international activities, including trade and tourism. Another major political concern is the involvement of all citizens in international celebrations, fostering a sense of uniformity and belonging to the global vision of the UAE. A multitude of residency and work permits in the UAE serves as an opportunity for expatriates to gain maximum benefits from tax-free wages and earnings. Goods procured locally, when exported from free zones outside the UAE, are not subject to customs duties. The UAE Vision 2020 targets the country’s goal of becoming the second largest economy in the region, a strategically important objective that makes the UAE a top investment destination for foreign businesses intending to operate in the Middle East, supported by its strong commitment to expanding development in sectors such as education, infrastructure, healthcare, and tourism. The country has a sound infrastructure, attractive export-oriented free zones, and a politically stable government providing subsidies and financing options in its diversified and service-based economy.

3. Tax Benefits and Incentives

One of the main reasons that influence entrepreneurs and multinational companies to incorporate their businesses in the UAE is the tax benefits. Although the corporate tax is 9% and it is now increasing to 15% with certain conditions, the UAE is considered to have the lowest corporate tax in the region and even in Europe; this allows the UAE to be a central hub for small businesses that need to start in a friendly political and economic environment and still gain many benefits, including the exemption from certain taxes, streamlined business registration processes, and a lack of personal income tax. These advantages significantly reduce operational costs and enhance the profitability of businesses, making the UAE an attractive destination for both startups and established corporations.

However, to operate in free zones and achieve such tax benefits, companies must be set up under different and specific establishment contracts and legal forms, i.e., free zone establishments or free zone Limited Liability Companies that have a resident director and are able to practice, to obtain the essential commercial licenses. Initial investments vary, but the advantages of having no tax to pay under certain conditions, as well as the absence of duties on export and import volume, can be similar. Many free zones have provided that foreign owners of the companies can own 100% of the shares without the need for any local sponsor or local partner. If a company decides to operate outside the free zone area, then a local service agent should be appointed and paid an annual lump sum in exchange for the provision of some services provided by the former.

4. Strategic Location and Access to Markets

The UAE is located geographically in the middle of the European, Asian, and African continents and serves as the gateway to these markets. Many companies and corporations see the UAE as the best market where their products and services can be provided and catered to all these markets from here by means of trade. The UAE transport sector, including ports, airports, and bridges, has experienced rapid growth and has become a major hub for import and export in the region. The UAE has a well-developed transport and logistics infrastructure that makes it easy for businesses to move goods, supplies, and products to the growing markets in the Gulf and the Middle Eastern region. They establish and choose the UAE as the main base for their commercial operations, provide their products, and utilize supply chains through the airports or ports.

Dubai and the UAE’s strategic location serve as a springboard to more than three billion people across Central Asia, Africa, and West Asia. Over one-sixth of the world’s population can be reached in eight hours from Dubai. Dubai, possessing one of the world’s largest ports and a major airport, is ideally placed to tap growth in international trade volumes. About 93 shipping lines are deployed to reach 130 different countries. Sixty airlines fly out of Dubai to over 120 destinations worldwide. Indeed, Dubai International Airport is the main port of call for 75% of travel between Western Europe and the Asia-Pacific region. Every year, dozens of major international trade exhibitions and conferences are held in Dubai, some as high-profile entities in global business. These events have proven to be significant platforms for helping companies make their market presence felt, establish new relationships, and gain business. Dubai is ranked 14th in the Global Networking Index as a city with the most effective business network.

5. Business-Friendly Environment and Infrastructure

The UAE is well-known as a region with a business-friendly environment that is created through various means. One is the well-developed infrastructure supported by government projects and plans. The government continuously improves the country’s ease of doing business by launching initiatives and reforms that help companies operate more effectively. In line with visions of the future and related to sustainability, the UAE government also launched projects related to technology and energy, which are important to reduce the cost of doing business.

There are other task forces that work to make the UAE a favourable option for investors, such as a new patent program and investment in technologies related to healthcare, farming, and logistics. The high level of infrastructure is also an advantage, as this affects transport systems and communication systems. A higher quality of logistics and delivery of goods occurs at Free zones, mainlands, and customs clearances since the UAE has a high logistics performance and a good international hub, which is better than most other countries. This is supported by the presence of excellent toll roads and water transportation and is ranked highly for road quality and port infrastructure quality. The quality of air transportation in the UAE is also one of the best in the world. High-quality infrastructure is further supported by various professional services in the UAE to support companies. Legal and regulatory frameworks in the UAE are further enablers, given that the country’s commercial laws and regulations are written primarily to protect investors and entities, guaranteeing the protection of intellectual property, and this has increased investor trust. Social infrastructure is also vital to the efficiency of business operations because it guarantees an improved lifestyle with state-of-the-art housing, telecommunication, education, and hospitals. Considering the abovementioned aspects, we deduced that a suitable business environment makes the UAE an attractive country in which to live.