In the UAE, business activities fall into three categories: business activities, where 100% direct foreign ownership is allowed, business activities, where no direct foreign ownership is allowed, and the remaining businesses, where 49% direct foreign ownership is allowed.

We're going to take a closer look at the Foreign Direct Investment Law and investigate what types of activities are on the Positive and Negative Lists in this article.

UAE investment laws and regulations

There is no centralized investment law in the UAE, so FDI is governed by several different pieces of legislation, such as:

1) Federal Direct Investment Law.

2) The Commercial Companies Law.

3) The Commercial Agencies Law.

4) The Real Property Law.

5) The Bankruptcy Law.

6) The laws and regulations governing various free zones.

7) The Competition Law.

8) Tender regulations for government contracts.

The historical context

UAE Cabinet of Ministers approved Federal Decree No. 18 of 2017 (the "Decree"), amending Article 10 of the UAE Commercial Companies Law. The article limited foreign ownership in UAE companies and required that at least 51% of the shares in UAE companies be owned by UAE citizens.

UAE's Foreign Direct Investment Law came into effect in September 2018. The law stipulated a list of sectors in which a foreign direct investment application may not be made (the "Negative List").

Here is a list of the sectors and activities included on the Negative List:

- Oil extraction and exploration;

- Investigations, security, military forces, production of military weapons, explosives, uniforms, and equipment;

- Transactions involving banking and financial services, payment systems, and cash;

- Insurance services;

- Hajj and Umrah services;

- Recruitment activities;

- Electricity and water services;

- Fishing services;

- Telecommunications, postal services, and audiovisual services;

- Transportation by air and ground;

- Printing and publishing services;

- Commercial Agencies;

- Retail sale of medical supplies (including pharmacies); and

- Blood banks, toxicology centers, and quarantine services.

UAE Government may supplement or reduce the Negative List.

The Positive List

A Positive List of economic sectors and activities in which foreign direct investment is permitted was released by UAE Cabinet in March 2020. This is a long-awaited list of activities where foreign ownership of companies is permitted under certain conditions.

There are more than a thousand economic activities on the Positive List, which can be divided into three main sectors:

- Agricultural sector (includes farming, forestry, and auxiliary activities)

- Industrial sector (manufacturing certain foodstuffs, clothes, electronic goods, vehicles, etc.)

- Services sector (provides services in the legal and accounting fields, health care, science, education, entertainment, hotel business, and construction).

The Positive list permits foreign investors to establish companies outside free economic zones in the form of limited liability companies (including sole proprietorships) or private joint-stock companies. Therefore, foreign investors may acquire 100% ownership of companies, subject to certain criteria and conditions set by the licensing authorities (such as the Department of Economic Development in each Emirate).

With full foreign ownership rights, the investment climate in UAE has changed, as the region has become more attractive to foreign investors and so has more commercial activity.

Through various initiatives, the UAE encourages foreign investors to actively participate in the economy. Among the most effective initiatives to promote the attraction of foreign investment is the creation of more than 50 designated free trade zones.

Free zones have unique regulatory mechanisms that appeal to international investors due to their clear and market-oriented regulations, the possibility of including wholly foreign-owned businesses, and the guarantee of tax vacations on all corporate taxes.

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