In principle, there are no restrictions on economic activities for foreign investors in the UAE. The UAE do not make any selection regarding the economic benefit of an investment.

Foreign investors can do business in Dubai and the other emirates of the UAE (Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah, Umm Al Quwain) in the following ways:

Trade:
The following business activities can be categorised under the term trade:

Participation in public tenders
Participation in public tenders can be based on

Establishment of a company
Depending on the business purpose, you can choose from the following company forms:

Establishing a foundation
Foundations in the UAE are used by local and international families and individuals for the following purposes

VAE foundations can be described as a hybrid of a trust and a company, as they share the characteristics of both.

The individual export business to the UAE is not subject to any special legal features or restrictions. Any company based in the UAE (with a corresponding import licence) can import goods. The often-heard statement that goods can only be imported via a registered commercial agent is not true.

The commercial agent is entrusted with the task of brokering business for the principal in the principal's name and for the principal's account in return for commission payment in a specific contractual territory. Any transaction is therefore concluded between the principal and the customer.

The distributor purchases goods from the principal and sells them in its own name and for its own account in the contract territory.

The UAE Commercial Agency Law not only applies to the commercial agent, but also to the distributor. Further legal regulations can be found in the UAE Civil and Commercial Law. However, these regulations are only applicable if there are no special legal provisions in the UAE Commercial Agency Law or if it is not applicable. In the absence of special legal provisions, the UAE Commercial Agency Law applies analogously to franchise agreements.

According to the provisions of the UAE Commercial Agency Law, only UAE nationals can be commercial agents/distributors. If the commercial agent is a legal entity, all shareholders must be UAE nationals. The UAE Commercial Agency Law is therefore not applicable to a sales company with foreign capital participation. In this case, the provisions of the UAE Civil Law and the UAE Commercial Law apply.

A commercial agency agreement must be registered with the Ministry of Commerce in accordance with the provisions of the UAE Commercial Agency Law. Only if the corresponding contractual relationship between the principal and the commercial agent/distributor is registered, the provisions of the UAE Commercial Agency Law are applicable. Therefore, no claims can be derived from unregistered commercial agency agreements as per the UAE Commercial Agency Law. In cases of unregistered commercial agency agreements, the provisions of the UAE Civil Law and the UAE Commercial Law apply.

Unregistered commercial agents/distributors may import a principal's goods, provided they have a valid import licence and there is no exclusive registered commercial agency/distributor agreement for the goods in question. A distribution company with foreign capital participation that is not eligible for registration as a commercial agent/distributor may legally act as a commercial agent/distributor. However, non-registered contractual relationships are not subject to the UAE Commercial Agency Law. In this case, the provisions of the UAE Civil Law and the UAE Commercial Law apply. In contrast to the provisions of the UAE Commercial Agency Law, these laws do not stipulate that the commercial agent/distributor must be a UAE national. Furthermore, the cancellation of a non-registered contract is much less complicated than the cancellation of a registered contract.

If a claim for compensation on termination of a commercial agency agreement is not contractually excluded, the commercial agent/distributor is generally entitled to compensation for the loss suffered as a result of the non-renewal of the agreement.

In addition, the commercial agent/distributor may claim loss of profit if he can prove that his activities have contributed to the principal's success in the territory and that the termination has deprived him of this source of income.

By law, the commercial agent/distributor enjoys exclusivity regarding the agreed contractual territory. This can extend to the entire UAE, a specific Emirate or several emirates.

In the case of a registered contract, the principal also enjoys certain protection rights, as not only the commercial agent/distributor but also the principal can prevent parallel imports of the principal's products. In such cases, the competent authorities generally order the goods to be detained.

Under the former Commercial Agency Law, a commercial agent could stop the principal from importing its goods into the UAE in the event of a legal dispute with the principal by submitting an application to the Ministry of Economy. The commercial agent thus had an effective means of exerting pressure on the principal with regard to the payment of compensation, as the contractual territory was blocked for the principal until the contract was de-registered from the commercial agency register.

The new Commercial Agency Law stipulates that goods can be temporarily imported into the UAE or a new commercial agent/distributor can be appointed during an ongoing legal dispute with the authorisation of the Ministry of Economy.

No. The agreement of a law other than that of the UAE is only possible for unregistered contractual relationships.

In the UAE the procurement of goods or the realisation of public projects (construction projects, road infrastructure, healthcare facilities, etc.) is generally carried out through public tenders.

The UAE's public authorities follow a fair and transparent system. Tenders are published and are accompanied by clear guidelines that bidders must follow.

In principle, only those companies that have previously successfully participated in a prequalification or registration procedure with the tendering authority and/or whose products are registered accordingly can take part in public tenders. Here, the 'wheat is separated from the chaff' in advance, as before participating in the actual tender, interested companies must first provide evidence of specific projects that they have successfully completed in the past.

Public contracts are generally only awarded to companies that have a legal presence in the form of a company in the UAE. If a foreign company is awarded a public contract, it must set up a company in the UAE to fulfil the contract.

You can find out about tenders in the relevant online portals of the federal and emirate governments, the press, the chambers of industry and commerce or the relevant business associations that deal with the region.

The legal form of a company to be established by a foreign investor depends on the nature of the intended business activity in the UAE.

It is generally possible for foreign investors to hold 100% of the shares of a company in the UAE outside a free zone for a variety of business activities. However, it is advisable to seek professional advice to check whether 100% foreign ownership is actually possible for certain economic activities, as a local shareholder is still required for a few specific economic sectors.

The LLC is one of several company forms recognised by the UAE Companies Law. The LLC is the form of company most frequently chosen by foreign investors.

Both forms are branches of a parent company, bear its name and are 100% owned by the parent company without having its own legal personality. Since June 2021, both forms of branch no longer require a service agent. The main difference between the two forms of branches is that the representative office - unlike the branch - is not permitted to carry out any commercial activities.

By establishing a representative office, the parent company creates a legal and physical presence in Dubai. The representative office supports the parent company and can fulfil the following tasks, among others:

The activities that a branch can carry out depend on the licence issued by the competent licensing authority, the Dubai Department for Economic Development. In principle, only activities that are at least similar to those of the parent company are permitted. However, import, export and trading activities are excluded from this. In practice, the activities of a branch are therefore limited to service and consulting activities. A branch can import products into the UAE and trade them if they are manufactured by the parent company.

There are various legal options available to the foreign investor regarding the establishment of a joint venture. Joint ventures can be found in the UAE in all economic sectors (trade, services and industrial production). Internationally the term joint venture is not always used consistently. In principle, a joint venture is understood to be the joint will of at least two parties to realise a common goal, without this being aimed at a specific legal form. In the UAE, a joint venture with foreign participation is generally understood to be the corporate merger of foreign investors and/or UAE nationals with the aim of economic activity in the UAE.

The UAE Companies Law recognises a total of seven different company forms. Foreign investors predominantly choose the Limited Liability Company (LLC) as the most suitable company form.

The UAE Companies Law does require a majority shareholding of UAE nationals (or a 100% UAE-owned legal entity) in the capital of an LLC. The LLC can therefore generally be 100% foreign-owned.

The object of the company must be precisely defined, as this determines the authorised area of activity of the LLC. Apart from the prohibition of activities in the banking, investment and insurance sectors, there are no other statutory restrictions regarding the authorised scope of activities of an LLC. In practice, the legal form of LLC is only granted restrictively to companies that only offer services.

There are now around 50 free zones in the UAE, most of which are located in the Emirate of Dubai.

In contrast to companies within the UAE, which are generally subject to the regulations of the UAE Companies Law, free zones are exempt from the regulations of the UAE Companies Law, provided that the free zones have their own legal regulations.

There are various options for setting up a company in the UAE free zones:

In contrast to a branch office, the FZE, FZCO and FZ-LLC are legal entities with their own legal personality. They qualify as limited liability companies. In most free trade zones, the FZE can be founded as a one-man limited liability company, whereas the FZCO can generally be founded by several foreign shareholders. The FZ-LLC can be founded by one or any number of shareholders.

The licences issued by the free zones are generally limited to the territory of the respective free zone. As a result, a commercial agent, trader or a joint venture in the form of a distribution company is required to export goods to the UAE, if the end customer does not have a corresponding import licence that allows them to import from a free zone. When exporting goods from one of the free trade zones into the UAE, a customs duty of 5% of the cif value of the goods is due.

The formation of a company under the UAE Companies Law is generally reserved for commercial and industrial activities.

Economic activities that are neither trading activities nor industrial manufacturing activities are to be qualified as service or consulting activities. If these activities are characterised by the personal involvement of the company owner, they must be carried out in the form of a professional firm or a civil company. This applies, for example, to lawyers, auditors, architects, management consultants or craftsmen. Owners of professional firms and civil companies can only be natural persons.

The foreign investor in question can be 100% owner and licence holder of the company without the need for a local partner. Only a service agent is required.

An offshore company is not an alternative to an onshore company in the UAE if the investor's target market is the UAE. Offshore companies can acquire real estate, open bank accounts and maintain necessary business relationships with UAE-based service providers such as lawyers, accountants, management companies, etc. However, they are not permitted to carry out any other business activities within the UAE. If the main purpose of setting up an offshore company is to relocate profitable business activities to the UAE as a tax haven, this restriction is not harmful.

Although an offshore company does not have to rent its own office, it is obliged to maintain a corresponding contact address via the office of a so-called registered agent. Authorised law firms and accountants act as such agents.

Value added tax (VAT) in the UAE is 5%. VAT applies to most transactions (goods and/or services) and is levied at every stage of the supply chain. Certain goods and/or services are exempt from VAT.

In the UAE, corporate income tax is levied at a standard rate of 9% on profits more than AED 375,000.00.

There is currently no personal income tax in the United Arab Emirates. As such, there are no individual tax registration or reporting obligations.

The global income principle states that all income is taken into account for tax purposes within the scope of unlimited tax liability (for individuals with their residence or habitual abode in their home country and for companies with their management or registered office in Germany, for example), regardless of whether the profit is generated in Germany or abroad.

Income from the UAE is generally subject to German taxation without restriction in accordance with the global income principle, unless double taxation agreements or national regulations provide for corresponding tax relief.

There is no longer a double taxation agreement in place between the UAE and Germany.

Even without a treaty for the avoidance of double taxation, tax relief exists for income from profit distributions within the meaning of Section 8b (1) KStG, which arise from the participation of a German company in a local company in the UAE, such as an LLC, FZCO, FZE or FZ-LLC.

Similar tax relief rules apply for German companies that maintain a permanent establishment (dependent branch) in the UAE and this permanent establishment is subject to corporate income tax in the UAE.

Austria has had an agreement with the UAE to avoid double taxation since 2004. The agreement applies to natural persons, companies (legal entities) and all other associations of persons resident in Austria.

Switzerland has had an agreement with the UAE for the avoidance of double taxation since 2012. The agreement applies to individuals, companies and all other associations of persons domiciled in Switzerland.