Trade between East and West- The UAE

Trade between East and West- The UAE

Ella Rosenberg

Written by

Ella Rosenberg
March 19, 2023

The signing of the Abraham Accords and the officialization of diplomatic relations between Israel and the United Arab Emirates meant that many Israelis have considered to operate in the Emirates, but in certain cases, situations may arise where such may encounter frustrating regulatory barriers, which stem mainly from a lack of familiarity with the regulatory environment of the Emirates.

Incorporating companies in the United Arab Emirates is divided into two main categories of operations - activities in a free trade zone and activities in the mainland. The mainland is an area where Emirates laws apply, and a free trade zone is an area with its own regulatory framework. Companies licensed to operate in free zones often cannot operate in the mainland, unless there is a special and appropriate license from the regulator at the federal level. Meaning, when clients would like to open an activity that is considered a financial institution in the United Arab Emirates (and sometimes other activities) there is a need to open a company in the Union itself and there is also a need for licensing from the Federal Central Bank.

However, when global operations are required, there is a possibility to open a company in a free zone. In any free zone, the laws of the Emirates are applicable to an extent, and each free zone has its own laws. For example, in the Dubai International Financial Center - DIFC, there are separate laws than the laws of the Union and in order to operate in the emirates themselves there is a need for a special permit. When examining the types of licensing in a comparative manner, two main points of regulatory barriers can be found - banking access and financial activity. Many companies tend to start operations in a free zone, in which case additional activity licenses will be required when such seek to work in the mainland, or outside the Union, such as in Europe, from within the DIFC.
The licensing process in the mainland and free trade zone is a relatively similar process but with a different result. First, one has to choose the type of activity that the company wishes to operate in, submit an application for company registration with the relevant activity and, in cases of licensing, ensure that the appropriate license is sought and received. In such cases it is possible to receive a local resident visa. It is possible to receive a residence visa both when operating in a free zone and when operating in the mainland, yet usually the taxation in the free zone is 0%, while in the mainland taxation is 5%. In cases of opening bank accounts for the company, as well as for the company's owners, the process may take several weeks and includes an extensive set of compliance and regulation designed to prevent cases of money laundering and terrorist funding.

In conclusion, when starting to work in the United Arab Emirates, it is important to ensure that the registration of the local company is regulated together with an operative bank account and with regulated licensing, and if operations are commencing in other countries and trade areas, such as the European Union, it is important to ensure that the licensing on the corresponding side is regulated and with correct regulatory enforcement. For this purpose, it is important to contract with a party with experience in issuing such licenses, because similarly to other countries, if applications are submitted in a manner that does not comply with the requirements, the procedures may become complicated and time consuming.