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Dubai UAE Witnesses Growing FDI Inflow on The Back of New Visa Reforms
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Dubai UAE Witnesses Growing FDI Inflow on The Back of New Visa Reforms

New visa reforms and ease and simplicity of doing business are attracting a growing number of foreign investors for new business setup in Dubai UAE.

As per a report, the UAE government has initiated several measures to make it easy for overseas investors to relocate their business into the country and this will, in all likelihood, result in higher FDI inflow into its economy.

A PRO Services in Dubai UAE recently reported about rising inquiries relating to new visa options for setting up a business in the emirates duly suggesting that the country is all set to witness more HNIs and millionaires this year.

Another UAE-based business consultancy firm reported receiving an increasing number of inquiries and clarification about new visa options including golden visa, investor visa, and freelance visa as many overseas investors are showing interest in joining the UAE’s tempting business community.

Besides new visa options, the UAE government’s business-friendly and forward-looking policies, a stable economy and incentivized tax systems are also becoming major factors in attracting global investors to the country’s soil.

There are reports that the UAE government is seriously considering rolling out a series of new policies to make the country’s business landscape far more attractive for foreign investors and entrepreneurs. It is learned that the government is committed to further simplifying the process of business licensing by removing other bureaucratic procedures that are still in existence.

Building Special Economic Zones (SEZ) is another new policy that the government is expected to introduce during 2023. These SEZs would likely be designed to cater to sector-specific industries and businesses including financial services, technology, and manufacturing.

Newly planned SEZs would also offer sector-specific incentives to further attract foreign investors for new company formation in Dubai UAE.

As per reports, even Covid pandemic couldn’t destabilize the country’s growing trend of new business setups that further display the strong resilience of UAE’s economy. There are also government pushes to enhance the SMEs’ participation in the economy as evidenced by increased disbursement of funds from the Emirates Development bank for the SMEs. Furthermore, the Dubai SME initiative is also providing increased networking opportunities for sustainable growth in the SME space.

Today, several sectors including real estate, e-commerce, hospitality and tourism, transportation, and logistics are booming in the UAE and industry and investment experts believe that more foreign investments are going to be poured into these sectors in the years to come. Experts are also confident that the government’s relentless push to drive technology and sustainable finance would open the doors for tremendous business growth opportunities in the coming years.

Amongst all Arabian nations, the UAE has been ranked first and 19th worldwide in attracting FDI inflows during 2022 as the World Investment Report issued by the United Nations Conference on Trade and Development (Unctad) suggests.

Industry experts forecast that FDI inflow in the UAE during 2023 could be huge, attracting a major share of USD 66 billion in potential FDI inflows into the Middle East, North Africa, and Pakistan (Menap) as the country is considered the most favored destination for investment by global investors and entrepreneurs.

The Institute of International Finance also reported that UAE had attracted an estimated $22 billion in FDI inflows during 2022 due to its business and visa reforms.

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UAE Ministry of Finance Clarifies Some Key Aspects of Newly Introduced Corporate Tax Laws
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UAE Ministry of Finance Clarifies Some Key Aspects of Newly Introduced Corporate Tax Laws

On 31 January 2022, the UAE Ministry of Finance (MoF) made the breakthrough announcement that a new federal corporate tax (CT) system will be implemented in the UAE, effective financial years commencing on or after 1 June 2023. The MoF recently clarified the following key aspects of this new CT regime.

Status of Regulation

The newly issued decree law for Corporate Tax would not have separate ‘Executive Regulations; however, would issue various cabinet decisions from time to time with detailed guidance for implementation.

Registration

The CT registration will be independent of the VAT registrations and all businesses across all the emirates would be required to register even if the taxable income is below the threshold of Dh375,000 or exempt.

Over the next few months, the Federal Tax Authority (FTA) will send out an ‘invitation to register’ to select businesses. There may not be any penalty relating to registration once the businesses register before the due date for tax return submission which is nine months from the end of the relevant financial year. Unlike VAT, there is the scope of deregistration from CT.

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Individuals

CT has been termed as a misnomer as besides corporates, even individuals including social media influencers, freelancers, sole proprietorships, or civil companies could be subject to this taxation.

Free Zones

The details of “Qualifying Free Zones” and “Qualifying income” are expected to be released soon. FZ business will require to ensure adequate substance in the UAE and fulfill other criteria to become eligible for tax exemptions.

Qualifying Group

A business with multiple Entities would need formal approval from the FTA to become a ‘qualifying group,’ not requiring intra-group transactions for tax purposes. A ‘tax group’ is allowed to submit a single tax return for all members of the group. If a business has formed a VAT tax group, it is not necessary to form a similar CT tax group or vice-versa.

Anti-abuse Rules

Businesses must furnish valid commercial reasons for reorganization without which any claim for obtaining tax benefits could be disregarded under anti-abuse rules.
Small Business Relief
Besides the taxable threshold of Dh375,000, businesses eligible for ‘small business relief’ would be considered as having Zero taxable income. More details on the small business relief are expected soon.
International Taxation
The location of key management personnel and/or board of directors, and of decision-making will determine the Place of Effective Management (PoEM). Should the PoEM of a foreign company be in the UAE, it will be covered under CT.
Documentation and Accounting

Taxable income will be computed from the books of accounts and the businesses do not need to prepare a separate set of books for tax purposes. Global accounting standards, such as IFRS, are acceptable, and for small businesses, simplified accounting procedures may be allowed.

All businesses need to retain and maintain accounting records for a minimum period of seven years even when a business is not taxable, claimed exemption, or did not pay tax in a particular year to facilitate future tax assessments.

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Recent Legal and Regulatory Reforms: Impacting the Brand Owners in the UAE
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Recent Legal and Regulatory Reforms: Impacting the Brand Owners in the UAE

Introduction

Over the last decade, the UAE has greatly Internationalized itself and become one of the most prominent global business hubs elevating its economic diversity. The government has rolled out a series of laws to move towards an innovation and knowledge-driven economy with an increasing awareness of the importance of intellectual property rights as the backbone of the country’s economy.

Major changes have been made in the intellectual property space including an expansion of trademark laws, revisions to patent laws, stronger copyright and industrial design rules, and greater protection of personal data.

Meta verse has become the hot topic in the UAE intellectual property rights in 2022 and will continue to be the buzzword in 2023 as well. Dubai has already set up an independent regulator for virtual assets, the Virtual Assets Regulatory Authority “VARA”, and announced its Metaverse Strategy in July 2022 as the country focuses on becoming a global hub and one of the world’s top 10 metaverse economies and plans to generate more than 40,000 jobs in the virtual world by 2030 through R&D in Web 3.0 technologies and applications in important sectors including tourism, education, retail, health care, and judiciary.

The Recent Legal and Regulatory Updates

Update 1: Cabinet Decision No. 57/2022 on Executive Regulations of the Federal Decree-Law No. 36/2021 on Trademarks issued on 22 June 2022 to supplement and refine the procedural framework for trademark matters. The most significant changes are accession to the Madrid System of WIPO, and the transfer of cancellation actions to the authority of the Trademark Office instead of the local courts to hasten filing cancellation within 90 days of filing. removal of time limitations on cancellation actions against bad faith filings and doing away with the need to publish new applications, renewals, and assignments in two local newspapers.

The other important areas addressed in this update include Multiclass Applications, removal of Trade License requirements for UAE Applicants, an extension of the period for filing grievances, an extension of the timeline of amendments, trademarks renewal, geographical indications, attachment on trademarks, etc.

Impacts on Businesses

The new regulatory update streamlined the UAE trademark practices in line with international practices and enhanced the ease of doing business.

Multiclass applications though initiated only stipulated the procedural framework and as of date, are not an option for trademark owners upon filing. However, based on the provisions, the UAE is expected to adhere to a multiclass filing system within the next twelve months.

Update 2: Cabinet Decision No. 47/2022 the Implementing Regulation of Federal Decree-Law No. 38/2021 on Copyrights and Neighboring Rights came into force on 11 May 2022 to further refine the copyright registration, importation, and license procedures in the UAE.

The new Copyright Law and implementing regulations together have made several substantial reforms to copyright practices in the UAE. The copyright owner has been made the employer as opposed to the creator, based on the relationship or contract. Other reforms included the establishment of the fair use doctrine, Smart Applications, Compulsory Licensing, Assignment of benefits of a Copyright License, Customs Seizure, and Protection of Privacy of Photography And Audio/Visual Recordings.

Impact on Businesses

Work for hire doctrine is expected to bring relief for many business owners, saving both time and money. The Default Ownership of Copyright In Architectural Designs in the new Copyright law could be an important game changer to the industry which will set essential limitations on the architectural works, ability to reutilize their designs, and/or enforce their rights against third parties.

Update 3: Cabinet Resolution No. 6/2022 regarding the Executive Regulations Of Federal Law No. (11) of 2021 regarding the Regulation and Protection of Industrial Property Rights was enforced in November 2021 followed by the implementing regulations which were issued on 10 February 2022. The new law and implementing regulations updated the legal framework that applies to patents and industrial designs, with changes to the preparation, prosecution, and enforcement of patents and designs.

The most important changes include the introduction of speedy examinations for patents, conversion of a utility certificate into a patent, extending the period of a utility certificate from 10 years to 20 years, ensuring the protection of Layout designs of integrated circuits, establishing the conditions for converting a utility certificate into a patent and documenting the process of examination, the process of mandatory license requests and the process for registration of layout design for integrated circuits. The new law also significantly raised the penalties related to patent infringement and removed the requirement of Arabic translation during patent registration.

Impact on Businesses

With these updates in regulatory requirements, inventors and applicants can now obtain protection for their intellectual property in the UAE more easily. The speedy examinations will promote enhanced availability of protection.

The Takeaway

The UAE is increasingly becoming the most coveted international financial and business hub and will continue to develop and substantiate its legal IP framework to attract foreign investment.

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How Do Foundations Differ from Trusts in the UAE
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How Do Foundations Differ from Trusts in the UAE?

Foundations and Trusts are established to provide financial support for intended organizations and individuals through the management of assets and family wealth. Though both these are legal entities, they differ from each other in structure, asset control, and liability.

Structure

The primary difference between a foundation and trust lies in its structure. A foundation is not legally allowed to undertake commercial activities for generating profits and is managed and controlled by a Member council like a Board of Directors. It is usually funded by a single family or individual to protect family wealth and make further investments. The founder registers the foundation’s charter at the public registry which can sue or be sued, can enter into contracts and agreements, can open bank accounts, and engage in commercial activities. It is governed by by-Laws, similar to an AOA. UAE law offers a modern and flexible legal framework as DIFC foundation law, for establishing private, charitable, and corporate foundations.

Trusts are established to relate three entities including the settlor that creates the trust, the trustee who is in charge of the trust, and the beneficiary that gets benefits from the trust. The legal ownership of the trust remains with the trustee that holds and manages assets on behalf of one or more beneficiaries. Trusts are usually private arrangements and are not governed by public disclosure requirements but by a trust agreement, defining the responsibilities and rights of the trustee and beneficiaries. The two main types of trusts in the UAE are charitable trusts and discretionary trusts.

Assets and Wealth Control

The level of control over assets and wealth differs between trusts and foundations. In general, foundations have more control over family assets and can undertake specific programs or initiatives as documented in the charter and by-Laws as per the objectives of the Founder in generating returns from investments.

Trusts have limited control over family assets and can use the assets only for beneficial owners. Trusts are typically established for specific organizations and individuals wherein trustees are made responsible for managing the assets.

Liability

Foundations are established with limited liability where the personal assets of the beneficiaries and members of the council are protected. The founder has no legal claim to assets.

The trustee is fully responsible for the liabilities of the trust unless a protector is accepting the liability.

The Takeaway

Both UAE nationals and expatriates establish Foundations and Trusts to help them manage their assets. Both are useful vehicles for managing and protecting family wealth and enjoying tax exemptions. DIFC doesn’t impose any withholding tax on dividends, interest, or royalties paid to UAE non-residents. Incomes generated within the DIFC are also tax-exempt. While setting up a Foundation or Trust, hiring the services of a law firm is usually recommended.

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Dubai and UAE are the Front Runners in Attracting Foreign Direct Investment in MENA Region
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Dubai and UAE are the Front Runners in Attracting Foreign Direct Investment in MENA Region

In recent years Dubai and the UAE are witnessing elevated FDI inflow, mostly driven by a friendly business environment, excellent infrastructure, pro-business policies, and structural reforms focused on diversification of the economy and building of a dynamic and ever-expanding private sector.

Attractive capital markets for foreign entrepreneurs and investors have also helped propel the growth in FDI inflow. As the investors are bullish and confident on the capital markets of Dubai and other emirates, fundraising for startups and scaleups is becoming easier.

As entrepreneurs go global, fundraising through foreign participation becomes more competitive unless international investors and entrepreneurs find the country or region attractive for investment.

Dubai and the UAE in the MENA region are seen to be the front runners in attracting FDI primarily due to a stable economy, tax incentives, and the existence of several free zones.

Why FDI for Economic Stability, Resilience, and Sustainability

Besides being a key driver of economic growth, FDI has always remained a significant non-debt financial resource for a country’s economic development. Foreign investors and entrepreneurs invest in a country to benefit from the investment privileges the country offers. The Dubai government in the recent past has signed more than 100 agreements to secure and facilitate foreign investments.

FDI helps the country develop technological know-how and generate employment. These investments have been pouring into Dubai and the UAE because of the vibrant business climate, the government’s supportive policy framework, and rising global competitiveness.

Data reveals the fact and bears the testimony that Dubai and the UAE are ahead of other MENA countries in terms of FDI inflow. The UAE contributed more than 30 percent of FDI inflow into the MENA region during 2020 and 2021 taking Dubai and the other emirates at the top of the list. The 2022 UNCTAD World Investment Report also reveals that the UAE ranks first in FDI inflows amongst the West Asian countries registering a phenomenal FDI growth of 4 percent and above.

What Attracts Foreign Investors

When foreign financial institutions or companies or governments want to invest, they often look for the economic stability of businesses or projects they are interested in. Besides, such investors focus on governance frameworks that offer transparency and tax efficiency.

Records of economic growth and prospects of economic growth and stability also matter a lot to foreign investors as these instill confidence amongst them. The availability of a highly-skilled workforce also adds to the investors’ confidence in facilitating fund inflow through new company formation in Dubai.

Why FDI is Flowing in Dubai

Dubai, including the other emirates, has attractive capital markets with a lower cost of investment for foreign investors across a lot of sectors. The UAE, as a whole, also symbolizes the political and economic stability investors long for. Dubai is preferred amongst other emirates due to its status as an International financial hub with an expanding and thriving business community. It is also one of the richest and smartest global cities with a high quality of life and high standards of living that global investors get attracted to.

Dubai’s strategic location also adds another feather to its crown as it is at the heart of the MENA region and connected to more than 240 cities worldwide by air. Besides, the city can boast of one of the best transport infrastructure facilities in the world.

International Environmental, Social, and Governance (ESG) investors are also feverish about Dubai after the city rolled out the Dubai Metaverse strategy. As the digital drive picks up speed in the city, doing business is becoming easier. Besides, the Dubai government’s Paperless strategy and adoption of a technology-based unique approach towards measuring, impacting, and sustaining happiness for the entire city are causing investors to flock to the city.

The other reason that is driving investors to Dubai is the ease of doing business. Business registration for a business set up in Dubai is a straightforward process and only takes a few days.

The business community of foreign investors has established proven businesses and family offices in Dubai which is inspiring prospective investors to come and set up a business in the city. Business sectors that are offering the highest stability and growth potential include e-commerce, real estate, insurance, financial services, manufacturing, mining and tourism, and hospitality.

The other most vital reason for investors to choose Dubai is the number of dedicated free zones available in the city specifically designed to support and cater to specific business activities that enable foreign investors to obtain full business ownership. There are more than 40 free zones in Dubai, and some are solely dedicated to research and development.

Business registration and visa issuance processes are transparent and streamlined with easily available low-cost office spaces and warehouses.

Dubai is known as a tax haven and even after the introduction of corporate tax, a business with turnover surpassing AED 375,000 only needs to pay tax on profits and that too at a low rate of 9% which is one of the most competitive tax rates globally.

Foreign investors conducting business activities outside of the UAE don’t come under the corporate tax regime and foreign businesses owned by overseas investors in the free zones continue to enjoy tax holidays subject to fulfilling certain conditions.

The UAE has also signed several double taxation avoidance agreements (DTAA) with different countries which protect Dubai-based companies and individual residents from double taxation. As opposed to the tax systems in other jurisdictions, the UAE and Dubai governments don’t impose any tax on individual income from employment facilitating easier talent engagement and retention.

The Prospect of FDI in Dubai

In connection with the future FDI prospect of Dubai, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum remarked, “We remain committed to enriching Dubai’s enabling business environment to explore fresh growth avenues with our partner investors to achieve even greater success in years to come. Furthermore, diversifying the economy, attracting more investment in future-focused sectors, and enhancing growth opportunities in the digital economy will remain our strategic objectives for Dubai’s development journey.”

Dubai and the UAE as a whole, are dedicated to investor services by creating business opportunities and protecting foreign investments. The UAE at the recently held Emirates Investment Summit announced the launching of projects under the ‘Project of The 50’ program that clearly outlined the next phase of growth in the country.

The primary goal of attracting increased FDI inflow into the country is to channel investment funds with public and private organizations. The nation aims at attracting a whooping AED 550 billion in FDI over the next nine years which is a tempting proposition for all startups and SMEs.

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Relevant Activity Must Be Directed and Managed in The UAE to Comply with ESR and Avoid Penalty
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Relevant Activity Must Be Directed and Managed in The UAE to Comply with ESR and Avoid Penalty

UAE Economic Substance Regulations were rolled out by the UAE in April 2019 and amended afterward by Cabinet Resolution, 57 of 2020, and Ministerial Decision, 100 of 2020.

ESR is a comparatively new regulation and requires several reports for virtually all UAE private companies. Though it is a new regulation, the Ministry of Finance (MoF) has remained strongly committed to its effective implementation and started imposing hefty penalties on companies not complying with the ESR.

Tests specified in Article 6 for the Economic Substance in UAE are used to determine the monetary penalty by the MoF in case the companies fail to demonstrate the following.

  • The core income-generating activity is conducted within the UAE
  • The relevant activity is directed and managed in the UAE, and
  • There are adequate assets and employees engaged within the UAE

The most specific about ESR’s deliberation is that the relevant activity is “directed and managed” in the UAE to be exhibited by the business entity.

A relevant activity to be “directed and managed” in the UAE, there must be an adequate number of meetings to be convened and attended in the UAE by the board of directors physically.

There is no specific mention of the number of board meetings that would make it adequate and satisfy the “directed and managed” condition except that the adequate number of meetings will be determined by the nature of the relevant activity being carried out in UAE and the amount of income generated from the relevant activity of the company.

Mere convening board meetings for the sake of fulfilling the requirement of the ESR test may not be sufficient to satisfy and convince the MoF that the relevant activity, conducted by an entity, is being directed and managed in the UAE and may attract more severe penalties.

To remain compliant with the ESR and avoid penalties, companies in the UAE must carry out their businesses in the UAE only. As UAE becomes an international financial hub, the regulation is only expected to intensify in the future with increased supervision from the MoF.

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UAE Issues New Decree Law on Family Businesses and Offices
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UAE Issues New Decree Law on Family Businesses and Offices

The UAE Government, on October 10, 2022, issued Decree Law No. 37 on Family Businesses and published it in the official gazette. The New Law shall come into force on January 10, 2023, three months from the date of publication.

The issuance of this new legislation has been seen as a much-welcome move from the government reiterating the nation’s commitment to supporting family organizations and businesses. The new law recognizes the vital role of family businesses and offices in the sustainable development of the UAE economy besides being the most significant contributor to employment generation in the UAE

Objectives of the New Decree Law

This Decree-Law is being enforced to establish a comprehensive legal framework to regulate the ownership and governance of family businesses, make the legal framework accessible to all family businesses and facilitate their success across generations, ensure family business continuity, promote the role of the private sector in the growth of the national economy and community contribution, stipulate measures to resolve family business-related disputes through committees in the local courts and enhance the contribution of family businesses to the economic competitiveness of the emirates.
The New Decree Law also focuses on establishing best practices for a succession of family businesses, in terms of ownership and control, over future generations. The New Law also provides an increased level of support for family businesses from the state machinery.

Key Features of the New Decree Law

  • Stipulated the requirement of maintaining a unified register by the government for all family businesses
  • Stipulated eligibility requirements for the application of registration on the register for the family office in UAE
  • Stipulated applicability of the new law for all companies established under the Federal Companies Law or applicable legislation in the Freezone, excluding public joint stock companies and general partnership companies
  • Introduced two separate categories of shares with voting rights and profit participation rights as agreed between family members
  • Established regulation requirements on share transfer between members of the same family and between others from outside the family
  • Provided measures to prevent existing shareholders from selling their stakes to outsiders
  • Introduced a family charter under the new law to enable family members to agree on important issues including profit-sharing methods and requisite education, training, and qualification requirements of family members
  • Encouraged and outlined various tools for family office structures and governance including family council, family assembly, and family constitution to help family businesses thrive
  • Stipulated the establishment of a committee in each Emirate called the “Committee for the Resolution of Family Business Disputes” by a decision of the Minister of Justice or the head of the local judicial authority
  • Specified the composition and the procedure for the settlement of disputes of family businesses, chaired by a judge and assisted by two experienced and competent persons in the legal, financial, and family business management fields
  • Regulated insolvency and bankruptcy of family member shareholders

 

What HR procedures do I contract out?

The New Law is seen as a positive development in terms of family office regulations in the UAE as it includes issues not previously addressed. The new law may not be the panacea for all issues related to family businesses and offices however, it does address the majority of the issues and associated challenges under the existing legislative framework that was previously addressed inadequately on the objective of ensuring the continuity of family businesses and offices in the UAE.

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New UAE Visa Rules: Creating Opportunities for Investors and Entrepreneurs
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New UAE Visa Rules: Creating Opportunities for Investors and Entrepreneurs

There has been a huge surge in business license issuance in Dubai during the first half of 2022 with an almost 25% jump in the number of licenses issued compared to the first half of 2021 totaling 45,653.

The new UAE visa laws have been proven to be a boon, especially for startups and are opening floodgates of opportunities for entrepreneurs, investors, job seekers, IT professionals and tourists. These visa reforms are aiding the country’s economy in a great way as per insights gathered from an industry veteran.

Industry experts believe that visa reforms in the gulf led by UAE and Saudi Arabia have not only increased economic activities in the region but also created new jobs and attracted talent from overseas. Besides bringing reforms to existing visas, USE also introduced new visas to benefit from enhanced economic activities. The business entry visa allowing prospective investors and entrepreneurs entry into the country multiple times over an extended period would also be very helpful to attract foreign direct investment as this period could be best and effectively utilized for market research by the investors before they finally embark upon a new business setup in Dubai UAE.

Industry experts strongly believe that the economy of UAE will register very good growth during 2022 and 2023, rising around 5.2% and 4.2% respectively on the back of the government’s reforms initiatives including new visa laws. The economic growth of UAE has also been attributed to Expo 2020 which has played a key role in supporting the country’s economy, predicted to reach 33.4 billion USD by 2031, industry veterans highlight.

The current exponential growth in Dubai’s infrastructure and construction sectors also resulted in huge economic development and is mainly driven by investments made by foreign entities, industry experts emphasize. The policy and structural reforms undertaken by the government have made UAE the centre of attraction for trade and investment worldwide, believe the experts.

Experts agree that reforms introduced for easy business licensing also complement the visa rules and go hand in hand with increased business activities in Dubai UAE. Business activity usually decides the time to obtain a license and may typically take 3 days to 4 weeks. A reputed and professional PRO service in Dubai UAE can help prospective investors get licenses in an easy and hassle-free manner.

Real estate investment and advisory firms report that the construction project market of UAE witnessed a rebound during 2021, with residential construction being the highest-performing sector. The trend has been continuing so far in 2022 as there are several successful launches of residential projects in Dubai and across other emirates.

The covid-19 pandemic has made Work-From-Home (WFH) the new normal and becomes a blessing in disguise for the construction sector. Home buyers are currently demanding more spacious and luxurious living spaces in communities having recreational and other facilities including swimming pools & gyms along with commercial outlets such as restaurants and shopping malls. Again here the UAE government’s new visa legislation allowing property investors to get a Golden Visa in the event of buying a property worth Dhs 2 million played the role of a catalyst, believe the industry experts. Besides construction and real estate, the other sectors that benefit from the liberalized new visa rules are tourism, trading and e-commerce.

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UAE Expands into The Virtual World with Dubai Metaverse Strategy
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UAE Expands into The Virtual World with Dubai Metaverse Strategy

UAE is branching out into new virtual realms with the launch of the Dubai Metaverse Strategy, designed to propel the Emirate’s economy into the future. A new era of blockchain technology has emerged that would promote Dubai as the Global Capital of Web 3.0 with a scrupulously documented regulatory framework.

Today, the UAE is considered to be one of the top metaverse economies in the world and Dubai, with its recent metaverse strategy, is seen as a pioneer in offering the most advanced metaverse and blockchain ecosystem worldwide.

Blockchain technology, which is essentially an immutable distributed ledger that facilitates the process of recording transactions and tracking assets in a business network, finds widespread usage in Cryptocurrency, Non-Fungible Tokens or Tokenized assets and the metaverse.

Metaverse is a virtual space where people can interact with digital objects. We need to create our digital avatars to enter the metaverse, an expansive network of real-time 3D worlds and simulations. A decentralized metaverse incorporates blockchain technology and blockchain-powered assets. Web 3.0 is the World Wide Web, www as our internet, however advanced, incorporating concepts such as decentralization, blockchain technologies and tokenized economics.

The emergence of web 3.0 and metaverse presents endless possibilities of how this innovation can positively impact the economy of UAE through industries and communities.

Dubai Metaverse Strategy

Originally announced in June 2022 by Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum, the strategy aims at ensuring that the metaverse increases its contribution to 1% of the emirate’s overall GDP.

The Dubai Metaverse Strategy focuses on four sectors including tourism, education, government services and retail &real estate to become one of the leading economies in the world and a major hub for the global metaverse community.

The strategy was officially unveiled at the Dubai Metaverse Assembly on September 28, 2022. Headed by the Dubai Crown Prince, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, heads this strategy which has five main pillars including innovation, government implementation of metaverse technologies and talent development and will be focused on extended reality, augmented reality, virtual reality, mixed reality and digital twins.

The strategy also aims at doubling the number of blockchain companies in Dubai plus generating 40K new jobs in this field.

Unveiling of the metaverse strategy will witness Dubai host more than 1,000 companies in the blockchain and metaverse sectors that presently contribute 500 million USD current for the UAE’s national economy. This contribution would considerably increase in the future, experts predict. Four billion dollars of the country’s GDP in the coming five years is targeted through the Dubai metaverse strategy.

The strategy plans to build multiple secure platforms for metaverse users by developing a standardized system as per international standards along with a regulated infrastructure for controlled inclusion and enhanced simulation of such innovative technologies.

Metaverse- Application

The application of the metaverse is widespread with the following key applications.

Healthcare

Augmented reality, AR is the best example of a metaverse application in the healthcare sector helping surgeons in various surgical procedures.

Education

Virtual reality, VR is an example of a metaverse application in the education sector where a VR headset helps students attain a high level of effectiveness in comprehending concepts through visuals. Students also get increasingly motivated to learn with the use of VR technology.

Real Estate

Real estate is another glowing example of metaverse application through VR where real estate agents can leverage the power of this technology for offering immersive virtual tours of properties to prospective buyers.

Defence

Defence is another area where metaverse technology finds many applications. Tactical Augmented Reality (TAR) like night-vision goggles (NVG) can display a soldier’s precise location.

Metaverse applications are becoming huge in many industries and facilitating their transformation through seamless virtual operations.

Metaverse Market

Metaverse market size globally will be valued at 1.6 trillion USD by 2030. Many multinationals like Meta (Facebook), Microsoft, Google, and Nvidia are also making significant investments in the metaverse. Mubadala Capital, a leading global venture platform has been proactive and making investments in the blockchain technology space.

Metaverse in UAE

The metaverse strategy is in perfect alignment with the UAE Artificial Intelligence strategy. The Ministry of Health and Prevention, in its proactive stance, has launched a blockchain platform to ensure that medical data is secure.

The Dubai government formed the Dubai Virtual Assets Regulatory Authority (VARA) to help safeguard investments in crypto and NFTs. As MetaHQ is established, the VARA has started functioning as the regulatory body for foreign transactions providing a safeguard for investors in the virtual asset industry for the first time.

Business and Dubai Metaverse

Facebook, the global major presently named Meta, has opened its headquarters in the country.

Dubai has already documented and implemented business setup regulations in fintech, blockchain, and Web 3.0 to safeguard crypto and digital assets. Dubai World Trade Center (DWTC) is dedicated to virtual assets.

Dubai’s fintech sector offers tremendous opportunities for business in the digital space and is currently valued at 2.5 billion dollars. The Dubai International Financial Center (DIFC) Innovation Hub is the first ecosystem in the gulf with more than 2,400 companies in fintech. Dubai Financial Services Authority (DFSA) has been made responsible for overseeing the regulation of investment tokens.

Dubai – The Crypto Hub

Dubai’s metaverse strategy aims to make the city the crypto capital of the world, with over 400 businesses operating in the crypto space including Crypto.com, FTX, and Binance, the leading and famous FinTech and cryptocurrency firms with licenses in possession.

Business Licences – Metaverse

Investors seeing for a company formation in Dubai in the metaverse space must engage with the following government authorities who are responsible for offering metaverse services license.

  • Dubai Economy and Tourism (DET)
  • Dubai Silicon Oasis Authority (DSOA)
  • Dubai Multi Commodities Center (DMCC)
  • International Free Zone Authority (IFZA)

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British Business Setups are Growing in Dubai UAE
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British Business Setups are Growing in Dubai UAE

The UAE has been witnessing a rapid surge in the number of UK businesses, effectively growing by 23% year-on-year, with many UK businesses entering the middle-eastern market through new company formation in Dubai UAE.

The growing British business setup in Dubai is happening at a time when the economic forecast from the British Chambers of Commerce (BCC) points to an economic recession in the UK predicting the economy slowing down by the end of 2022, mostly due to the staggering and unabated inflation soaring to 14%. Multiple factors such as lower consumer demand and weaker currency against the USD, higher energy costs and slower growth in international trade and investment are responsible for this massive decline.

While the UK economy slips into recession, the economy of the UAE shows resilience and stability due to higher oil prices, lower taxes and booming consumer demand. UAE’s thriving economy is driving increasing numbers of UK investors to the emirates to consolidate their operations and hedge risk.
With a surge in market entry of new British businesses, there has also been a higher demand for reputed and professional business setup consultants in Dubai UAE who can facilitate setting up new enterprises.

The business-friendly landscape and pro-business policies of the UAE are also attracting UK investors and entrepreneurs to its shore. The UAE government has also been instrumental in bringing in several progressive and strategic reforms in the recent past including the introduction of long-term visa categories, full foreign ownership etc. to promote foreign direct investment through new company incorporation. Foreign investors and entrepreneurs, aggressively looking for business expansion are moving to the UAE to protect their businesses from recessionary slowdowns.

British companies are also preferring to expand in the UAE due to higher market demand for their products and services. Given the economic slump in the UK, British investors are increasingly pursuing to diversify their businesses in other geographies with stable economies and higher market demands.

Besides Dubai, Abu Dhabi Global Market (ADGM) has also witnessed a growing interest amongst the new British investors and entrepreneurs in setting up new companies. Transparent policies, easy business setup processes and a robust regulatory framework are mainly attributing to this increased interest.

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