Planning for doing business in UAE? With an open economy that has one of the world’s highest per capita income with a sizable annual trade surplus the UAE has undergone an unprecedented transformation into a modern state with a high standard of living. In this article we will discuss the top 7 reasons for doing business in UAE.
7 reasons for doing business in UAE
Some of these reasons are very obvious and some are not so
1. 0% Taxes: The most important reason for doing business in UAE
In UAE, corporate tax and personal taxes are nil. Companies in UAE enjoy the least demanding tax framework in the world. The favorable nature of tax framework in UAE was highlighted by the study Paying Taxes 2013 compiled by the World Bank, International Financial Corporation and PricewaterhouseCoopers.
In practice however only oil, gas and petrochemical companies and branch office of foreign banks are required to pay taxes.
There is no personal income tax to be paid by the residents of the UAE. However, there is a system of compulsory pension contributions for employees who are UAE nationals (approx 5% of the salary) and authorities are studying a proposal to create similar systems for expatriates too.
Considering the tax benefits offered by UAE, setting up a business in UAE is of strategic advantage for both corporate entities as well as people.
2. Very Low Import Duty
Import duties in UAE are very low (around 5% for most of the goods). For goods imported for use within a specific Free Zone, there are no import duties. There are around 40 Free Zones in UAE which offers competitive packages for doing business in UAE.
3. Double Taxation Agreements of UAE
UAE has signed treaties and agreements on the avoidance of double taxation with around 50 countries. These countries include its major trade partners from across the world.
4. Free Trade Agreements of UAE
UAE part of the Gulf Cooperation Council (GCC) and hence UAE based businesses (with the exemption of Free Zone companies) enjoy duty free trade with all countries in GCC that also has Saudi Arabia, Qatar, Kuwait, Oman and Bahrain as its members.
It is also a member of the Greater Arab Free-Trade Area (GAFTA) in which all Gulf Cooperation Council (GCC) states take part. This enables UAE to trade with all the members of GAFTA with minimum duties and barriers.
The UAE is also a contracting party to the General Agreement on Tariffs and Trade (GATT) since 1994 and a member of the World Trade Organization (WTO) since 1996.
The GCC block is currently negotiating to sign Free Trade Agreements with the EU, Japan, China, India, Pakistan, Turkey, Australia, Korea and the Latin American countries of Brazil, Argentina, Uruguay and Paraguay.
Those who target the Middle Eastern markets including GCC, setting up a business in UAE is a natural choice.
5. UAE has a Strong and Competitive Economy
UAE’s economy was ranked third among 15 countries in the Middle East and twenty-eighth worldwide among 185 countries in the Index of Economic Freedom 2013 prepared by the Heritage Foundation in partnership with the Wall Street Journal. UAE has created a dynamic environment for entrepreneurs’ because of its transparent and favourable business climate and high degree of political stability.
UAE was classified as the only innovation-driven economy Arab economy in the WEF Global Competitiveness Index 2012–2013, which assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity. UAE maintained its status as the most prosperous country in the Arab world according to the 2012 Legatum Institute’s Prosperity Index.
6. Strategic Location Advantages of UAE
The UAE enjoys a strategic location on the new Southern Silk Road between Asia, Europe and Africa, a situation that provides greatest trading conditions. Chinese businesses use UAE as a hub for Africa. Indian traders use the emirates to reach the world. Latin American ‘multi-latinas’ see UAE as a launch pad into South Asia. And, of course, Western multi-nationals use UAE as a hub for the Middle East. Setting up a business in UAE helps in targeting and reaching a wide geographic area with significant business potential.
7. World-class Infrastructure of UAE
Infrastructure in the UAE is extremely well developed following a period of rapid progress that saw the construction of residential, tourism, industrial and commercial facilities. Development activities in massive scale and scope has resulted in redrawing the urban environment and infrastructure facilities in UAE.
UAE host some of the busiest ports and airports in the region making it a logistics hub for international companies.
Infrastructure facilities of international standards make it easier for doing business in UAE and run them conveniently.