TRW & Co · Corporate & Commercial
Foreign Direct Investment in the UAE
Foreign investment in the UAE no longer depends on a local majority partner for most activities, but it does depend on choosing the right vehicle, licensing authority and approvals. This guide explains the ownership rules, restricted sectors, the company law changes in force since late 2025, merger control, tax and the home-country rules that shape the deal.
Key pointFull foreign ownership has moved the hard questions from ownership to architecture: the vehicle, the licensing authority, sector approvals, merger control and tax status now decide whether an investment works, and the 2025 company law amendments let investors put protections into the constitution itself.
At a glance
100% ownership for most
The Commercial Companies Law reforms in force since early 2021 removed the 51% Emirati ownership rule and the national service agent requirement for foreign branches in most activities.
Strategic-impact exceptions
Cabinet Resolution No. 55 of 2021 keeps approvals for sectors such as defence, telecoms, banking, insurance and commercial agencies, where ownership may be limited or conditioned.
New tools since October 2025
Federal Decree-Law No. 20 of 2025, in force since late 2025, allows LLC share classes, constitutional drag and tag rights and redomiciliation between jurisdictions.
Merger control thresholds
Since 31 March 2025, deals above AED 300 million combined UAE turnover or 40% combined share must be notified at least 90 days before completion.
Tax is part of structure
Corporate tax is 9% above AED 375,000, with a possible 0% for qualifying free zone income and a 15% top-up tax for large groups.
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What foreign investment in the UAE involves
Foreign investment in the UAE covers every route by which a non-UAE investor puts capital into the country: setting up a wholly owned mainland company, opening a branch, incorporating in one of the free zones or in the DIFC or ADGM financial centres, forming a joint venture with a local group, or acquiring shares in an existing business. Each route has its own licensing authority, ownership rules, tax profile and dispute forum.
The headline reform is now well established. Since the Commercial Companies Law was amended with effect from early 2021, foreign investors can own 100% of most mainland companies, and the old requirement for a 51% Emirati shareholder or a national service agent has gone for most activities. What remains is a narrower but important set of restricted and regulated sectors, a merger control regime with real thresholds, a corporate tax system, and a fresh round of company law amendments that took effect in late 2025.
The legal question is rarely "can we own it?" It is usually which vehicle, in which emirate or zone, licensed by which authority, with which approvals, and on what exit terms. Getting that architecture right at the outset is far cheaper than restructuring later.
The legal framework for foreign investment in the UAE
The foundation is the Commercial Companies Law, Federal Decree-Law No. 32 of 2021, which consolidated the 2020 reforms made by Federal Decree-Law No. 26 of 2020. The UAE government's guidance on full foreign ownership confirms that those reforms removed the majority-Emirati ownership requirement and the obligation on branches of foreign companies to appoint a UAE national service agent. The 2018 foreign direct investment law, which had introduced a limited positive list, was overtaken by these reforms.
The current list of company legislation is published on the Ministry of Economy and Tourism's companies legislation page. Alongside the main law it includes Cabinet Resolution No. 55 of 2021 determining activities with strategic impact, Cabinet Decision No. 77 of 2022 on limited liability companies, Federal Decree-Law No. 37 of 2021 on the Commercial Register, Cabinet Decision No. 109 of 2023 on beneficial ownership procedures, and Ministerial Decision No. 138 of 2024 on registering branches and representative offices of foreign companies.
The 2025 amendments, in force since late 2025
Federal Decree-Law No. 20 of 2025 amended the Commercial Companies Law with effect from late 2025. For foreign investors, the most useful changes are the ability of mainland LLCs to issue multiple classes of shares with different voting, dividend and liquidation rights; express recognition of drag-along and tag-along rights in constitutional documents; clearer rules for in-kind contributions; and a route to redomicile a company between emirates, between the mainland and free zones, and between free zones without creating a new legal entity.
Free zone companies that operate in the mainland are now expressly subject to the Commercial Companies Law for that activity. Some of these changes depend on implementing resolutions, so check what has been issued before relying on them.
Activities that remain restricted
Cabinet Resolution No. 55 of 2021 identifies activities with strategic impact, where foreign ownership needs approval and may be conditioned or refused. The government guidance lists security, defence and military activities; telecommunications; banking, exchange, finance and insurance; currency production; commercial agencies; Hajj and Umrah organising; Quran memorisation centres; and certain fishing and pearling activities. Our page on commercial agencies explains why that sector still requires national agents.
Choosing the vehicle: mainland, free zone, DIFC, ADGM or branch
The right vehicle depends on where your customers are, what you sell, whether you need a regulated licence, and how you intend to exit. Foreign investment in the UAE usually starts with this comparison.
| Vehicle | Licensing authority | Foreign ownership | Best suited to | Watch-outs |
|---|---|---|---|---|
| Mainland LLC | Emirate economic department (e.g. Dubai Department of Economy and Tourism, Abu Dhabi DED) | Up to 100% for most activities | Selling to UAE customers and government, onshore operations | Strategic-impact approvals; Emiratisation; licensing per activity |
| Branch of a foreign company | Emirate economic department and Ministry registration | Wholly owned by the parent; no separate legal person | Project work, contracting, testing the market | Parent liable for branch debts; corporate tax registration |
| Free zone company | The free zone authority | 100% | Regional hubs, trading, logistics, services outside the mainland | Mainland trading needs an onshore route; qualifying free zone tax conditions |
| DIFC or ADGM entity | DIFC Registrar of Companies or ADGM Registration Authority | 100% | Financial services, holding companies, funds, family offices | Regulated activities need DFSA or FSRA authorisation |
| Joint venture with UAE partner | Depends on vehicle | As negotiated | Restricted sectors, government-facing projects, market access | Deadlock, exit and control rights must be drafted carefully |
DIFC and ADGM are financial free zones with their own common-law based civil and commercial legislation and their own courts. ADGM applies English common law directly, as explained in its legal framework overview. That makes both centres popular for holding companies and shareholder arrangements even when the operating business sits onshore. Our pages on mainland company structures and free zone company formation go into the practical set-up steps.
Pick the vehicle for the customer, not the formation fee. A free zone company that needs to invoice mainland customers regularly may face licensing friction and lose qualifying free zone tax treatment on that income, which can cost more than a mainland licence would have.
The question is no longer whether a foreign investor may own the business. It is which vehicle, which regulator and which exit route the business will need in five years.
Regulated sectors and approvals
Full foreign ownership does not remove sector licensing. In financial services, onshore activities are licensed by the Central Bank of the UAE or the Capital Market Authority (which replaced the Securities and Commodities Authority from 1 January 2026), while the DFSA regulates the DIFC and the FSRA regulates ADGM. Virtual asset businesses in Dubai outside the DIFC fall under VARA. Telecoms sits with the TDRA, healthcare with federal and emirate health authorities, and education with emirate regulators. Real estate brokerage and development in Dubai is overseen by the Dubai Land Department and RERA.
Those approvals often take longer than incorporation and can shape the vehicle. A regulated licence may require local substance, minimum capital, approved individuals and governance arrangements that need to be built into the shareholder documents from the start.
Merger control on acquisitions
An acquisition can also trigger the competition regime under Federal Decree-Law No. 36 of 2023 on Regulating Competition, listed on the Ministry's competition legislation page. Cabinet Resolution No. 3 of 2025 set the filing thresholds, effective from 31 March 2025: broadly, combined UAE turnover in the relevant market above AED 300 million in the last financial year, or combined market share above 40%. A notifiable deal must be filed at least 90 days before completion and must not close during review. See our merger control page for the detail.
Investing in restricted sectors through joint ventures
Where an activity remains restricted, foreign investment in the UAE usually takes the form of a minority stake or a joint venture with a UAE partner, or a structure in which the foreign party supplies technology, brands or management services under contract while the licensed entity is controlled locally. These structures can work well, but they need careful drafting: reserved matters, information rights, management appointments, licence terms and exit options must all be consistent with the ownership approval actually granted. Arrangements that give the foreign party more control than the approval contemplates can be challenged by the regulator or by the partner in a dispute.
Ongoing obligations after licensing
A licence is the beginning of compliance, not the end. Mainland and free zone companies must keep their beneficial ownership registers current, renew trade licences, file corporate tax returns, and comply with economic substance, anti-money laundering and data protection rules where they apply. Mainland private-sector employers above the size thresholds set by the Ministry of Human Resources and Emiratisation must also meet Emiratisation targets, which should be budgeted from the outset. Our page on Emiratisation compliance explains the current approach.
Tax: corporate tax, free zones and the minimum top-up tax
Since financial years starting on or after 1 June 2023, the UAE has levied corporate tax under Federal Decree-Law No. 47 of 2022: 0% on taxable income up to AED 375,000 and 9% above that. Qualifying free zone persons can benefit from a 0% rate on qualifying income if they meet substance, income and compliance conditions, but income from many mainland transactions does not qualify.
Large multinational groups must also consider the Domestic Minimum Top-up Tax of 15%, introduced by Federal Decree-Law No. 60 of 2023 and Cabinet Decision No. 142 of 2024 and effective for financial years starting on or after 1 January 2025. It targets groups within the OECD Pillar Two scope, broadly those with consolidated revenues of at least EUR 750 million. VAT applies at 5%. Registration, returns and guidance sit with the Federal Tax Authority. Our corporate tax and transfer pricing pages cover the detail.
Process: from investment decision to operating entity
- Map the activity. Identify the exact licensed activities, check them against the strategic-impact list and sector licensing rules, and confirm whether 100% ownership is available.
- Choose the jurisdiction and vehicle. Compare mainland, free zone, DIFC and ADGM options against customers, tax, regulation and exit, and decide whether a holding company should sit in DIFC or ADGM.
- Clear competition and sector approvals. For acquisitions, test the merger control thresholds; for regulated activities, open discussions with the regulator before incorporation.
- Prepare constitutional documents. Draft the memorandum or articles to reflect share classes, reserved matters, transfer restrictions, drag and tag rights, and deadlock mechanisms now permitted by the 2025 amendments.
- Legalise and file. Notarise, legalise and translate parent documents, file with the licensing authority, and register beneficial owners as Cabinet Decision No. 109 of 2023 requires.
- Set up post-licence compliance. Register for corporate tax and VAT where required, open bank accounts, arrange visas and establishment cards, and plan Emiratisation obligations for mainland entities.
- Protect the investment. Document intra-group agreements, IP licences and transfer pricing, and check whether a bilateral investment treaty protects the investor's home-country structure.
Documents and information to assemble
- Parent company constitutional documents, certificate of incorporation and good-standing certificate, notarised and legalised.
- Board resolutions approving the investment and appointing managers, with powers of attorney for signatories.
- Passports and residence details of shareholders, directors, managers and ultimate beneficial owners.
- A business plan describing the activities, which licensing authorities and some regulators require.
- Lease or office arrangements, since most licences require a registered physical address.
- For acquisitions: due diligence findings, competition analysis, change-of-control consents and regulatory approvals.
- For joint ventures: the shareholders' agreement, side letters and any put, call or exit arrangements.
Risks and common mistakes
Leaving legacy nominee arrangements in place
Before 2021 many foreign investors used a local shareholder holding 51% on paper, with side agreements returning control and profits to the foreign party. Those arrangements remain risky: they may conflict with beneficial ownership disclosure, can be unenforceable, and create succession and dispute problems if the nominee dies or falls out with the investor. Where the activity is now open to 100% foreign ownership, the safer course is usually to restructure the shareholding transparently, update the licence and beneficial ownership register, and unwind side agreements with proper releases.
Assuming every activity is open
The strategic-impact list and sector rules still matter. An investor may obtain a general trading licence and then find that a specific activity, such as financial services, telecoms-related services or security work, needs a separate approval or cannot be wholly foreign-owned. Licensing authorities assess the activity code, not the investor's description of its business. Map activity codes early, confirm with the authority or regulator in writing where there is doubt, and build conditions precedent into any acquisition or joint venture agreement.
Trading onshore from a free zone
Free zone entities are formally UAE companies, and the 2025 amendments confirm that their mainland activities fall under the Commercial Companies Law. But a free zone licence is generally not a licence to trade freely in the mainland. Regular onshore sales may require a mainland branch, a distributor or a specific permit, and can affect qualifying free zone tax status. Investors should map revenue streams by customer location before choosing a free zone and revisit the structure as the onshore customer base grows.
Closing an acquisition before clearance
Since 31 March 2025 the merger control thresholds have been in force, and a notifiable concentration must be filed at least 90 days before completion and must not be implemented during review. Investors from jurisdictions with lighter or later filing regimes sometimes assume they can close and file afterwards. Gun-jumping risks penalties and complicates integration. Build a competition analysis into the term sheet and allow realistic time in the long-stop date.
Neglecting exit and dispute terms
Joint ventures and minority investments often fail at the exit stage. Under the amended law, drag-along, tag-along and different share classes can be embedded in the constitution, which makes them more robust than side agreements alone. Choose a governing law and forum deliberately: DIFC or ADGM courts, arbitration under DIAC or another institution, or onshore courts each carry different enforcement paths. Our shareholder agreements team can align the documents.
Cross-border angle: outbound rules and investment protection
Foreign investment in the UAE is shaped as much by the investor's home rules as by UAE law. Bangladeshi investors need to consider Bangladesh's foreign exchange controls, under which outward equity investment generally requires central bank approval, so the UAE timetable should allow for that. Indian investors must structure the investment under India's overseas investment rules under FEMA, which affect the permitted holding structure and reporting. Chinese investors typically need outbound investment filings or approvals with the relevant Chinese authorities and banks before funds move.
UK and Singaporean investors face fewer outbound controls but should consider their own tax rules on controlled foreign companies and the UAE's double tax treaties with their home countries. Investors using the UAE as a regional base for Saudi Arabia should note that the Saudi regional headquarters policy can affect government contracting there, which may influence where senior management and the GCC holding company sit.
On investment protection, the UAE has an extensive treaty network. The India-UAE bilateral investment treaty signed in 2024 entered into force on 31 August 2024, and the UAE has comprehensive economic partnership agreements with several trading partners. The UAE is a party to the New York Convention, and the Federal Arbitration Law (Federal Law No. 6 of 2018) governs onshore arbitration. Structuring through a treaty-protected holding company should be considered before, not after, a dispute arises.
How TRW & Co helps
TRW & Co supports foreign investment in the UAE from first feasibility work to post-closing integration, coordinating with our offices in Dhaka, Singapore, London and China. Where licensing filings or court representation need local practitioners, we work alongside locally licensed advocates and registered practitioners. Promotion and incentive questions can also be raised with the federal Ministry of Investment and emirate bodies such as the Abu Dhabi Investment Office.
Entry structuring
We map activities, ownership limits and licensing authorities, compare mainland, free zone, DIFC and ADGM options, and recommend a holding and operating structure that supports tax, regulation and exit.
Acquisitions and joint ventures
We run legal due diligence, assess merger control thresholds and sector approvals, and negotiate share purchase, joint venture and shareholder documents that use the 2026 company law tools.
Regulatory pathway
We plan approvals with the Central Bank, CMA, DFSA, FSRA, VARA and sector regulators, sequencing them with incorporation so that the business can launch on time.
Home-country coordination
We coordinate Bangladesh, India, China, UK and Singapore outbound requirements with the UAE timetable, so that funding, approvals and filings land in the right order.
Related pages include company formation and joint ventures and strategic alliances. You can explore all our UAE practices or speak to our Dubai team about a planned investment.
Checklist for decision-makers
- Have we mapped each activity code against the strategic-impact list and sector licensing rules?
- Is the vehicle chosen for where our customers are, not just for set-up cost?
- Do we need a DIFC or ADGM holding company for governance, financing or exit?
- Does any acquisition meet the merger control thresholds, and is the long-stop date realistic?
- Have we modelled corporate tax, qualifying free zone status and, for large groups, the 15% top-up tax?
- Are share classes, drag and tag rights and deadlock terms reflected in the constitution, not only in side agreements?
- Have home-country outbound approvals been obtained or scheduled?
- Is the investment held through a structure that benefits from treaty protection?
Foreign investment in the UAE is now more open than at any point in the federation's history, but openness has shifted the legal work from ownership workarounds to structure, regulation and tax. Investors who plan those three together tend to move faster and exit more cleanly.
Frequently asked questions
01Can foreigners own 100% of a mainland UAE company?
Yes, for most activities. The Commercial Companies Law reforms that took effect in early 2021 removed the general requirement for a 51% Emirati shareholder and for branches to appoint a national service agent. Activities with strategic impact, listed under Cabinet Resolution No. 55 of 2021, still need approval and may be restricted, including defence, telecoms, banking and insurance, and commercial agencies. Sector licences, such as financial services approvals, are also still required.
02What changed in UAE company law in October 2025?
Federal Decree-Law No. 20 of 2025 amended the Commercial Companies Law with effect from late 2025. Key changes include multiple share classes for mainland LLCs, drag-along and tag-along rights in constitutional documents, clearer in-kind contribution rules, redomiciliation between emirates and between mainland and free zones, recognition of non-profit companies, and express application of the law to free zone companies operating in the mainland. Some changes depend on implementing resolutions.
03Should we use a free zone, the DIFC or ADGM, or the mainland?
It depends on customers, regulation and exit. The mainland suits businesses selling to UAE customers and government. Free zones suit regional hubs, trading and services outside the mainland, and may offer qualifying free zone tax treatment. The DIFC and ADGM offer common-law frameworks and courts and are often used for holding companies, funds and financial services. Many groups combine a DIFC or ADGM holding company with a mainland operating company.
04Does a UAE acquisition need merger control clearance?
It may. Under Federal Decree-Law No. 36 of 2023 and Cabinet Resolution No. 3 of 2025, effective 31 March 2025, a transaction is notifiable broadly where the parties' combined UAE turnover in the relevant market exceeds AED 300 million in the last financial year or their combined market share exceeds 40%. Filing must be made at least 90 days before completion, and the deal must not close during review.
05What tax will a foreign-owned UAE company pay?
Corporate tax applies at 0% on taxable income up to AED 375,000 and 9% above that. Qualifying free zone persons may access a 0% rate on qualifying income if they meet the conditions. Large multinational groups within Pillar Two scope face a 15% Domestic Minimum Top-up Tax for financial years starting on or after 1 January 2025. VAT applies at 5%. Transfer pricing rules apply to related-party dealings.
06Are foreign investments in the UAE protected by treaty?
The UAE has a wide network of bilateral investment treaties and double tax treaties. For example, the India-UAE bilateral investment treaty signed in 2024 entered into force on 31 August 2024. Treaty protection usually depends on the investor's nationality and holding structure, so it should be considered when designing the structure. The UAE is also a New York Convention state, which supports enforcement of foreign arbitral awards.
07What happens to old nominee shareholder arrangements?
They remain legally and practically risky. Where the activity is now open to full foreign ownership, investors usually benefit from restructuring transparently: transferring the nominee's shares, amending the licence and memorandum, updating the beneficial ownership register and terminating side agreements with proper releases. Leaving them in place can create disputes, enforceability problems and difficulties on the nominee's death or exit.
Sources and official materials
- Full foreign ownership of commercial companies (u.ae) — Official guidance on 100% ownership and restricted activities
- Companies Legislations, Ministry of Economy and Tourism — Commercial Companies Law, 2025 amendments, strategic-impact list
- Regulation of Competition Legislations, Ministry of Economy and Tourism — Competition law and merger control
- Federal Tax Authority — Corporate tax, VAT and top-up tax guidance
- Ministry of Investment — Federal investment promotion
- Abu Dhabi Investment Office — Abu Dhabi investment support
- The ADGM Legal Framework — Application of English common law in ADGM
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
