Legal Framework for Foreign Ownership in Dubai

In this article, you’ll get a full breakdown of Dubai’s foreign ownership framework, including the laws that opened the door to 100% ownership, licensing processes, tax implications, and compliance obligations that come with it.

Foreign Ownership of Dubai Business

Foreign ownership in Dubai has evolved dramatically over the past two decades. What was once a tightly controlled environment requiring majority local ownership has opened up into one of the most accessible legal systems for foreign investors in the region.

In recent years, the UAE has implemented significant reforms to attract foreign investment. One of the most notable changes is the amendment to the Commercial Companies Law, allowing 100% foreign ownership in many sectors. Previously, foreign investors were required to have a local partner holding at least 51% ownership in onshore companies.

The new legislation removes this requirement for most business activities, providing greater autonomy to international investors.

The Old 51/49 Rule

For many years, foreign investors could own no more than 49% of a business operating in the Dubai mainland. The remaining 51% had to be held by a UAE national, commonly referred to as a “local sponsor“. This structure, while legally functional, created challenges for full control, profit distribution, and long-term strategic planning.

This rule applied broadly to most commercial activities outside of Free Zones. While some arrangements included side agreements or profit-sharing contracts to give foreign owners greater say, the legal ownership on paper remained with the Emirati partner, limiting flexibility for many global companies.

The Timeline of Reform

Reform didn’t happen overnight. It came through a series of calculated, investor-friendly steps:

• 2002: Freehold property ownership was first allowed for non-GCC nationals in designated areas, opening the door for real estate investment by foreigners.
• 2003–2010: Free Zones like JAFZA, DIFC, and DAFZA became popular because they allowed 100% foreign ownership, but only within their zones and for specific activities.
• 2015–2018: Gradual loosening of visa and ownership policies began, including long-term residency permits for investors.
• 2020: The real shift came with Federal Decree-Law No. 26 of 2020, amending the Commercial Companies Law to allow 100% foreign ownership in many sectors outside Free Zones.
• 2021 onwards: The “Positive List” of eligible activities was released, and more freehold property zones were introduced for foreigners, reinforcing the shift toward liberalization.

This legal transformation hasn’t just improved investor confidence; it has reshaped the business community. More foreign-owned SMEs, startups, and multinational expansions are entering the UAE market than ever before.

Federal Decree-Law No. 26 of 2020

In late 2020, the UAE government introduced Federal Decree-Law No. 26, which amended the existing Commercial Companies Law (CCL). This amendment officially removed the requirement for UAE nationals to hold a 51% share in Mainland companies.

Under this new law, foreign investors can now fully own companies on the mainland, provided their activities fall within the sectors approved by the Ministry of Economy and the Department of Economic and Tourism (DET).

This law is the legal backbone of the UAE’s current foreign ownership regime.

The Positive List

Alongside the legal changes, Dubai introduced what’s called a “Positive List”, a collection of over 1,000 business activities where full foreign ownership is allowed. This includes:

• Agriculture and farming
• Manufacturing (industrial activities)
• Renewable energy and environmental technology
• Information and communication technology
• Hospitality and food services
• Education and training
• Healthcare and medical services
• Logistics and supply chain
• Technical consulting and R&D
• E-commerce, marketing, and digital media

Each activity on the list may come with specific conditions. For instance, certain sectors may require a minimum capital investment, use of advanced technologies, or adherence to industry-specific standards.

Strategic Impact Sectors (Still Restricted)

Despite the liberalization, some industries are still considered “strategic to national interest” and therefore require either full or partial Emirati ownership.

These typically include:

• Oil and gas
• Military and defense services
• Banking and finance (regulated by the UAE Central Bank)
• Insurance
• Pilgrimage and religious services
• Water and electricity
• Telecom (where Emirates Integrated Telecommunications Company and Etisalat remain dominant)

If your business falls into one of these sectors, full foreign ownership may not be available, but you may still be able to partner with a local entity or apply under special regulatory frameworks.

Who Regulates Foreign Ownership?

While the federal law provides the framework, implementation happens at the emirate level. In Dubai, the regulatory body that oversees licensing, registration, and foreign ownership permissions is Dubai Economy and Tourism (DET).

Other important players include:

• The Ministry of Economy – overseeing compliance, exemptions, and FDI approvals
• The Federal Tax Authority (FTA) – handling corporate tax and VAT matters
• The UAE Central Bank – regulates banking, insurance, and monetary services
• Industry-specific regulators – such as KHDA (education), DHA (health), and TRA (telecom)

If your activity requires additional approvals, DET coordinates with these bodies as part of your business setup in the UAE.

What This Means for Foreign Business Owners

Foreign investors can now fully own and operate companies in the mainland in Dubai for most business activities, without the need to appoint a UAE national sponsor or shareholder. This opens the door for international entrepreneurs, SMEs, and corporations to operate with full control over management, equity, and profit distribution, something that wasn’t possible under the old 51/49 rule.

But with that freedom comes responsibility. You must still comply with licensing rules, capital requirements, and sector-specific conditions. Not every business activity is automatically approved for full foreign ownership. That’s why a careful review of the activity list and consulting with our EZONE business setup experts is essential before proceeding.

Setting Up a Foreign-Owned Business in Dubai

Business setup in Dubai is relatively fast and efficient compared to many global cities, but only when you choose the right structure, apply under the correct jurisdiction, and follow licensing procedures carefully.

Mainland vs. Free Zone Setup

Your first big decision is where to register your company on the mainland or in one of Dubai’s free zones. Both allow 100% foreign ownership, but the rules, benefits, and restrictions differ.

Mainland

Companies registered on the mainland are licensed by Dubai Economy and Tourism (DET) and can trade freely across the UAE and with government entities. Full foreign ownership is now allowed for most activities, though some still require local participation or additional regulatory clearance.

Mainland is ideal if:

• You want to serve clients across the UAE.
• You plan to open a physical retail space, restaurant, clinic, or office.
• You want to bid for public-sector contracts.
• You’re in a sector that’s on the Positive List with no ownership restriction.

Free Zones

Dubai has over 40 Free Zones, each catering to specific industries (e.g., Dubai Internet City for tech, Dubai Multi Commodities Centre for trade, DIFC for finance). Free Zones offer:

• 100% foreign ownership
• Full repatriation of profits and capital
• Custom tax benefits and duty exemptions
• Easy visa sponsorship for staff

The trade-off? You generally can’t do business directly in the UAE mainland unless you work with a distributor or obtain a dual license.

Our blog on the Benefits of Dual Licensing breaks down all you need to know. 

Free Zones are ideal if:

• You serve clients outside the UAE or operate mostly online.
• You want a low-cost, low-commitment way to start.
• You need a specific license structure tailored to your industry.
• You’re testing the market before expanding further

Choosing the Right Legal Structure

Once you’ve picked your jurisdiction, you’ll need to choose a legal structure. Here are the most common options:

• Limited Liability Company (LLC) – The most popular setup for mainland businesses. Now available with 100% foreign ownership in approved activities. Offers liability protection, flexible operations, and access to the full UAE market.
• Free Zone Company (FZCO or FZE) – The standard for Free Zone businesses. FZCO is for multiple shareholders; FZE is for solo founders. Both offer full ownership, quick setup, and simplified renewal.
• Branch Office – An extension of an existing foreign company. Doesn’t create a new legal entity but allows the parent company to operate in Dubai under the same name and structure.
• Representative Office – Cannot trade or earn revenue. Used for promotion, marketing, and research. Best for early-stage market exploration.

Each business structure has different requirements for capital, licensing, visas, and audits. The right choice depends on your goals, business activity, and risk tolerance. Our professional experts will guide you through the process to ensure you make the best decision for your needs.

Step-by-Step Company Setup Process

While the exact steps may vary slightly depending on the business activity and jurisdiction, the general process looks like this:

1. Choose Your Business Activity – Refer to the DET or the Free Zone authority’s list. Ensure your activity aligns with the regulations and allows full foreign ownership.
2. Select Legal Structure and Jurisdiction – Decide between Mainland and Free Zone based on your strategy.
3. Reserve Your Trade Name – Register a company name with DET or your chosen Free Zone authority. Make sure the name complies with UAE naming conventions.
4. Apply for Initial Approval – Submit your initial application for a business license. This confirms that your chosen activity and name are acceptable.
5. Lease Business Premises – You’ll need a registered office space, either a dedicated office, co-working space, or virtual office (depending on the zone).
6. Sign the MOA or Legal Agreements – For LLCs, this includes a Memorandum of Association (MOA); for branches or free zone companies, standard company formation documents apply.
7. Submit Final Application and Pay Fees – Complete the licensing process, submit all required documents, and pay government and registration fees.
8. Receive Your License and Register for Tax – Once approved, you’ll get your business license and can proceed with opening a Corporate Bank Account, Corporate Tax Registration, VAT Registration, and Visa issuance.

Property Ownership for Foreign Investors

Dubai’s property market is one of the most accessible in the region, offering strong returns, modern infrastructure, and a legal framework that supports international ownership. But ownership comes with rules. Not all areas are open to foreign buyers, and not all property rights are equal.

Dubai allows two types of property ownership for foreign nationals: freehold and leasehold.

Freehold Ownership

Freehold means full ownership of the property and the land it sits on. As a foreign investor, you can buy, sell, rent out, or leave the property to your heirs without restrictions.

You’re eligible for freehold ownership only in designated freehold zones, areas approved by the Dubai government where non-UAE nationals can purchase property outright. Popular freehold areas include:

• Dubai Marina
• Downtown Dubai
• Palm Jumeirah
• Jumeirah Village Circle (JVC)
• Business Bay
• Arabian Ranches
• Dubai Hills Estate
• The Greens and The Views

These areas have been developed by approved master developers such as Emaar, Nakheel, DAMAC, and Dubai Properties. The title deed is registered in your name with the Dubai Land Department (DLD), giving you legal ownership. Freehold is the preferred option for long-term investors and residents.

Leasehold Ownership

Leasehold means you own the property, but not the land. It’s essentially a long-term lease, usually for 10 to 99 years, after which ownership reverts to the freeholder (often a local authority or the government). This model is common in non-designated zones where full foreign ownership is not permitted. Leaseholders can use, modify, and rent the property, but often need landlord consent for major changes. Leasehold is less common in Dubai today due to the wide availability of freehold options.

Buying Property Through a Company

If you’ve set up a foreign-owned business in Dubai, you can also buy property under the company’s name. This is common for:

• Commercial spaces (offices, warehouses, retail units)
• Residential properties for staff accommodation or executive housing
• Real estate investment firms

The process differs slightly depending on whether your company is based in a free zone or mainland.

• Mainland companies can buy in any area open to foreign ownership.
• Free zone companies may be limited to buying in designated areas or under special rules, depending on the free zone and the developer.

Before proceeding, it’s important to check with DLD and the Dubai International Financial Centre (DIFC) if you’re acquiring property through a legal entity.

Ownership and Visa Eligibility

Buying property in Dubai doesn’t just give you an asset; it can also qualify you for Dubai’s golden residency visa, provided the property meets certain conditions.

As of 2024:

• You must invest at least AED 750,000 in property to qualify for a 2-year renewable visa.
• For a 10-year Golden Visa, you must invest AED 2 million or more, either in a single property or a portfolio.
• The property must be completed and ready for handover—off-plan purchases don’t qualify.
• The property must be mortgage-free or mostly paid off (a minimum threshold is required if financing is involved).

These visas allow you to live in Dubai and sponsor your family members, making them especially popular with foreign entrepreneurs who want to enjoy both business and lifestyle benefits.

Discover if you qualify for Dubai’s Golden Visa by reading our latest blog on UAE Property Visa Options.

Pitfalls to Avoid

Buying in non-freehold areas without understanding the lease terms.

• Purchasing off-plan without checking the developer’s history and escrow guarantees.
• Failing to verify service charges and community fees.
• Assuming all properties qualify for a visa (some do not).
• Using unlicensed brokers or skipping due diligence on the title.

Our experts will guide you through the confirmation and verification process to protect your investment and give you peace of mind.

Taxation and Financial Considerations

For years, Dubai’s tax environment was one of its biggest attractions: zero corporate tax, no personal income tax, and minimal barriers to profit repatriation. While some of that has changed with the introduction of a federal corporate tax, the UAE still offers a highly competitive tax regime that favors growth and investment. Here are some things you need to know about the UAE corporate tax, VAT, and how exemptions apply depending on your business activity and setup. 

Corporate Tax Registration

As of June 1, 2023, the UAE introduced a 9% corporate tax on business profits that exceed AED 375,000 per financial year. This tax applies to all companies operating in the UAE mainland and free zones, unless they meet specific exemption conditions.

Key points:

• Profits up to AED 375,000 are tax-free to support startups and small businesses.
• Only net profits (after expenses) are taxed, not revenue.
• Free zone companies can still qualify for a 0% tax rate if they meet specific criteria (see below).
• Multinational companies with consolidated global revenues over EUR 750 million may be subject to the OECD’s Global Minimum Tax at 15%.

If your company earns beyond the threshold, it must register with the Federal Tax Authority (FTA) and file annual returns.

Who Must Register for Corporate Tax

• All mainland companies, regardless of size.
• Free zone entities that earn income from outside their zone or from UAE mainland clients.
• Branches of foreign companies (if generating UAE-source income)
• Holding companies with passive income above the threshold

Registration for corporate tax is mandatory for all corporations, even if you expect to remain below the AED 375,000 profit threshold. 

Who May Be Exempt from Corporate Tax

Some businesses are fully or partially exempt from corporate tax, including:

• Free zone entities that qualify as “Qualifying Free Zone Persons”.
• Companies engaged in natural resource extraction (still taxed under Emirate-level rules).
• Government entities and pension funds.
• Investment funds meeting certain conditions.
• Public benefit entities (nonprofits, charities, and certain NGOs).

Free Zone Companies can retain the 0% Corporate Tax rate if they:

• Only earn qualifying income (e.g., foreign trade, inter-free zone transactions).
• Maintain adequate substance in the UAE.
• Do not earn non-qualifying revenue from the Mainland UAE.

If they breach these rules, they may be taxed like a mainland company.

VAT: Still at 5%

The UAE introduced Value Added Tax (VAT) in 2018 at a flat rate of 5% on most goods and services. Foreign-owned companies are required to register for VAT if their annual taxable turnover exceeds AED 375,000. VAT registration is mandatory if you:

• Sell goods or services subject to VAT.
• Import goods into the UAE.
• Expect to exceed the AED 375,000 threshold within the next 30 days

You can also voluntarily register if you’re earning more than AED 187,500, which can be beneficial for claiming input tax credits. Once registered, you must:

• Charge VAT on taxable invoices
• File returns quarterly (or monthly for high-volume businesses)
• Maintain VAT-compliant records for at least 5 years

VAT applies to most commercial activities, but some categories are zero-rated or exempt, such as basic healthcare, education, and exports of goods and services to non-GCC countries.

Tax Residency and Double Taxation

The UAE has established a comprehensive network of DTAs to promote international investment and prevent double taxation. As of the latest data, the UAE has concluded 193 DTAs and Bilateral Investment Treaties (BITs) with various countries, including the UK, India, Canada, Germany, and China. These treaties help reduce or eliminate double taxation on income earned in the UAE. If your home country has a DTA with the UAE, you may be eligible to claim exemptions or credits for taxes paid in the UAE, depending on your local laws.

Businesses can also apply for a Tax Residency Certificate from the Ministry of Finance, which is often required when claiming tax treaty benefits.

Withholding Tax and Repatriation

The UAE currently does not impose withholding taxes on dividends, interest, or royalties paid to foreign entities. This makes Dubai one of the few jurisdictions where you can repatriate 100% of profits without tax leakage at source.

There are also no currency controls, so companies can transfer profits freely across borders in any currency.

Tax Compliance Requirements

• Corporate Tax: Annual registration and filing with the FTA, starting from your first financial year after June 1, 2023.
• VAT: Quarterly filing and accurate invoicing. Late filings result in fines.
• Audit Requirements: Some sectors or free zones (like DIFC) mandate external audits annually.
• Transfer Pricing: Required if you transact with related parties. You’ll need to justify pricing policies with documentation.

Compliance and Regulatory Obligations

Once your business is up and running in Dubai, compliance becomes the foundation for sustainable growth. While the legal environment here is pro-business, it’s also structured and strictly enforced. From labor laws to financial reporting, businesses are expected to maintain high standards of governance.

Labor Law and Hiring Obligations

Employment in the UAE is governed by Federal Decree Law No. 33 of 2021, which introduced updated regulations around contracts, working hours, leave, and termination policies.

Key compliance points include:

• All employees must be under a valid UAE work visa, sponsored by the employer.
• A written contract must be signed by both parties and registered with the Ministry of Human Resources and Emiratisation (MOHRE).
• Contracts must specify job role, salary, leave entitlements, and notice period.
• The maximum probation period is six months, after which standard labor rights apply.
• UAE labor law mandates gratuity (end-of-service benefit), calculated based on years of service.
• Annual leave must be provided.
• Employers are responsible for health insurance and Wage Protection System (WPS) compliance, salaries must be paid through WPS-approved channels.

Failure to comply can result in fines, visa blocks, and company blacklisting, which prevents further hiring or license renewal.

Immigration and Visa Management

For every employee (and most owners or directors), you’ll need to manage:

• Entry permit issuance
• Medical fitness tests and Emirates ID registration
• Residence visa stamping
• Renewals every 2–3 years, depending on visa type

Businesses must track expiry dates to avoid overstays or penalties. Most free zones offer in-house visa services to simplify the process. For mainland entities, visas are processed through the GDRFA (General Directorate of Residency and Foreigners Affairs) in Dubai.

Data Protection and Cyber Law

The UAE introduced its first federal data privacy law, Federal Decree Law No. 45 of 2021 (PDPL), in line with global standards like GDPR. It applies to all entities processing personal data inside the UAE, including foreign companies with UAE-based operations.

Your business must:

• Obtain clear consent from users before collecting their data.
• Disclose how data is used and stored.
• Allow individuals to access or request the deletion of their data.
• Implement basic data security protocols (encryption, restricted access, breach procedures).

Certain free zones like DIFC and ADGM have their own stricter data laws. If you’re operating in these zones, you’ll need to comply with those regulations in addition to the federal rules.

Bookkeeping, Reporting, and Audits

All UAE businesses must maintain proper financial records and submit them to the relevant authorities when required.

• Companies are required to retain financial records for a minimum of five years.
• Some free zones (like DMCC, DIFC, and DAFZA) mandate annual audits by approved firms.
• For VAT-registered businesses, detailed records of invoices, payments, and returns must be filed quarterly.

Corporate Tax will also introduce more robust reporting obligations, including:

• Annual corporate tax return filing
• Transfer pricing documentation for companies with cross-border or related-party transactions
• Accounting based on IFRS standards, especially if audited financials are required

Proper bookkeeping is not only a legal requirement, but it also makes your business more credible to banks, investors, and partners.

Trade License Renewals and Regulatory Filings

Businesses in Dubai are legally required to renew their trade license annually. Delays in renewal can result in fines, loss of visa sponsorship ability, and blacklisting.

Other regulatory filings may include:

• Economic Substance Reporting for certain activities like HQ services, IP, and holding companies.
• Ultimate Beneficial Ownership (UBO) disclosure, identifying real individuals behind the company.
• Anti-Money Laundering (AML) compliance, if you operate in sectors like real estate, crypto, or finance.

Industry-Specific Compliance

Certain industries come with additional compliance obligations due to their risk profile or regulatory structure:

• Real Estate: Agents and brokers must register with RERA and maintain clean financial and AML records.
• Healthcare: Clinics and providers are regulated by DHA, requiring professional licenses and strict patient data handling.
• Finance and Fintech: Subject to DFSA (in DIFC) or CBUAE regulations, including AML/KYC, audits, and capital requirements.
• E-commerce and Digital Services: Must comply with PDPL, consumer protection laws, and proper invoicing under VAT rules.
• Logistics and Customs: Must register with Dubai Customs and meet documentation standards for imports/exports.

For high-compliance sectors, expert guidance from our legal team helps ensure your company meets every requirement and avoids costly delays, penalties, or setbacks.

Participation Exemptions Under Corporate Tax Law

The Ministry of Finance introduced specific exemptions for qualifying income to maintain the country’s attractiveness to international investors.

One of the key updates is the Participation Exemption, which applies when a UAE company owns at least 5% of the shares in a foreign company and:

• Holds that investment for at least 12 months, and
• The foreign company is subject to a corporate tax rate of at least 9% (or an equivalent) in its jurisdiction

In these cases, dividends and capital gains earned from that investment may be exempt from UAE corporate tax, encouraging UAE businesses to hold international assets without being taxed twice. This is particularly useful for holding companies and family offices based in Dubai, as well as foreign-owned entities planning international acquisitions from a UAE base.

Expanded Visa Reforms Supporting Foreign Business Owners

The UAE has rolled out several visa reforms that directly support foreign investors and business owners, including:

• Golden Visa: 10-year residency available to investors who own AED 2 million+ in property or AED 2 million in capital in a UAE-based company.
• Green Visa: 5-year residency for skilled professionals, freelancers, and partners in UAE-based businesses.
• Remote Work Visa: 1-year visa for entrepreneurs operating UAE-based companies from abroad.

Final Thoughts

For foreign investors, transforming your business into something more global, agile, and resilient is now fully possible because ownership in Dubai is no longer limited. It’s strategic, structured, and built for businesses ready to operate with confidence and clarity. But while the barriers to entry have dropped, the importance of good decisions has only grown. Book a FREE consultation with EZONE’s business setup experts today.