In the last century, one of the meccas for entrepreneurs had always been the United States. Even in the 1970s, you could see slogans inviting entrepreneurs to live the American dream. Something that boosted the economy, both nationally and globally. But this perspective has changed a lot.
More than 50 years later, the entrepreneur’s mentality has changed. Even so, the greedy thinking of always getting more and more is still present. Moreover, they are always looking for large but easily accessible markets. That is why the UAE (and the Middle East generally) has been so attractive to entrepreneurs.
The UAE, the entrepreneurs’ paradise
This strong attraction of entrepreneurs to invest in the UAE has not been purely coincidental. The United Arab Emirates has reached this point after many years of study and projects by the government. This has resulted in the UAE being recognized as one of the best investment locations in the world.
One of the main tasks of the UAE government has been the creation of a legal framework. This framework constantly adapts, exceeds or match the highest international standards. In this way, it can meet the needs of the worldwide entrepreneurial community.
In the emirates, the authorities have been developing many strategies and initiatives concerning entrepreneurship. This connects both the public and private sectors with entrepreneurs. This results in easy access to potential customers, from regional to international.
This has clicked in the minds of many investors. We see the UAE as a place to base a company and work in other markets. But a market of innovation and momentum that other places in the world do not offer today. Consequently, it has become one of the fastest-growing economies in Asia and the world.
Six reasons why the UAE attracts entrepreneurs globally
If we go inside the mind of an entrepreneur, choosing the proper foundation for your company is at the top of the list. The choice of the base can make or break your company’s future. For this reason, many entrepreneurs have made the UAE (Dubai in particular) the most significant business address today.
The exponential growth of startups in Dubai has been coming since 2014, although it has been amplified since 2019. Many startup-friendly initiatives are one of the foundations of this growth. In addition, incentives for female business owners, UAE golden visa benefits for older professionals, 100% foreign ownership of companies, and more are also part of the change.
This and much more have made the UAE a paradise for entrepreneurs worldwide. But, today, several main reasons attract global startups. These reasons have shaped how entrepreneurs and established companies view the UAE. This has led to increased entrepreneurial development in the region.
Some of these reasons are:
A steadily growing economy
If there is something to remark about the UAE, it has become one of the world’s most important hubs for entrepreneurship. Many incentives, such as the economy, allow the startup market to achieve remarkable growth. Even such economic aspect in the entrepreneurial field has seen changes since 2018.
The International Monetary Fund raised its forecast for economic growth in the UAE to 2.9% in 2018 and 3.8% in 2019. This estimate was well above that of other markets. These numbers are expected to triple by 2022, in conjunction with the adaptation of blockchain.
Because of this, the economic strengthening of the UAE poses a “safe” investment play for entrepreneurs. A key element when undertaking a project.
Expo 2020
Something that differentiates the UAE business market from other markets is the constant commitment of the government. A bet concentrated on offering different platforms to entrepreneurs. One of the emirates that have stood out in this has been Dubai. The Emirate has hosted one of the largest business exhibitions in the world: Expo 2020.
Expo 2020, held between 2021 and 2022, attracted an average of 24 million people. An unthinkable figure after being repeatedly postponed due to the pandemic. Even so, this expo achieved something incredible in the UAE: it increased international business interest. But more importantly, it boosted the economy of established companies in the region.
Free tax zone
Undoubtedly, one of the main attractions of the UAE is that it is tax-free. This has been a statement that has been repeated in recent years. But is it real? Well, it is true… but not quite. The UAE has always been tax-free for the most part, although there are certain instances and areas where taxes are applied.
Concerning companies, each Emirate has its corporate tax laws. However, in the past, these laws did not apply to foreign oil or gas producing companies; or international banks operating in the UAE. Consequently, many companies operating in the UAE were not subject to these taxes.
Has this business haven become a tax haven?
Although the UAE has always been considered tax-free, since 2017, it has been affecting the region. The first stone in this business growth dates back to these dates. Since it included the UAE in the blacklist of tax havens of the EU. A decision that has hindered the business massification planned by the UAE government.
This decision was taken taking into account international policies for the prevention of money laundering. Something that considerably affected the region’s international standing. Although the UAE, at the time, reacted to this situation in the best way with the EU, it leaves a question in the air: Is it a tax haven?
Beyond the political and media noise that at the time had repercussions in the region, the reality is not like that. Despite the operation of Russian oligarchs and expatriates, the UAE is attentive to any attempt at money laundering. This decision ended up positively affecting the emirates.
This has led to increased controls by financial institutions in the region. Above all, the GCC member countries have always been classified as money laundering risk countries. Even so, the government does not stop taking action to prevent this problem from snowballing.
What can we expect with the new UAE Corporate Tax Law?
One of these measures taken by the government in the region has been creating a corporate tax law. The UAE plans to impose a federal tax on corporate earnings. This will end the levy-free environment that has attracted entrepreneurs and companies from all over the world. Still, does this mean the end of the ‘entrepreneurs’ paradise’?
Well, the straight answer is: no. In January 2022, the Ministry of Finance of the UAE finally announced a project that had been under construction for many years: The Corporate Tax Law. This law, which starts in June 2023, will introduce a federal corporate tax. It will be taken from the financial year’s profit beginning on June 1, 2023.
Thus, a standard statutory tax rate of 9% will be applied to companies. Although, from now on, it is critical to clarify that it will be exempt from this new corporate tax. This new tax will exempt personal income from employment, real estate, and many more investments.
Although the government of the UAE had been working to improve the business situation in the country, this move was not expected. Especially when the competition from Saudi Arabia. This has increased due to the many incentives to relocate the company’s headquarters from the UAE to the kingdom.
How will the New UAE Corporate Tax Law transform business operations?
The UAE does not currently have a federal corporate tax regime. So far, corporate tax has been determined at an Emirate level through tax decrees. And as mentioned before, only oil and gas companies, and foreign banks, paid corporate tax. But this will change for the nation’s benefit and domestic and international entrepreneurs.
Diversifying tax income away from the natural resources sales and deriving revenues from elsewhere is beneficial to the UAE. In this way, it can offer more excellent stability and assurances for the country’s prosperity. In addition, it will allow for a much stronger economy, which will further facilitate the arrival of entrepreneurs to the nation.
Companies registered in the Free Zones will also see a change
Something that has also created much confusion is how the companies registered in the Free Zones would look. Abu Dhabi, and Dubai, are home to different Free Zones. These zones offer additional incentives to both multinational and small and medium-sized enterprises. But most importantly, they provide specific tax incentives to businesses registered with their connect resources.
Concerning this new corporate tax law, the Ministry of Finance also addressed the Free Zones’ theme. They have indicated that companies registered in the Free Zones will be subject to this new law. However, the UAE government will adapt the tax incentives offered in these zones to this new tax regime
This applies to companies that meet all compliance requirements. In addition, these companies must not conduct business domestically with companies or individuals in the UAE. The government will share further information regarding this in the coming months.
The horizon of entrepreneurship in the UAE is looking very bright
Despite these corporate tax changes, the business outlook for the UAE looks very promising. This is how assertive each of the government’s business decisions has been.
This has turned the spotlight back on the UAE. This change could even represent a significant shift in the image of the emirates as a tax haven. An image that has unwittingly wreaked havoc within the region.
The government of the UAE seeks with this new law to align itself with global corporate practices. And in this way, it creates a more significant number of opportunities for those thinking of owning their own business. Thus, regaining the lead in the business competition in the face of Saudi Arabia’s reign.
