Key Regulations Shaping the UAE Business Landscape

The United Arab Emirate’s world-class infrastructure and forward-looking mindset create an ideal environment for entrepreneurs to build and expand their businesses - both big and small - within the nation and across the broader Gulf Cooperation Council (GCC). To attract more foreign investment, the UAE has made significant strides over the past decade in modernizing and liberalizing its market.

Several federal laws have been introduced to strengthen financial transparency and corporate social responsibility, aligning business practices with international standards. As part of this effort, the UAE is enhancing governance with a focus on transparency, accountability, and sustainability.

In this article, we’ll explore three key initiatives that have recently shaped the way business is conducted across all seven emirates. Entrepreneurs either launching a new venture or expanding operations across the GCC using the UAE as their corporate and operational base must have a solid understanding of these regulations.

Foreign Ownership of Commercial Companies & New Companies

One of the most recent, game-changing corporate laws is the Federal Decree-Law No. 26 of 2020 on Commercial Companies, which permits 100% foreign ownership of commercial companies in most sectors, eliminating the previous requirement for a majority Emirati shareholder or agent. This law was then followed in 2021 by the Federal Decree-Law No. 32 of 2021 on Commercial Companies, referred to as the New Companies’ Law and which took effect on January 2, 2022, making extensive changes to enhance the country’s business environment and corporate governance.?

However, some exceptions remain where full foreign ownership is restricted, primarily in strategic industries such as oil & gas, defense, security, and civil aviation. Even in sectors where foreign ownership is allowed, certain services may be limited to specific emirates.

For an accurate and up-to-date list of activities not eligible for 100% foreign ownership, consult the Department of Economic Development in both Abu Dhabi and Dubai.

The new companies’ law marks a significant advancement toward aligning with international standards and promoting a more secure, transparent, and compliant business environment in the UAE.?

Key progress points include:

- Stricter corporate governance rules for all companies, especially public joint-stock companies, to enhance management and oversight.

- Mandates for more detailed disclosures regarding financial transactions and director dealings, aiming at providing shareholders and stakeholders with improved visibility into company operations and financial health.

- Introduction of Special Purpose Acquisition Companies (SPACs) and Special Purpose Vehicles (SPVs) to facilitate segregation of assets and liabilities related to specific financial operations.

Together, these laws have significantly reshaped the UAE’s corporate and investment landscape, providing more flexibility and opening up the economy to broader international participation. The higher foreign investment has, in turn, led to greater economic diversity and innovation across sectors.

Introduction of Corporate Tax

A significant and widely discussed change in the UAE’s business landscape is the introduction of corporate income tax on business profits. This step aims to streamline the federal tax system and align it with international standards, a process that began with the implementation of a 5% value-added tax in 2018.

Effective from June 1, 2025, the corporate tax will be levied at a fixed rate of 9% on annual profits exceeding AED 375,000 (approximately USD 95,000), while profits below this threshold will remain tax-free.

However, the tax treatment differs for mainland and free zone entities. In this context, the designation of a "qualifying free zone person" (QFZP) is key to understanding tax exemptions for businesses registered in UAE free zones. QFZPs can benefit from a 0% corporate tax rate on what the UAE corporate tax regime defines as “qualifying income."

Simply put, free zone companies can remain exempt from the 9% tax as long as they do not conduct business with the mainland. Transactions within the same free zone, between different free zones, or with international clients typically qualify for the 0% tax rate. However, to maintain this exemption, a company must meet specific conditions, such as having a physical office and conducting genuine business activities within the free zone. Any income that does not meet the "qualifying income" criteria will be subject to the standard 9% rate.

Regardless of whether they qualify for exemptions, all free zone companies must register for corporate tax.

Mitigation and Adaptation to Climate Change Impact

Last but certainly not least, a noteworthy new law with far-reaching implications for business operations is the Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects. Issued last summer, this climate law applies nationwide, including free zones, and will take effect on May 30, 2025.

The law’s primary objective is to ensure businesses mitigate and adapt to climate change, aligning with international agreements and national emission reduction targets. It also seeks to strengthen research and development in mitigation and adaptation technologies.

On the mitigation front, organizations must quantify and disclose emissions while implementing measures to reduce them. An electronic system is expected to be introduced to facilitate compliance.

For adaptation, companies must develop industry-specific plans that address the economic and non-economic losses and damages resulting from climate change.

To encourage compliance, the Ministry of Climate Change and Environment plans to introduce incentives for companies taking concrete action to reduce carbon emissions. Meanwhile, businesses found in violation of the law face penalties ranging from AED 50,000 to AED 2,000,000.

With this new climate-focused legislation, the UAE once again showcases its pragmatic, future-oriented vision by supporting entrepreneurs to develop concrete sustainability strategies. The nation’s supportive environment for responsible, innovative business practices goes far beyond words and delivers IMPACTFUL solutions!

Navigating the many laws and exceptions involved in opening or expanding a business in the UAE can be overwhelming but it is also quite invigorating. If you need guidance, feel free to reach out to me here on LinkedIn or via email: [email protected]

I will be delighted to assist you on your business journey!