Local Sponsor

In the UAE, it is a standard procedure for foreign business people to acquire a local sponsor when they wish to start a company. Therefore, fifty-one percent or a majority of the shares in a company had to be owned by a resident of UAE or an Emirati citizen, even if the person has no input in company decisions or lacks any claim to company profits.

If a person does not want to give the majority of the company's stake away, they have to open their business in a free trade zone. To do this, they need to acquire a sponsor-free license such as the free-zone license, which will allow them to operate their company in any of UAE's free zones.

What are the types of licenses available?

Business establishments require a valid trade license to operate in the free trade zone. However, none of them require sponsors, and foreigners can retain 100 percent ownership of their company. Some of the primary ones are as follows.

• Professional license: Service-oriented companies and consultants acquire it.
• Industrial license: It is given to firms that are involved in manufacturing, export, and import.
• General trading license: The company can trade a wide range of goods and commodities.
• Warehousing license: Companies that are involved in storage and distribution services can acquire this license.

Advantages of acquiring the license

• - It will provide overseas investors with the opportunity to conduct business transactions within the free zone and foreign markets.
• - Investors can retain 100% of ownership without requiring a local sponsor.
• - While there are restrictions governing trade with the UAE mainland, companies can apply for a commercial license and seek a local distributor for operations in that region.
• - Many financial incentives are present such as no corporate and income tax, no customs duties, and the possibility to repatriate all of a company's profits.

What is the recent change in legislation?

Effective from December 1st, 2020, for certain sectors in the UAE, foreign investors are allowed to have 100 percent ownership of their company in the UAE mainland. This legislation is part of the federal law issued by the President His Highness Sheikh Khalifa Bin Zayed Al Nahyan.

Here is a brief description of each jurisdiction.

Will sponsor-free licenses still be required?

The above does not apply to all sectors in the UAE; therefore, some sponsors will still be required. If a company operates in these sectors, it can apply for sponsor-free licenses and move operations to a free zone. Operating in the mainland also means certain taxes will need to be paid; thus, the financial benefits of the free zone will not be applicable.

How to acquire a license?

There is a procedure that needs to be carried out to acquire the license. The necessary paperwork needs to be filled and submitted to the government so they can issue the license. If you need help, we at Xcellence can compile the documents and handle the application process for you. With our attention to detail and thorough knowledge of the process, you can receive the license quickly without any hassle.