Difference Between Foreign Trade Foreign Investment

The cabinet of UAE released a resolution under cabinet resolution No. 16 by March 2020 which determines a Positive List of the economic sectors and economic activities. A total of 122 categories are given full ownership in the UAE mainland under the law FDI – Foreign Direct Investment. This positive list of activities and economic sectors would permit almost all Foreign Direct Investment and they can own 100%, a full ownership.

Foregoing 2018, foreign investments can own up to 49% only in UAE Mainland under Law no. 19 of Federal decree law. This fell under the structure foreign investors can hold up to 100% shares but provided a big negative list of activities. So that, taking full ownership was a complete impossibility.

Moving towards the year 2019, the UAE has passed a law in which foreign investors can hold 100% ownership in the positive list of sectors in mainland entities outside free zones. This law by committee FDI persisted some unsatisfied criteria too. Manufacturing, agriculture, hospitality, transport & storage, food services, science and technology, information and communications, education, construction, healthcare and arts are the positive list covered areas in 2019.

With reference to UAE cabinet resolution No. 16, taken recently in 2020 gives 100% ownership to foreign companies which come under three main sectors

– Service sector | 52 activities

– Agriculture | 19 activities

– Manufacturing | 51 activities

These sectors have taken place in the positive list and are fully eligible to hold complete ownership with some conditions. This resolution has set some requirements and conditions for these companies to meet. They are contributions to research and technology, modern technologies, employee headcounts and other activities for the approval of license.

Some interesting activities in the new positive list are manufacturing sports goods, toys, consulting services, electrical equipment, photography, building constructions, education, health care, music bands and advertising agency.

UAE’s new cabinet resolutions provide more flexibility, more choices in share hold dealings and greater texture for ownership. FDI committee requires every emirate based firm to streamline licensing and its implementation structures.

Raju Menon, the chairman of Kreston Menon noted that, Even though manufacturing makes the backbone of any country, it didn’t take front row due to legal ownership restrictions and capital intensive project’s nature. Setting up a manufacturing unit and operating it is quite a difficult process. He also added, running up a unit in free zones can permit us 100% ownership but operating costs in free zones are expensive.

Managing partner of Chartered House Tax Consultancy – Mr. Anurag Chaturvedi commented, this full ownership system creates positive effects in job creation, productivity enhancement which results in less importation as goods are being produced in domestic economies. He also added, FDI will do compensation in Covid- 19 decrease in domestic investments and helps in kick starting the economy upliftments.

Due to the present economic effects by covid-19, the release of resolution no.16 of 2020 emerges as an initial welcome move for existing as well new investors and makes the UAE – A investment hub.

Agriculture sector

	ISIC4	Business activity	Minimum Capital	Conditions and controls for foreign direct investment
1	01111	Grain cultivation (wheat, corn, barley, etc.)		– use of modern technology- achievement of high added value- contribution in the research and development field- satisfaction of the requirements of the licensing entities in the state
2	01112	Cultivation of bean crops
3	0113	Cultivation of vegetables, melons, roots and tubers
4	0114	Cultivation of sugar cane
5	0116	Cultivation of fiber crops
6	0119001	Flowers and Flower Buds Cultivation
7	0121	Growing of grapes
8	0123001	Fruits and Citrus Cultivation
9	0124	Growing of pome fruits and stone fruits
10	0125	Growing of other tree and bush fruits and nuts
11	0126	Growing of oleaginous fruits
12	0127	Growing of beverage crops
13	01289	Growing of aromatic, drug and pharmaceutical crops
14	0161	Support activities for crop production	10
15	0162	Support activities for animal production
16	0163	Post-harvest crop activities
17	0164	Seed processing for propagation
18	0210	Silviculture and other forestry activities
19	0240	Support services to forestry

Manufacturing sector

	ISIC4	Business activity	Minimum Capital	Conditions and controls for foreign direct investment
20	10	Manufacture of food products (except):1071- Manufacture of bakery products105 – Manufacture of diary products108 – Manufacture of prepared animal feeds	15	– use of modern technology- achievement of high added value- contribution in the research and development field- satisfaction of the requirements of the licensing entities in the state
21	10	Manufacture of beverages (except):1101 -Distilling, rectifying and blending of spirits1102 -Manufacture of wines1103- Manufacture of malt liquors and malt	15
22	14	Manufacture of wearing apparel (except):14109 – Tailoring and Sewing of Wearing Apparel1410122 – Military Garments Manufacturing	15
23	15	Manufacture of leather and related products	15
24	16	Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials	15
25	2012002	Straight or Complex Fertilizers Manufacturing	15
26	2013	Manufacture of plastics and synthetic rubber in primary forms	15
27	2021	Manufacture of pesticides and other agrochemical products	15
28	2022	Manufacture of paints, varnishes and similar coatings, printing ink and mastics	15
29	2023	Manufacture of soap and detergents, cleaning and polishing preparations, perfumes and toilet preparations	15
30	2029006	Glues and Prepared Adhesives Manufacturing	15
31	2029008	Manufacture of dyestuffs and pigments	15
32	2029009	Textiles and Leather Finishing Used Chemical Materials Manufacturing	15
33	2029013	Manufacture of photographic plates, films	15
34	2029019	Gelatine and Its Derivatives Manufacturing	15	– use of modern technology- achievement of high added value- contribution in the research and development field- satisfaction of the requirements of the licensing entities in the state
35	2029021	Essential Oils Manufacturing (Essence)	15
36	2029022	Extracted Natural Aromatic Products Manufacturing	15
37	2029023	Aromatic Distilled Waters Manufacturing	15
38	2029024	Matches Manufacturing	15
39	2029025	Welding Powders and Pastes Manufacturing	15
40	2030	Manufacture of man-made fibres	15
41	2100	Manufacture of pharmaceuticals, medicinal chemical and botanical products	15
42	22	Manufacture of rubber and plastics products	15
43	23	Manufacture of other non-metallic mineral products	15
44	24	Manufacture of basic metals (except):242 Manufacture of basic precious and other non-ferrous metals2432 Casting of non-ferrous metals	20
45	25	Manufacture of fabricated metal products, except machinery and equipment (except)2529 Manufacture of weapons and ammunition	15
46	26	Manufacture of computer, electronic and optical products	15
47	27	Manufacture of electrical equipment	20
48	28	Manufacture of machinery and equipment n.e.c. (except)28259 Tobacco Processing Machinery Manufacturing	100
49	29	Manufacture of motor vehicles, trailers and semi-trailers	100
50	3011101	Building of Commercial Vessels	100
51	3011103	Ships and Floating Structures Sections Manufacturing	100
52	3011905	Construction of Drilling Platforms, Floating or Submersible	100
53	3011906	Construction of Floating Structures	100
54	3011907	Building of Hovercraft	100
55	3012	Building of pleasure and sporting boats	15
56	3020	Manufacture of railway locomotives and rolling stock	20
57	3030	Manufacture of air and spacecraft and related machinery (except):3030006 Military Ballistic and Guided Missiles Manufacturing	100
58	3090	Manufacture of transport equipment n.e.c.	20
59	31	Manufacture of furniture	15
60	3220	Manufacture of musical instruments	2
61	3230	Manufacture of sports goods	3
62	3240	Manufacture of games and toys	3
63	3250	Manufacture of medical and dental instruments and supplies	20
64	3290	Other manufacturing n.e.c.	3
65	3312001	Repair and maintenance of train engines	15
66	3312002	Repair and maintenance of engines ship	15
67	3315001	Repair and maintenance of ships	15
68	3315004	Repair and maintenance of trains and railway equipment	15
69	3315005	Maintenance and Repair of Aircrafts Engines	15
70	3315006	Repair and maintenance of aircraft	15

Service sector

	ISIC4	Business activity	Minimum Capital	Conditions and controls for foreign direct investment
71	6910002	Legal Consultancy Offices	As per the applicable regulations	– Not to advocate before the UAE courts.- Not to carry out any judicial procedure before courts, arbitral tribunals, and judicial and administrative committees.- Not to carry out attestation activities- To obtain the approval of the relevant entities in charge of licensing such activities in the State- To be a natural or legal person known for its excellence in this field
72	692	Accounting, bookkeeping and auditing activities; tax consultancy	As per the applicable regulations	Only permissible for tax planning for businesses and consultancies, preparing and reviewing taxes on businesses
73	711	Architectural and engineering activities and related technical consultancy	As per the applicable regulations	To be a natural or legal person known for its excellence in this field
74	862	Medical and dental practice activities
75	75	Veterinary activities
76	620	Computer programming, consultancy and related activities	As per the applicable regulations	To provide a technical team of no less than 5 specialized programmers by the end of the first year of the company
77	72	Scientific research and development	As per the applicable regulations	As per the applicable regulations
78	7730-77300	Renting and leasing of other machinery, equipment and tangible goods
79	471	Retail l sale in non-specialized stores (except Cooperative Societies 4711001)
80	731	Advertising
81	732	Market research and public opinion polling
82	702	Management consultancy activities
83	712	Technical testing and analysis
84	331	Repair of fabricated metal products, machinery and equipment (except ships or aircrafts and other transport equipment)
85	8121-81210	General cleaning of buildings
86	742	Photographic activities
87	8292-82920	Packaging activities
88	823	Organization of conventions and trade shows
89	741	Specialized design activities
90	7490005	Legal Translation Services
91	7490006	Translation services, movies and television programs
92	7490012	Translation Publications Services
93	8299002	Translation Services
94	41	Construction of buildings	As per the applicable regulations	Only permissible for large-scale infrastructure projects such as airports, highway roads, sport facilities and projects whose value exceed AED 450,000,000
95	42	Civil engineering
96	432	Electrical, plumbing and other construction installation activities
97	433	Building completion and finishing
98	431	Demolition and site preparation
99	439	Other specialized construction activities
100	7730009	Construction and Building or Demolition Machines and Equipment Renting
101	851	Pre-primary and primary education	As per the applicable regulations	Public education excluded.To obtain the approval from the entities in charge of education to license such activities and to comply with such standards and controls as may be determined by them.To comply with the conditions and standards of school facilities and to ensure a high level of education quality
102	852	Secondary education
103	853	Higher education
104	854	Other education
105	370	Sewerage	As per the applicable regulations	As per the applicable regulations in this regard
106	382	Waste treatment and disposal
107	3900001	Pollution Consequences Treatment and Environment Protection
108	861	Hospital activities	100	Subject to the approval of the relevant authorities in light of the economic need taking into account the number of hospitals, medical and health centers in a specific area.Dubai Healthcare City is excluded from the above condition.
109	869	Other human health activities	70	As per the applicable regulations
110	8211001	Hotel Management	As per the applicable regulations
111	8211004	Restaurants Management
112	90009	Creative activities and presentation of arts drama (theater)	Permissible only for theater activities and live bandsAs per the applicable regulations
113	9000104	Music Band
114	9000110	Circus
115	8130002	landscape and gardening services
116	9103-91030	Botanical and zoological gardens and nature reserves activities	Permissible only for public garden services and specialized garden services.
117	5012-50120	Sea and coastal freight water transport	As per the applicable regulations
118	5022001	Internal Water Transportation of Goods
119	7730016	Commercial Ships Rental
120	5222002	Ship Piloting and Towing
121	5222007	Marine towing of boats and jet sk
122	New	Activities of holding companies in intellectual property