Have you ever wondered how a foreign investor can benefit from the foreign investment laws ın the UAE
after the recent amendments? Is it better to start your business in one of the free zones full of incentives, or to establish it on the mainland to take advantage of broader opportunities in the local market?
These questions are not just a matter of curiosity—they are crucial decisions that determine the future of any investment in the UAE. With every new legislative update, investors from around the world are increasingly keen to understand the differences, advantages, and restrictions of each option. Are the benefits of free zones enough, or does operating on the mainland open wider doors for growth and expansion?
In the following lines, we will take you on a comprehensive journey through the latest reforms and reveal how to choose the best path for successful investment in the UAE.
What Are the New Updates in UAE Foreign Investment Laws?
The story of foreign investment laws in the UAE began with major reforms announced in 2020, when Federal Decree No. 26 was issued. For the first time, it allowed 100% foreign ownership in a large number of business activities. This was a turning point, ending the requirement for a local Emirati partner holding the majority in mainland companies and opening the door for investors worldwide to establish their companies with greater freedom.
Since then, the UAE has continuously updated its regulations to enhance its investment appeal. The “Positive List” was announced, including over 120 economic activities eligible for full foreign ownership, with exceptions for strategic sectors such as energy and defense. The laws also strengthened the role of free zones, which originally allowed full foreign ownership, but recent updates now allow some of these companies to operate directly on the mainland under specific conditions.
The latest updates in 2024 and 2025 focused on expanding the scope of activities permitted for foreign ownership, simplifying procedures to convert companies from local partnerships to full foreign ownership, and local decisions in emirates like Dubai that allow certain free zone companies to operate in the domestic market more flexibly.
In short, through these amendments, the UAE aims to solidify its position as a global investment hub by providing a flexible and dynamic legal environment, making it easier for foreign investors to choose between free zones or expanding into the mainland market with confidence and clarity.
Which Is Better for Investment: Free Zones or Mainland?
When considering establishing a company in the UAE, foreign investors face two main options: operating within free zones or expanding on the mainland. But which is the best choice?
Free zones offer a flexible investment environment with attractive incentives, such as tax exemptions, full repatriation of profits, and ease of importing and exporting goods. They are often the preferred choice for startups or investors targeting international trade more than the local market.
Operating on the mainland, however, provides direct access to the UAE domestic market, interactions with government institutions, and eligibility for local tenders. Following recent amendments, it is now possible to own companies 100% in many activities without a local partner, greatly enhancing the attractiveness of this option.
The choice between the two depends on the nature of the business, the target audience, and future expansion plans. Therefore, it is crucial for investors to carefully assess their goals before making a final decision.
Do the Recent Updates Apply to All Economic Activities?
Despite the significant openness in UAE foreign investment laws, the recent updates do not cover all economic activities universally. They focus on specific sectors classified under the “Positive List,” including over 120 economic activities such as trade, logistics, technology, and some manufacturing industries, where 100% foreign ownership is allowed, whether in the mainland or selected free zones.
Strategic or vital sectors for the national economy, such as energy, defense, essential infrastructure, and major financial services, are subject to additional restrictions and may require a local partner or special government approvals.
This approach aims to balance attracting foreign investors with fostering local economic growth while allowing flexibility in free zones and encouraging investors to explore opportunities on the mainland without affecting critical sectors.
What Are the New Economic Activities Eligible for 100% Foreign Ownership?
UAE foreign investment laws have recently been updated to allow full foreign ownership (100%) in specific activities, including trade, logistics, technology, manufacturing, and agriculture.
In free zones, full foreign ownership has always been permitted. On the mainland, investors can now conduct these activities without a local partner in approved sectors, providing greater access to the domestic market.
The updates emphasize modern and innovative sectors such as fintech, renewable energy, and digital services to enhance the investment environment’s flexibility and attract foreign investors.
If your ambition is to establish or expand your business in the UAE to fully capitalize on the dynamic market opportunities, we make this step easy and secure. Our specialized team has assisted in establishing nearly a thousand companies for foreign investors to date. We guide you step by step in choosing the right activity, selecting between free zones or the mainland, and completing all official procedures smoothly. Contact us now to start your business with confidence and peace of mind.
You can view the list of activities permitted for foreigners here.
Can Investors Easily Convert Existing Local Partnerships to Full Foreign Ownership?
Following the updates in UAE foreign investment laws, investors can convert their existing companies from local partnerships to full foreign ownership in activities listed on the “Positive List.”
The process requires submitting a formal application to the competent mainland authorities and fulfilling regulatory requirements, such as updating the commercial register and obtaining the necessary approvals. In free zones, the process is simpler, as companies are fully managed under zone regulations, allowing conversion without a local partner.
In short, conversion is possible, but it depends on the type of activity and the company’s location, and compliance with official procedures ensures a smooth legal transition.
Are There Tax Incentives or Additional Facilities for Full Foreign Ownership?
Yes, UAE foreign investment laws provide clear incentives for foreign investors who fully own their companies, whether in free zones or on the mainland within permitted activities. These incentives include:
- Tax exemptions: No personal income tax, and companies in many sectors enjoy long-term tax exemptions.
- Profit repatriation ease: Investors can transfer their profits abroad fully without restrictions.
- Simplified company setup: Registration and issuance procedures are faster in free zones, with the possibility to operate on the mainland after meeting specific conditions.
- Government and legislative support: The UAE government provides a clear and flexible legal environment to facilitate the creation and management of foreign companies.
In short, these incentives make investing in the UAE more attractive and flexible, offering broad options for investors between free zones and the mainland.
BY Belkıs Husseın
