How to Invest in Dubai

 How to Invest in Dubai

Write an assignment of 3 pages about “how to invest in Dubai and how to apply taxation“

Pages: 3

Introduction

Sheikh Rashid bin Saeed Al Maktoum’s words, ‘ My grandfather rode a camel, my father
rode a camel, I drive a Mercedes, my son drives a Land Rover , his son will drive a Land Rover,
but his son will ride a camel,’ are often attributed to Dubai’s economic prosperity. Located in the
Arabian Gulf, Dubai is unique in comparison to all other UAE nations. This is because of its
political stability and it is a center of globalization, liberalization and modernization (Group,
2008) . Dubai has a business-friendly government that ensures a tax-free environment and this
has made it possible for the largest and the most successful free trade zones of the world to find a
space here. This environment has captured the attention of foreign investors from all over the
globe and this is a high time for investors to create a fortune out of their investments.

How to Invest in Dubai?

In Dubai, there are many different fields for an investor to venture in to. In 2016, the
main invested sectors were inclusive made of; wholesale and retail trade; car repairs, Real estate,
Financial and insurance, Manufacturing, Mining and Construction (International business
publications, 2014). Whether one has a large capital or a very small capital to invest, these fields
are suitable; stocks, exchange-traded funds, Mutual funds, gold. Gold is also a commonly held
asset in well-diversified portfolios as it can be used to hedge against inflation (Maceda, 2019) .
To invest in Dubai, potential investors should consider the following; first, understand the
sector you want to invest know about the risks and the opportunities. Second, make an
investment plan, to ensure that you invest your money wisely, set out why you want to invest.
Third, choose diversification, this means that one should consider different investments. This
lowers risk levels and is vital in ensuring a productive investment. Understand the cost of each

INVESTING AND TAXATION IN DUBAI 3

investment; it is advisable to keep costs and fees low for long-term gains (Santander, 2020) .
There are many advantages associated with investing direct investment in Dubai. They are, long-
term political stability, no direct taxation , no foreign exchange control, diversified economy,
good-quality business climate, good transportation and production infrastructure, low-cost
foreign labor force, strategic geographical positioning, access to low-cost energy, hydrocarbons
resources and stable and profitable banking sector favorable to foreign investors.
There are procedures stipulated to foreign investment in the UAE, including Dubai. Such
Procedures are; First, Freedom of Establishment, it is limited because is compulsory to have a
local agent and foreign shareholding in a company cannot exceed 49%. Second, Acquisition of
Holdings, in this the majority capital acquisition of a local company cannot exceed 49%. Third, a
foreign investor has the Obligation to Declare. There is no special obligation to declare and not
unless being in the free zones a company is foreign capital cannot exceed 49%. Forth, Competent
Organization for the Declaration this is in accordance with World Association of Investment
Promotion Agencies. Lastly, Requests for Specific Authorizations from relevant authorities are
required in these fields, health, banking, insurance, transport, maritime, education and media
(Santander, 2020) .

How to Apply Taxation in Dubai

Prior to 2009, Dubai was an Emirate that had capitalized on its strategic geographic
position to become a zero tax-trading capital and got its income from government-based services,
rents and tariffs (Group, 2008) . The Dubai Income Tax Ordinance of 1969 states that an
organization that conducts business or trade including rendering of any service in Dubai is
subject to the following tax scale; 10% rate for income between Dh 1,000,000 – 2,000,000.

INVESTING AND TAXATION IN DUBAI 4

30% rate for income between Dh 3,000,000 – Dh 4,000,000. 40 % rate for income between Dh4,
000, 000- 5,000,000 and a 50% rate for income above Dh 5,000,000 (international business
publications, 2014) . Dubai is surrounded by free trade zones, which serve as incentives for
foreign investors. Paying taxes in these free zones has the following aspects; authorities in free
zones provide exemptions from the income tax for companies, corporate tax exemptions issued
authorities run for 50 years, repatriation of profits from free zones to other countries is also free
and in the Free Zones, there are no capital gains or withholding taxes levied.
For many decades, Dubai taxation regime relies on a set of tax decrees that were
stipulated in 1969 but this has changed since 2018 after the UAE government issued new tax
law. These laws are; value added tax, the excise tax and corporate income tax. Dubai’s VAT rate
is one of the lowest in the world at 5% and is usually imposed on the final consumer. The
corporate income tax is on a scale of 0% -50% depending on the income level. This is dependent
on the levels of profit and the nature of the businesses mainly those operating in Free Zones. In
Dubai, foreigners can buy land and property by adhering to the property tax. Also involved in the
Property tax is income tax, corporate income tax, local property taxes and inheritance tax
(Santander, 2020) .

Conclusion

Dubai thrives as one of the highest per capita incomes in the world today. It has become
a hub for global investors due to its culture, modernism, and touch of luxury, finance and high
technology. Every day, more and more international investors are venturing and investing in
various trades in Dubai because they are convinced of fruitful returns on the money they have

INVESTING AND TAXATION IN DUBAI 5

invested. In addition, the fact that there is no direct taxation of corporations apart from oil,
banking and insurance sectors or of individuals is quite attractive.

INVESTING AND TAXATION IN DUBAI 6

References

Group, O. B. (2008). The Report: Dubai 2008. Dubai: Oxford Business Group.
International Business Publications, U. (2014). UAE, How to Invest, Start and Run a Profitable
Business in the UAE. Washington DC: Washington DC.
Maceda, C. (2019, September 11). 6 ways to invest Dh2, 000 in the UAE. Retrieved from How
To: https://how-to.com
Santander. (2020, April). United Arab Emirates: Foreign Investment. Retrieved from Santander
Trade: https://santandertrade.com