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UAE legislates to lower the costs of doing business

The UAE Cabinet announced, on 13 June 2018, that it had approved significant reforms to the visa and labour insurance laws, including the abolition of bank guarantees for the recruitment of labour in the private sector.

Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, said the reform would create a stimulus of up to AED 14 billion for the economy as well as lowering the cost of doing business in the UAE.

The current requirement for an AED 3,000 (USD 820) monetary bank guarantee per employee is to be replaced by a new, low-cost insurance system that is priced at AED 60 per year, per employee. The insurance policy will cover employees’ end-of-service benefits, vacation and overtime allowances, unpaid wages and return air tickets, as well providing injury-at-work protection of up to AED 20,000 per employee.

The scheme is aimed at securing employees’’ rights in the private sector and reducing the burden on employers, allowing businesses to recover about AED 14 billion in monetary bank guarantees, freeing up capital for other purposes such as reinvestment.

The legislation approved by the Cabinet will also provide for visas to be renewed without the need for holders to leave and re-enter the UAE and the introduction of no fee, six-month temporary visas to help those who have lost their jobs to find new employment.

The Cabinet further approved 48-hour visas without charge for transit tourists and two-year visas for “talented and outstanding” students to stay after graduation. The legislation will further facilitate the voluntary departure of people overstaying their visa without incurring a ban.

Sheikh Mohammed said the new legislation would support the UAE’s goal of improving its high position in the global ‘ease of doing business’ rankings, as the government continues to promote an attractive economy based on flexibility and openness. The UAE was ranked 21st globally, a jump of five places, in World Bank’s Ease of Doing Business Index for 2018. It was the top-ranked Arab country for the fifth year in a row.

The latest reforms followed an earlier announcement of an AED 50 billion economic stimulus package for the Emirate of Abu Dhabi, as well as 10 initiatives to transform the ease of doing business. These include allowing people to work from home legally for the first time and a new licensing system that defers the current requirement for an office or workspace for two years.

In May, the UAE Cabinet also announced sweeping changes to its residency system in which key workers will be offered visas of up to 10 years, to attract sought-after professionals. It also proposed allowing 100% foreign ownership of businesses outside free zones by the end 2018, although it is not yet clear how the investment or Commercial Company Law will be amended.

Our strategic relationship with the Dubai Investment Development Agency (Dubai FDI) means that Sovereign Corporate Services is well positioned to help implement all the proposed labour and immigration changes for both new and existing customers across the Emirates without delay.

Simon Gordon, Director – Head of Strategy for Sovereign Middle East said: “In conjunction with the FDI, we are delighted by the recent announcements by the UAE government to further enhance what is already a very attractive foreign investment regime. We are committed to supporting our existing clients and to assisting new businesses with their UAE market-entry or structuring requirements. Our dedicated team of labour and immigration specialists and Public Relation Officers (PROs) are ready to help.”

Please contact Sovereign Corporate Services today for more information.

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