United Arab Emirates - Market ChallengesUAE - Market Challenges
While the UAE has established itself as a major international commercial hub, challenges remain for U.S. firms doing business here.
On the positive side, the UAE continued to improve its overall position in the World Bank’s Ease of Doing Business ranking of 190 countries, moving up to 11th place in 2018. It is among the world’s leaders in several elements of the ranking: getting electricity (1st place); paying taxes (2nd place); dealing with construction permits (5th place in 2018); registering property (7th place); and enforcing contracts (9th place in 2018). And, on the Transparency International Corruption Perception Index of 180 countries and territories, the UAE continues to be in 23rd place in 2018.
In terms of challenges, there are some areas where the UAE continues to lag according to the World Bank’s Ease of Doing Business. These include: trading across borders (98th place in 2018); getting credit (44th place); resolving insolvency (75th place in 2018).
Several common problems foreign firms may confront, such as delays in receiving payment for completed work, efforts by some UAE entities to modify scopes of work or otherwise alter contracts after signing, and difficulties in terminating commercial agent agreements even in cases of nonperformance by local agents. In certain sectors these issues can result in significant cost burdens and absorb valuable management time and resources. Dispute resolution mechanisms vary in effectiveness among the seven emirates and can be cumbersome.
New Value Added Tax
In January 2018, the UAE imposed a five percent value added tax (VAT); the tax is intended to be imposed throughout the GCC, although implementation has varied across the bloc. The tax applies to almost all goods and services except basic food items, education and healthcare. Most business functions have been impacted, from IT and human resources through to procurement, finance, and marketing, since VAT is a requirement at every stage in the supply chain. The UAE Ministry of Finance has confirmed that businesses with annual revenue of more than $375,000 (AED 1,376,250) will be required to register for VAT, while those with revenue of between $187,500 and $375,000 (AED 688,125 and AED 1,376,250) can choose whether they wish to register during the initial roll out or postpone it until later. Businesses should register for VAT with the Ministry of Finance.
Qatar Dispute
In June 2017, the UAE, Saudi Arabia, Egypt and Bahrain severed diplomatic, economic and commercial ties with Qatar. Regional businesses continue to adapt and evolve in reaction to these political dynamics. U.S. companies are advised to seek assistance from a local attorney regarding the implications of this boycott for their regional operations.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
On the positive side, the UAE continued to improve its overall position in the World Bank’s Ease of Doing Business ranking of 190 countries, moving up to 11th place in 2018. It is among the world’s leaders in several elements of the ranking: getting electricity (1st place); paying taxes (2nd place); dealing with construction permits (5th place in 2018); registering property (7th place); and enforcing contracts (9th place in 2018). And, on the Transparency International Corruption Perception Index of 180 countries and territories, the UAE continues to be in 23rd place in 2018.
In terms of challenges, there are some areas where the UAE continues to lag according to the World Bank’s Ease of Doing Business. These include: trading across borders (98th place in 2018); getting credit (44th place); resolving insolvency (75th place in 2018).
Several common problems foreign firms may confront, such as delays in receiving payment for completed work, efforts by some UAE entities to modify scopes of work or otherwise alter contracts after signing, and difficulties in terminating commercial agent agreements even in cases of nonperformance by local agents. In certain sectors these issues can result in significant cost burdens and absorb valuable management time and resources. Dispute resolution mechanisms vary in effectiveness among the seven emirates and can be cumbersome.
New Value Added Tax
In January 2018, the UAE imposed a five percent value added tax (VAT); the tax is intended to be imposed throughout the GCC, although implementation has varied across the bloc. The tax applies to almost all goods and services except basic food items, education and healthcare. Most business functions have been impacted, from IT and human resources through to procurement, finance, and marketing, since VAT is a requirement at every stage in the supply chain. The UAE Ministry of Finance has confirmed that businesses with annual revenue of more than $375,000 (AED 1,376,250) will be required to register for VAT, while those with revenue of between $187,500 and $375,000 (AED 688,125 and AED 1,376,250) can choose whether they wish to register during the initial roll out or postpone it until later. Businesses should register for VAT with the Ministry of Finance.
Qatar Dispute
In June 2017, the UAE, Saudi Arabia, Egypt and Bahrain severed diplomatic, economic and commercial ties with Qatar. Regional businesses continue to adapt and evolve in reaction to these political dynamics. U.S. companies are advised to seek assistance from a local attorney regarding the implications of this boycott for their regional operations.
Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.