UAE's top 5 new laws for SMEs and startups

Legal

UAE's top 5 new laws for SMEs and startups

Priya Wadhwa
Legal
Published:
UAE's top 5 new laws for SMEs and startups
Entrepreneurs — take note!

The UAE has long enjoyed the title of being the startup hub in the Middle East, receiving most of the deals and fundings with investors and startups preferring the forward-thinking country to set up their base. However, it has also been hailed as one of the most expensive in the region for startup establishment and running costs.

The UAE has come a long way since its introduction of VAT — revenues from which have exceeded the government’s expectations. It has for the first time in decades opened up its borders to allow long-term residencies much to the delight of its residents. Moreover, it has taken concrete steps to strengthen the SME and startup ecosystem that contribute a major chunk to its GDP.

In line with the UAE’s vision of leading the country towards establishing a more sustainable economy, leaders are continuously launching initiatives and reforms to address roadblocks faced by the startup and SME community. This year alone, we have seen massive steps being taken to stregthen the sector and make it easy for entrepreneurs to do business in the country. We look at the top 5 new laws enforced or initiatives launched that have the maximum direct effect on entrepreneurs:

Over 1,500 federal government services fees reduced or cancelled

Effective from 1 July 2019, the UAE Ministry of Finance revealed the cancellation or reduction by up to 50 per cent of over 1500 government service fees.

Of the 1500 plus federal services, 1200 service fees were reduced or cancelled by the Ministry of Interior, 80 by the Ministry of Economy, and 200 were by Ministry Human Resources and Emiratisation (MOHRE).

Following the announcement of the Federal government’s decision, the Ministry of Human Resources and Emiratisation announced that they have reduced the fees of 17 services and 128 transactions by 50-94 percent.

Some of these services include the issuance or renewal of security licences, registration of foreign subsidiaries, work permits and their renewals, surveillance systems licence, as well as a wide range of businesses and industrial licensing services.

Abu Dhabi Pledges AED 535 million for Hub71 startups

The Abu Dhabi government has pledged AED 535 million to strengthen the capital's startup ecosystem. The fund will be used to provide entrepreneurs with accommodation, office space and health insurance subsidies, as well as to co-invest with venture capitalists funding startups based out of Hub71.

The subsidy will be provided to startups that are based in Hub71, with those having five or fewer full-time employees receiving 100 percent subsidy for two years, and those with 6-25 employees receiving 50 percent subsidy for three years.

The efforts are aimed at "doubling down on our efforts to make Abu Dhabi a global beacon for technology and innovation," said Jassim Mohammed Buatabh Al Zaabi, chairman of the Abu Dhabi Executive Office,

Hub71 recently announced its partnership with Indian hospitality startup OYO, that will be providing entrepreneurs working out of Hub71 with accommodation just 2 kms from the financial centre.

SMEs to receive 5% of government capital projects, worth up to AED 400M, as well as payments within 30 days.

In a series of new initiatives, the Dubai government announced that it will be awarding a minimum of 5 percent of its capital projects to the small and medium sized businesses. Considering the value of these projects is upwards of AED 400 million, it will provide considerable business to the sector. Moreover, it will help the SME sector to grow and scale its operations and add noteworthy projects to their portfolio.

In line with the above initiative the Dubai government also vowed to shorten the time spans in which SMEs are paid for government projects. What was earlier a 90-day timeline has been cut to just 30 days.

Working capital is a tight and a major concern for the startup and SME sector. This shortening of payment timelines will help the businesses continue operations smoothly while increasing their interest and ability to work with the government.

Moreover, this step clearly shows the government is aware of the roadblocks and challenges faced by the sector and is continually working on the easing the business challenges they face.

UAE launches long-term residency permits to entrepreneurs, investors and high-earning expats

This is probably the biggest news of the decade as UAE opens its borders to a significant sector of its residents. While it started with high-net-worth investors, it opened the long-term residency permit to tech startup entrepreneurs as well as high-earning expats.

So far, the UAE has granted five-year long-term visas to entrepreneurs named in the top 100 Arab startups by the World Economic Forum, amongst many others.

100% foreign ownership in 122 UAE economic activities

Following the long-term visa scheme, the UAE also announced a new rule whereby foreign expats will be able to completely own their businesses in free zones as well on mainland economic zone, spanning 122 economic activities across 13 sectors.

Few examples of the economic activities include solar panels, power transformers, green technology, and hybrid power plants; while the sectors include renewable energy, space, agriculture, e-commerce and manufacturing.

These initiatives have already spiked entrepreneurs to set up their own businesses in the country. SMEs that help entrepreneurs get licenses and start their businesses have also seen a significant increase in the number of enquiries coming in. Flying Colour is one such company that claims it has seen a 20% increase in enquiries in H1 2019. With so many initiatives launched, increasing interest from investors and growing startup ecosystem, it is arguably a great time to start your business.