United Arab Emirates Market Entry

United Arab Emirates Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Key legal norms and regulations related to commercial and entrepreneurial activity in the UAE:

  • Act No. 2/2015 on Commercial Companies (“Commercial Companies Law”), incl. of amendments contains key provisions on the establishment, form, organization of statutory bodies, legal definition of responsibility, division of profits, etc.
  • Act No. 18/1981 on Commercial Agency (“Commercial Agency Law”), which sets the rules for commercial agencies of foreign companies in the UAE. It introduces the possibility of using several sales representatives (agents or distributors) at the same time, which cancels the previously valid principle of an exclusive representative (exclusivity).
  • Act No. 19 of 2018 on the promotion of foreign direct investment specifies the supported economic sectors for the entry of foreign investors, the criteria that must be met, state support for the inflow of FDI into the country, etc. Under certain conditions, it allows up to 100% ownership of a company by a foreign entity.

In terms of the level and friendliness of the business environment “Doing Business” of the World Bank (World Bank Group – WBG) for 2020, the UAE was ranked 16th. An import license is granted by the Ministry of Economy (MOE) to local companies registered with the Chamber of Commerce in the relevant emirate, and is usually valid for one year. Special permits and licenses from specialized authorities or ministries are required for special products, e.g. firearms, explosives, medicines or exotic animals. Check smber for agriculture and fishing facts of United Arab Emirates.

The UAE is bound by the Gulf Cooperation Council (GCC) Uniform Tariff, which exempts the movement of goods and services within the GCC from all duties and sets a Common External Tariff of 5% for most goods imported from non-GCC countries. Certain basic foodstuffs and medicines or medical devices are exempt from the external tariff. On the other hand, selected products, especially some products of the chemical or petrochemical industry, alcohol and tobacco products, are subject to an increased customs rate of 50-100% due to the protection of local industry. Customs fees must be paid in local currency. The import of weapons and ammunition is possible only after obtaining a special permit from the Ministry of the Interior. For deliveries of meat goods, a so-called Halal Certificate must be attached stating that the animal.

Finding a suitable local representative/distributor is a key element, both for the distribution of goods and for participation in government contracts. When choosing a representative, it is necessary to proceed very carefully, because according to the “Commercial Agency Law” (Act 18/1981 as amended by later amendments) the agency contract can only be dissolved by mutual agreement between the representative and the represented, regardless of whether it has already expired by the expiration of the period or not, or for reasons recognized by the so-called Commercial Agency Committee at the Ministry of Economy, or by a court decision. In the event of a dispute, the mutual relationship can be terminated through a court (local jurisdiction is always mandatory, even if the contract states otherwise) and with a high severance pay for the local partner. Until the delivery of a court decision, dissolution of the representation contract by agreement,

In the case of a representative relationship, exclusivity for representatives is mandatory by law, but it is possible to regionally limit this to only the area of ​​one emirate. It is thus possible to have a different agent/distributor for each emirate. However, an agent/distributor (sponsor) can cover the territory of several or even all emirates. Restrictions on the representative relationship can also be made in the area of ​​the subject of representation, i.e. the sold/offered product or service. One foreign company can therefore have more than one representative in the same territory, but each of them for a different and clearly defined product/service. The agency contract must be notarized and registered with the Ministry of Economy (at the federal level), or with its respective register of commercial agencies in individual emirates, if the agent is authorized to act only in a sub-emirate. The legal regulation of the representative relationship outlined above encourages very careful and prudent selection of the local partner – representative. Therefore, in many cases, Czech companies prefer to establish their own branch or a joint venture with a local partner, whose influence on the company’s operation can be limited by an accompanying contractual arrangement, the so-called “side agreement”.

Forms and conditions of operation on the market

UAE commercial law allows for the establishment of 10 different forms of companies. Czech companies most often use Limited Liability Company or Free Zone Establishment. Details of these forms are given below. Other forms are e.g. Public Joint-stock Company (min. capital – 10 million AED, with nominal value 1-100 AED, for banks 40 million AED), or Private Joint-stock Company (min. capital – 2 million AED, the chairman of the board and the majority of the directors must be Emirati nationals), used in banking, insurance and other financial services. Conditions for foreign investments are regulated by the following laws: Federal Companies Law, the Commercial Agencies Law, the Federal Industry Law, Government Tenders Law. To the most important change effective from 1 December 2020, includes the possibility to establish a Limited Liability Company as 1 person with a 100% share of foreign capital on the so-called mainland, but with certain restrictions on activities in specific sectors such as energy, water management, aviation, defense and security, transport and other strategic sectors. In this case, the ownership share is still limited.

Branch Office – (a branch of a foreign company) does not have its own legal personality and is considered part of the parent company. In contrast to the LLC (see below), the prior consent (license) of the Ministry of Economy is necessary for establishment. The branch office must have a local sponsor, the so-called “Service Agent”, who is of UAE nationality and who guarantees that the office’s activities comply with local standards and the license issued. For the establishment of a Branch Office, it is not necessary to deposit capital, only 50,000 is deposited. AED (in case of registration in the Emirate of Abu Dhabi) as a deposit for possible non-payment of mandatory fees, e.g. with the issuance of visas. The license is renewed annually. A similar, but easier to establish, form is the Representation Office, which, however, may not (unlike a Branch Office) carry out commercial activities.

Limited Liability Company (LLC) – similar to a Czech s.r.o. It can be established by 1–50 members, min. capital (which was e.g. AED 300,000 (USD 82,000) in Dubai, AED 150,000 in Abu Dhabi) was abolished by presidential decree in 2009 and is currently no longer quantified in the “Commercial Companies Law”, however its amount must be according to this law, adequate to achieve the goals of the established company. The company’s license issued by DED must be renewed every year, the fees amount to approx. 12 thousand. AED. The detailed procedure for setting up both an LLC and a Branch office can be found on the website of the Department for Economic Development (DED) in Abu Dhabi or Dubai.

Marketing and communication

Requirements for promotion, marketing, advertising and use of HSP reflect local consumer and cultural specificities. Almost all forms of marketing and promotion known from advanced economies are used. However, the advertising campaign should be bilingual (English, Arabic) for consumer goods and include Arabic periodicals (40% of the population are Arabic-speaking, 15% are local nationals). The most widely distributed English-language dailies are Khaleej Times and Gulf News. The content of all media (local and imported) is controlled by the National Media Council, which also issues relevant licenses to publishers.

In recent years, two media free zones have been created: 1/ Dubai Media City (DMC, www.dubaimediacity.com) and 2/ twofour54 (www.twofour54.com) in Abu Dhabi, which are trying to attract investors in media and marketing services, including music and film production. Companies that operate in these free zones are guaranteed that the government will not censor their output as long as they respect the rules of local tastes and customs. Consumer goods must have bilingual (English and Arabic) labels and instructions for use (Arabic is the official language and the language of state institutions). Food labels must include: product name and brand, date of manufacture and expiration (must be printed on the original packaging, an additional label is inadmissible), country of origin, name and address of the manufacturer, net weight in metric units, list of ingredients including additives in order of importance. Fats and oils must be listed separately. The label must be in Arabic or both Arabic and English. Additional Arabic stickers are allowed. Even if the majority of residents are fluent in English, presentation materials in Arabic are also recommended, as most of the so-called “decision makers” are Arabs (Emiratis, Lebanese, Egyptians) and demonstrating adaptation to the local culture will thus be an advantage compared to the competition.

Due to the widespread use of the Internet (80% of the population) and mobile phones, direct marketing is increasingly used, but it is provided by local distributors, including local online stores. These are used by 40% of the population. Internet sales are growing at a rate of 30% per year. Electronics are mostly bought this way. The most common payment instrument is a payment card and payment in cash upon delivery of goods. Pyramid or multilevel marketing is not allowed. As part of marketing communication, it is not appropriate to use tools that could be in conflict with the Islamic religion.

Popular social media platforms in the UAE in 2022

The use of social media is widespread among the population of the United Arab Emirates. Most people watch a streaming app that provides a wide variety of content i.e. YouTube. This application is used by 87.4% of the population. WhatsApp users are not far behind, 80.2% of the population use this network service daily. Facebook or Meta (as it is known today) has 79% of users out of the total population.

Issues of intellectual property protection

The UAE is a member of the WTO and a signatory to the Paris Convention for the Protection of Industrial Property. Therefore, in the field of protection of intellectual property rights, the relevant international standards apply here in terms of registration of patents, trademarks, etc., and legal sanctions in case of violation of these standards. In 2002, the first legislation to protect intellectual property rights was passed, namely the Trademark law, the Patent law and the Copyright law. The protection of intellectual property rights in the UAE and, in particular, control and penalties for their violation is based on this legislation, and therefore Czech companies should not rely on their rights being respected and enforced only on the basis of international agreements partially adopted into local legislation.

The registration of patents and trademarks is carried out by the Ministry of Economy. Ministry of Economy, PO Box 901, Abu Dhabi, UAE, Tel: +971-2-626-5000; Fax: +971-2-626-2922, E-mail: [email protected], Website: www.economy.gov.ae, Dr. Ali Ibrahim Al Hosani, Undersecretary for Intellectual Property, Mr. Fawzi Al Jaberi, Manager, Copyrights Tel: +971-2-613-1415, Ms. Fatema Al Hosani, Manager, Trademarks Tel: +971-2-613-1431 & 1430, Mr. Khalfan Al Suwaidi, Manager, Patents Tel: +971-2-613-1402 & 1406. In 05/2015 there was a significant increase in the fees associated with the registration of trademarks.

Due to Dubai’s position as the main logistics center for Asia’s trade with Europe, Dubai has become the 5th largest transshipment point (and therefore re-exporter) of counterfeits in the world. Counterfeit goods enter the country relatively easily, as customs control is only random with such a large number of imported products. In case of discovery of fake deliveries, these are not (in accordance with WTO standards) usually destroyed on the spot, but the shipment is sent back to the country from which it came (mostly China). The losses of the Emirati economy from illegal copies (PC software, car spare parts, textiles, etc.) amount to USD 400 million per year, according to estimates by the Ministry of Economy.

Public procurement market

According to local laws (Government Tender Law), only a company in which a local entity owns at least 51% can participate in tenders for federal state contracts (subscribed by ministries). If a Czech company does not intend to establish a joint venture in the country with a majority share of a local partner or a Branch Office (and have its service agent of Emirati nationality), it can participate in government contracts through (and on behalf of) its agent, who must be a national of the UAE or a company owned by 100% by national(s). The Government Tender Law is also applied to most public contracts awarded at the level of individual emirates. However, it does not apply to tenders issued by the Ministry of Defense and the Interior. In most cases, the selection procedure is preceded by a demanding pre-qualification process for the so-called “vendor list”. A condition for registering a company on the vendor list of state organizations is the prior acquisition of a local license/registration. Companies registered on the vendor list are usually invited directly by the customer to the tender process. A bid bond of 5% of the bid price is included with the bid.

Registration in the relevant emirate is required for state contracts tendered by individual emirates. Companies registered in free zones may not participate in state contracts, with exceptions. The awarding of public contracts takes place in such a way that the customer-contractor selects a consultant who will draw up the technical and legal conditions of the tender procedure and, in cooperation with the contracting authority, issue the relevant tender procedure. The personal contact of local licensed contractors with the consultant is thus crucial. The award of the tender can be known to them in advance, or it can be directly “tailored”. Arms contracts are subject to an offset system, through which the Ministry of Defense tries to get foreign companies to reinvest part of the profits from lucrative arms contracts in the country (the Ministry of the Interior does not yet require offset programs).

Offsets are required if the value of orders exceeds USD 10 million. The offset obligation amounts to 60% of the contract value and must be fulfilled within 7 years. In some cases, however, it is possible to reach a grace period. The offset obligation is a combination of Input activity (max. 30% of the total value), which is usually in the form of a share in a joint venture with a local partner for the production of military equipment or material, with output activity (min. 70% of the value of the obligation), which is, for example, the amount of profit, export sales, or employment of local forces. So-called multipliers are used to credit activities, which are 1-2 in the case of input activity, 2-5 in the case of output activity, taking into account their contribution to the economy of the UAE. The offset program is administered by the Tawazun Economic Council.

Payment terms, payment ethics and resolution of commercial disputes

Due to the developed banking and financial sector with the presence of both foreign banks and foreign management in local banks, the payment conditions are at the standard world level. Payment by letter of credit is a commonly used payment term, financial transfers are fast and payment morale is generally very good. Nevertheless, for example, the share of uncovered or fake checks in the UAE is about 5.5% compared to the European average of 1%, which is reflected in the generally widespread refusal of personal checks. The higher proportion of invalid checks is mainly influenced by the high number of foreigners, who in many cases pay checks shortly before their final departure from the country. The average maturity of invoices is approx. 14 days. In case of non-payment of the invoice and failure of further communication, the claim can be resolved through local law enforcement authorities (Police of the relevant emirate).

Visas, fees, specific conditions for traveling to the territory

The Ministry of Foreign Affairs of the Czech Republic recommends that Czech citizens check with the embassy of the country they are visiting before traveling whether the conditions for entry and stay have not changed. On the basis of the Agreement between the European Union and the United Arab Emirates on the abolition of the visa requirement for short-term stays, holders of travel, service and diplomatic passports of the Czech Republic can stay in the UAE without a visa for a maximum of 90 days during any period of 180 days from 05/07/2015. The agreement does not apply to persons traveling for the purpose of a gainful stay. Exceeding the permitted length of stay is penalized. More information can be obtained at the newly opened (since 07/2015) UAE Embassy in Prague. Contact: Embassy of the United Arab Emirates, Sibirské nám. 730/1, 160 00 Prague 6 – Bubeneč, phone: 221 517 777 A travel document with a minimum remaining validity of 6 months is required to enter the UAE. The so-called a flash passport without machine-readable data and without a carrier of biometric elements, which is issued with a validity period of 6 months, therefore cannot be used for travel to the UAE. Although there are cases when a citizen of the Czech Republic was admitted to the country on a so-called passport-flash, similar access cannot be guaranteed and the Czech Embassy in the UAE is not authorized to influence the local immigration authorities in this regard. The Ministry of Foreign Affairs of the Czech Republic recommends that its citizens take out travel insurance before traveling and register within the application “Voluntary registration of citizens when traveling abroad” (DROZD). During the Covid-19 crisis, we recommend following the website of the Embassy of the Czech Republic in Abu Dhabi for special measures in the UAE: www.mzv.cz/abudhabi.

Personal belongings are subject to customs inspection upon arrival in the UAE. It is prohibited to import pork products, pornographic or erotic materials (this applies to videos, books and magazines) and materials that could be considered aids for the propagation of a religion other than Islam. Cigarettes worth up to AED 2,000/400 pcs., cigars worth up to AED 3,000, 2 kg of tobacco, 4 liters of alcohol/24 cans of beer can be imported duty-free into the Emirate of Abu Dhabi (non-Muslims only and by air only), and gifts, incl. perfumes, worth up to AED 3,000. When entering the country through Dubai airport, you can import 400 cigarettes or 50 cigars or 500 g of tobacco, 4 liters of alcohol or 2 x 24 cans of beer and gifts worth up to AED 3,000 duty-free. The importation of alcohol is completely prohibited in the Emirate of Sharjah. In In 2007, extremely sensitive drug detection devices were installed at Dubai Airport. If a passenger is found to have even a small amount of the drug, there is a risk of trial for possession of narcotics, while the minimum rate for this crime in the UAE is imprisonment for four years without parole. This warning also applies similarly to Abu Dhabi International Airport. It is prohibited to import some medicines that are normally available in the Czech Republic into the UAE. We therefore recommend that you consult the current list of permitted and prohibited medicines before your trip, or obtain the required medical certificate for their importation in the Czech Republic in good time. In case of confusion, it is possible to verify the possibility of importing a specific drug by phone at the number: +971-2-6117359 (Drug Control Department). A veterinary certificate is required for importing animals, certificate of vaccination against rabies and certificate of absence of rabies in home country. Mandatory currency exchange is not in place in the UAE. However, travelers to and from the UAE must declare the transfer of cash over EUR 10,000 or equivalent in another currency. Czech driving licenses are not accepted by local authorities.

During short-term tourist stays, you can drive a car in the country based on a combination of an international driver’s license and a Czech driver’s license. By default, car rental companies require the presentation of an international driver’s license. In the case of a long-term stay of a Czech citizen in the UAE, it is necessary to apply for a local driver’s license at the traffic police, pay a fee of approximately 4,000 AED and attend a local driving school.

Traveling between individual emirates is absolutely safe. Public transport and taxis are at an excellent level in local conditions and are widely used by the local population.

Employment of citizens from the Czech Republic

The basic condition for work and long-term residence is the granting of a so-called resident visa (Resident Visa) linked to a work permit, which is valid only for a specific company. That is that there is no US green card type system that would allow an employee to move freely from one employer to another. This system applies to all foreigners without distinction. In practice, it looks like a local company applies for a work permit for its new employee at the immigration office in the emirate where it has its registration and valid license. The application must be accompanied by a copy of the passport, a photograph and a certified certificate of educational attainment, which must be legalized by the UAE Embassy in Prague and super-legalized by the UAE Ministry of Foreign Affairs. If everything is in order, in approximately 10 days the Immigration Office will issue a work permit and a so-called Employment Visa, on which the employee can come to the country. Upon arrival, he undergoes the prescribed medical examinations (TB, AIDS, etc.) and, according to their results, a residence visa is issued. The processing fee is approximately 3,000 AED + legalization fees, the visa is valid for 3 years. During the validity of the visa, the stay in the UAE can be interrupted for a maximum of 6 consecutive months

The employer (in the free zone and the “mainland”) is obliged to pay a so-called “security deposit” in the amount of 5000 AED and the price of a return ticket for each employee. This deposit is released when the employee leaves, or in the event of termination of employment. Each terminated employee has 60 days to find a new job, thereby obtaining a new sponsor and a new work visa. If he does not find a new job and a new sponsor within this period, he must leave the country. As of January 1, 2016, 3 new decrees of the Ministry of Labor are in force, which regulate labor-legal relations. The decrees are intended to better protect the position of foreign workers in the UAE vis-à-vis their employers. Decree No. 425/2015 establishes the requirements of a binding offer of employment, submitted for signature by the employee even before the employee’s arrival in the country, which the employer attaches to the application for a work permit for the purpose of issuing a work visa. Upon arrival in the country, this binding job offer will be changed to an employment contract in the same wording, which will be properly registered at the labor office after being signed by both parties. Changes are permitted only in the form of an amendment, which must not conflict with labor law and the wording of the original contract. Decree No. 422/2015 precisely determines the possibilities and methods of termination of the employment relationship, by both or one of the parties. Decree no. 423/2015 regulates the possibilities of changing the employer after and before the termination of the existing employment relationship (in case of mutual consent after 6 months, in case of disagreement of the employer after 2 years at the earliest) and the role of the employment office in this change.

There is no minimum wage set for foreign employees. Only citizens of Emirati nationality can draw on social care. Health insurance is provided by the employer under the conditions stipulated in the employment contract by law.

Fairs and events

The most important fairs in 2022:

INTERSEC

  • Date and venue: January 2022 in Dubai
  • Web: http://www.intersecexpo.com
  • Description: The Intersec trade fair is one of the largest trade fairs of its kind in the region focused on technologies and equipment for the protection of people, industrial and residential buildings, fire, rescue and security forces, safety of operation of production facilities and safety information systems.

IDEX

  • Date and venue: January 2023 in Abu Dhabi
  • Website: www.idexuae.ae
  • Description: Is the most important world exhibition of the arms industry (held every two years in Abu Dhabi). Global manufacturers consider it the gateway to the highly interesting MENA region and West and South Asia.

GULFFOOD

  • Date and venue: February 2022 in Dubai
  • Website: www.gulfood.com
  • Description: It is one of the most important food fairs in the world. It is considered a gateway to markets in the MENA region.

ARAB HEALTH

  • Date and venue: January 2022 in Dubai
  • Web: www.arabhealthonline.com
  • Description: ArabHealth represents the largest regional exhibition of products and services related to healthcare, complemented by a number of international conferences.

MIDDLE EAST ENERGY

  • Date and venue: March 2022 in Dubai
  • Web: www.middleeastelectricity.com
  • Description: The fair is focused on fields related to the production, transmission and distribution of electrical energy.

DUBAI INTERNATIONAL BOAT SHOW

  • Date and venue: March 2022 in Dubai
  • Website: www.boatshowdubai.com
  • Description: This fair is one of the most prestigious yachting events in the Middle East region and brings together the owners of the largest yachts in the world.

GITEX TECHNOLOGY WEEK

  • Date of event: October 2022 in Dubai
  • Website: www.gitex.com
  • Description: Gulf Information Technology and concurrently organized GulfComms is the world’s third largest ICT trade fair. GITEX is a suitable platform for companies doing business in IT and telecommunications.

GULFOOD MANUFACTURING, ISM, SPECIALTY FOOD AND PRIVATE LABEL

  • Date of event: November 2022 in Dubai
  • Website: www.gulfoodmanufacturing.com, www.prime-expo.com, www.speciality.ae, www.ism-me.com
  • Description: A combination of 4 interesting food fairs with a focus on production technologies, confectionery, gourmet and private brands.

ABU DHABI AIR EXPO

  • Date of event: November 2022 in Abu Dhabi
  • Website: www.abudhabiairexpo.com
  • Description: Abu Dhabi Air Expo, the only international aviation and space exhibition in the capital of the United Arab Emirates. In recent years, the aviation and space industry has grown rapidly in Abu Dhabi, and the exhibition is therefore an ideal place for the promotion of Czech companies operating in this sector with the aim of establishing themselves on the Middle East market.

Information and current fair dates can be obtained from the following websites and addresses of the main local exhibition centers: Abu Dhabi National Exhibitions Company ADNEC: www.adnec.ae, Dubai World Trade Centre: www.dwtc.com

United Arab Emirates Market Entry