Until recently, foreign companies and free zone company branches seeking to establish a branch in the UAE were required to pay a refundable bank guarantee deposit of AED 50,000 to the Ministry of Economy through a local UAE bank. This deposit was a mandatory financial safeguard to cover any potential liabilities that the branch might incur during its operations in the UAE. The guarantee could not be withdrawn or used as working capital and was held for the duration of the company’s license.

However, in a landmark decision, to boost foreign investment and simplify the process of establishing businesses, the UAE Ministry of Economy has officially eliminated this bank guarantee requirement, marking a significant shift in the country’s business regulatory framework. With this change, foreign entities and free zone company branches no longer need to provide the AED 50,000 refundable deposit to set up a branch in the UAE.

This move is part of the UAE government's broader initiative to streamline business procedures, reduce bureaucratic barriers, and encourage the inflow of Foreign Direct Investment (FDI). By eliminating the financial burden of the bank guarantee, the government is significantly reducing the upfront costs for foreign businesses looking to establish a presence in the UAE.

The removal of this requirement aligns with the UAE's vision to foster a more attractive and accessible business environment, further positioning the country as a leading global hub for trade and investment.

This rule change, confirmed by us during a call with the Ministry on November 20, 2024, is a strategic move to create a more attractive and business-friendly environment for global firms.

Why This Change Matters?

The removal of the bank guarantee requirement highlights the UAE's commitment to creating a more open and attractive environment for international companies. This development carries significant benefits for businesses looking to enter the UAE market:

1. Reduced Barriers to Entry: Previously, the AED 50,000 bank guarantee represented a substantial financial commitment, especially for small and medium-sized enterprises (SMEs). With this requirement now removed, the UAE market becomes more accessible to a broader range of global businesses, including startups and high-potential ventures that may have previously found the upfront costs prohibitive

2. Enhanced Cash Flow: Eliminating the bank guarantee requirement allows businesses to free up AED 50,000 that would have otherwise been tied up in a non-liquid deposit. This capital can now be utilized for operational expenses, strategic investments, and growth initiatives.
3. Accelerated Market Entry: With the removal of this financial hurdle, the process of establishing a presence in the UAE is significantly streamlined, enabling foreign companies to start operations more quickly and efficiently. This faster market entry empowers businesses to seize opportunities in the UAE sooner than ever before.

Strategic Implications for Foreign Companies

The UAE serves as a critical gateway to the Middle East, Africa, and South Asia (MEASA) region and the removal of the bank guarantee requirement significantly reduces both financial and procedural barriers. This change presents an ideal opportunity for companies to consider expanding their operations in the UAE.

Sectors that often operate on narrow margins and require substantial initial capital for growth will see immediate benefits significantly from this change. By removing the AED 50,000 guarantee, the UAE has fostered a more supportive ecosystem and accessible environment, enabling these industries to thrive and expand with greater ease.

What Should Foreign Companies Do Next?

For foreign businesses looking to tap into the UAE market, this regulatory update is a signal of the right moment to act. With streamlined procedures and reduced costs, now is the time to:

1. Reevaluate your expansion strategy, prioritizing the UAE as a key market for growth.
2. Seek expert guidance from business consulting firms like MBG Corporate Services to navigate the setup process smoothly and efficiently.
3. Explore the UAE's strategic advantages, including its prime location and world-class infrastructure, to bolster regional operations and enhance business opportunities across the MEASA region.

How MBG Corporate Service can help you expand?

MBG Corporate Services specializes in providing end-to-end support for foreign companies looking to establish their presence in the UAE. With over two decades of experience and an in-depth understanding of the UAE’s regulatory landscape, we simplify the business setup process by managing legal documentation, licensing, and compliance requirements.

Our team ensures that your expansion is seamless, cost-effective, and aligned with the latest regulatory changes, such as the recent abolition of the AED 50,000 bank guarantee.

By partnering with us you can take full advantage of the UAE’s dynamic business environment while focusing on what matters most—your core operations.

Contact us today to start your journey in the UAE market!