Regional Focus

Doing business in the United Arab Emirates

Published: Jul 2011

Oil-rich and rapidly diversifying

The seven Trucial States of the Persian Gulf – as they were then known – gained their independence from Britain in 1971. The states subsequently adopted a federal constitution, referring to themselves as the United Arab Emirates (UAE).

Country map of the United Arab Emirates

Key facts

Geography and society
Population growth rate:
Official language:
Capital city:
Abu Dhabi
Time zone:
GMT +4
Land boundaries:
Oman (410km) and Saudi Arabia (457km)
Emirati dirham (AED)
GDP per capita:
$252.7 billion (2010 est.)
Member of:
Fiscal year:
Gregorian calendar year
Financial capital:
History and politics
2nd December 1971
Government type:
Federation; certain powers delegated to the federal government and others reserved for individual emirates
Chief of state:
Khalifa bin Zayed Al Al-Nuhayyan
Prime Minister:
Mohammed bin Rashid al-Maktum
Legal system:
Mixed Islamic Shari’a law and civil law
Country credit rating
  • AA+ (The Emirate of Abu Dhabi)
Trading partners
Top five import sources:
China, India, US, Germany, Japan.
Top five export destinations:
Japan, South Korea, India, Iran, Thailand.

The UAE, consisting of Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain, joined the World Trade Organisation (WTO) in 1995. As a result, the emirates signed up to a free enterprise agenda and have since sought to attract overseas investment by establishing a number of free trade zones (FTZs).

These zones exempt the businesses operating in them from corporate tax and reduce the tariffs on their imports and exports. The Dubai International Financial Centre (DIFC), which was established in 2004, is perhaps the best-known FTZ in the region.

Until 1950, when oil was struck in the north-east of Abu Dhabi, the economy of the emirates was largely based on fishing and pearl harvesting. Today, the UAE sits on 7% of the world’s oil and 4% of its natural gas reserves. The country’s oil industry has attracted an influx of workers from India, Pakistan and Bangladesh. In fact, over three-quarters of the population is now of non-emirati origin.

The vast wealth that the emirates have derived from their oil exports has allowed them to develop their public infrastructure and meant that local residents enjoy some of the highest per-capita incomes in the world. This has not prevented the member states from seeking to diversify their economies, however. This is particularly true of Dubai, which, with far less oil than neighbouring Abu Dhabi, has promoted itself as a tourist destination and financial centre. To this end, the government licensed the NASDAQ Dubai, the stock exchange then known as the DIFX, in 2005.

With credit cheap and plentiful during the 2000s, Dubai experienced a property boom throughout the decade. In 2009, though, the emirate’s flagship investment vehicle, Dubai World Group, and Naheel, its highly-leveraged property development arm, asked creditors for a ‘stand-still’ on their debt and threatened to default if maturities weren’t extended by six months. In 2010, after much wrangling, creditors finally agreed to restructure the $25 billion they were owed, converting $8.9 billion of the debt into equity and leaving Dubai World to pay the remaining $14.4 billion over a revised payment schedule. The debt will be repaid in two tranches: $4.4 billion over five years and $10 billion over eight years.

The problems associated with the property bubble aside, Dubai and the other emirates have continued to thrive. Demand is growing for Shari’a-compliant banking products and the Islamic banking sector continues to grow. In fact, 16% of all banking assets in the UAE are Islamic.

Because the UAE is a member of many international bodies, including the World Trade Organisation (WTO) and the International Monetary Fund (IMF), its legal and regulatory framework broadly resembles that of many Western European countries.

  • The banking sector is supervised and regulated by the Central Bank of the United Arab Emirates according to the legal framework laid out in the country’s banking law of 1980. The central bank is divided into seven departments: Banking Supervision and Examination, Banking Operations, Research and Statistics, Administrative Affairs, Financial Control, Treasury, and Internal Audit.

  • The UAE is working with the Institute of International Finance (IIF) to improve existing corporate governance guidelines and monitoring. The country’s Central Bank has some of the most respected anti-money laundering systems and policies in the world, which focus on combating terrorism. All banks and financial institutions operating in the UAE are required to report suspicious activities directly to the Central Bank.

  • Financial institutions in the UAE banks are among the best capitalised in the world. Stringent capital adequacy requirements set by the UAE Central Bank mean that local banks already meet the requirements set by the Bank for International Settlements (BIS) as part of the Basel III accords. S&P, the ratings agency, reported in 2011 that the region’s bank capital adequacy ratios are “in the high teens and in some cases up to 20%”.

  • All companies listed on the Abu Dhabi Securities Exchange (ADX) are required to publish IFRS financial statements. Note that companies from UAE Emirates other than Dubai are listed on the ADX, in addition to Abu Dhabi companies. All companies listed on the Dubai Financial Market (DFM) and NASDAQ are required to publish IFRS financial statements.

  • All banks in the United Arab Emirates are required by the central bank to publish IFRS financial statements. Although IFRS is not legally required for unlisted companies other than banks, it is a considered best practice for these companies to adopt IFRSs.

  • The Commercial Companies Law in the UAE regulates the activities and the registration of foreign companies looking to establish a presence in the UAE. This law applies not only to foreign companies carrying out their main business activities in the UAE, or those that have their headquarters in the country, but also to foreign companies looking to set up a branch office. Local legislation in each emirate may also apply.

  • Neither the UAE nor the individual emirates impose foreign exchange controls. The Emirati dirham is pegged to US dollar at a rate of $1: AED 3.6725. There has however been talk of a single currency for the six countries of the Gulf Co-operation Council: the UAE, Saudi Arabia, Bahrain, Kuwait, Oman and Qatar.

  • Foreign Institutional Investors (FIIs) can own up to 49% of a UAE business. If the business operates in a FTZ, a 100% stake is allowed.

Taxation framework

There is no single federal tax regime in the UAE. However, five of the seven emirates (Abu Dhabi, Ajman, Dubai, Fujairah and Sharjah) have similar regimes. Professional tax advice should be sought in the region, but the main taxation points which apply to the UAE are:

  • Except for oil and gas exploration companies and branches of foreign banks, corporation tax is not imposed.

  • Withholding tax is not imposed, neither is stamp duty.

  • No transfer pricing or thin capitalisation rules apply.

  • The UAE currently has more than 30 double taxation treaties in place for income and/or capital together with a growing number of shipping and air transport treaties.

  • Municipal taxes are imposed on hotel services and income derived from rental of property. Annual rental income of residential and commercial tenants are taxed at 5-10%.

Treasury activities

Local banking sector

The UAE’s banking sector has been a major beneficiary of the country’s strong economic growth in recent years. Historically, the government has dominated the UAE’s banking sector, which currently consists of a total of 52 banks (24 domestic and 28 foreign). The World Trade Organisation has encouraged the UAE to open up its banking sector to foreign banks. Although the central bank has started to issue more licences to foreign banks, the number of branches that they can open is restricted. Islamic banking continues to evolve in the Gulf region and the majority of banks operating in the UAE either have an Islamic subsidiary or offer Shari’a-compliant products.


The main payment methods in use in the UAE are as follows:

  • Cash

    – still the preferred choice for retail payments as it is estimated that only just over half of UAE residents have a bank account.

  • Credit transfers

    – used for high value payments and salary payments. Retail transactions can be processed through e-banking systems whereas inter-bank transfers are arranged using the Central Bank FTS system and SWIFT messages.

  • Direct debits

    – usage is limited but growing for low-value frequent payments, such as utility bills. Direct debits are not carried out across the Central Bank and as such, parties to a direct debit must have a bilateral agreement in place and generally use the same bank. Most systems were introduced within the last five years.

  • Cheques

    – these remain one of the major cashless payment methods and the value of cheques in the UAE is typically high.

  • Card payments

    – usage has increased significantly but there have been high instances of card fraud and the Central Bank is considering a move across to the chip and pin system.

  • e-Dirham cards

    – sometimes referred to as a ‘secure electronic purse’, the e-Dirham card is a government initiative that allows customers to pay for goods and services without cash. The fixed value e-Dirham card is available in a number of denominations – from 100 to 5,000 dirhams. They cannot be re-used once the balance has been spent. The government client card is intended for people who wish to make frequent cashless payments. Initially used by local governments to collect revenues, the system is now also used in the private sector. Unlike its fixed counterpart, the government client card can be re-used.

  • Mobile e-payments

    – a relatively new but growing technology that enables customers to pay for items and transfer money via their mobile phone handsets.

Clearing and settlement

A clearing house in maintained by the Central Bank in each emirate, and all banks are clearing members. The UAE’s Central Bank operates a number of clearing and settlement systems:

  • The UAE Funds Transfer System (UAEFTS)

    The UAE Funds Transfer System is the Central Bank’s real-time gross settlement system for funds transfer between banks, cash withdrawal/deposit pre-authorisation, account status monitoring and account reconciliation facilities. The system, which was developed in-house to maintain full control over the facilities, reduces systemic risk, eliminating the need for Central Bank intervention in the inter-bank payments. This system is being made mandatory later in 2011.

  • Image Cheque Clearing System (ICCS)

    Image Cheque Clearing System was introduced in July 2008 and features cheque truncation and T+0 settlement. This means that settlement takes place on the same day that the cheque is presented into clearing. According to figures from the Central Bank, ICCS processes 97,000 items and AED 3.8 billion worth of transactions each day.

  • International Bank Account Number (IBAN)

    The UAE Central Bank has taken steps to make the International Bank Account Number (IBAN) applicable across UAE. The move is aimed at supporting the federal government’s strategy, which calls for adopting modern technology with a view to boosting systems and improving the services provided to bank customers


    UAESWITCH was introduced in 1996, the UAESWITCH system comprises 45 member banks and over 3,200 ATMs. Through its connection to GCCNET, UAESWITCH allows cardholders to use ATMs throughout the Gulf region.

  • The Wages Protection System (WPS)

    The Wages Protection System was introduced by the Central Bank in conjunction with the Ministry of Labour in September 2009. The system intends to provide a safe, efficient and robust mechanism to allow the timely payment of employees’ wages. All financial institutions registered with the central bank can act as agents to this system, and this has resulted in significant increase in efficiency and automation of salary payments.

Case study

DUBAL (Dubai Aluminium Company Limited)

Hussain N H Al Sayegh

Treasury Manager, DUBAL

One of the largest non-oil contributors to the economy of Dubai.

The challenge

DUBAL, one of Citi’s key clients in the UAE, grappled with two cash management challenges. The lack of a centralised electronic payments system meant that payments to DUBAL’s suppliers had to be made manually through physical signing and delivery of bank letters. Also, DUBAL held over 50 multi-currency bank accounts spread over eight relationship banks which created a logistical problem both in terms of its consolidated daily cash balance and timely, efficient reconciliation.

The solution

DUBAL has been a cornerstone client for Citi in UAE since 1996. Citi proposed a two-fold solution, both components of which used CitiDirect®. Firstly, DUBAL’s cumbersome payments system was shifted to electronic processing through CitiDirect® Online Banking, effectively eliminating the need for manual payments while also facilitating cross-currency payments. Secondly, DUBAL’s SAP enterprise software system was integrated with CitiDirect®. This eliminated the need for manual aggregation of a blizzard of papers from numerous banks for DUBAL to gain data visibility over its cash management position. It also enabled electronic automated bank reconciliations.

The result

By successfully integrating its systems with Citi’s, DUBAL now has online access, real-time visibility and control over its accounts, payments and reports. The new arrangement also gives DUBAL automated access to cross-currency payments. This has placed DUBAL as one of the most progressive companies in the region in terms of best practice treasury management. In addition, Citi is now DUBAL’s lead bank for all functional currencies (other than AED). The changes significantly reduced the time spent on bank reconciliation and increased straight through processing (STP) levels.

Hussain N H Al Sayegh, DUBAL’s Treasury Manager, says: “We evaluated similar solutions from other banks as well as Citi, but after consideration, we believed that Citi could deliver best practice in technology and excellent customer service. Now 99% of payments to suppliers are made electronically through CitiDirect. Instead of having two drivers constantly taking letters to the bank, we have only ‘half a driver’ doing the job. Also, processing has become faster and we know about problems more quickly. The whole system is more transparent.”

Case study


The challenge

JBF RAK LLC is a JV with the Ras Al Khaimah Investment Authority and has a capacity of 1200 tonnes per day for manufacturing polyester resin for packaging incorporating the latest technology. The facilities are located at Emirate of Ras Al Khaimah, U.A.E. JBF was looking to increase the efficiency of its trade cycle, specifically through reducing the time taken for export documentation to reach the confirming bank, and the time involved to resolve any discrepancies in order to more effectively manage its cash flow and ensure faster realisation of its trade receivables.

The solution

Citi positioned Direct Presentation®, which eliminated the need for physically delivering documents between JBF’s office in RAK and Citi’s office in Dubai. This solution enabled online presentation of documents, and for Citi to commence the document examination process within minutes of online document generation. Discrepancies could be resolved much quicker as documents no longer needed to travel back and forth between JBF and Citi. Supporting this foundation was Citi’s unique service model that consistently processed documents from within a few hours to one working day, compared to an industry average of four to five days. Export documents were processed more quickly, resulting in faster realisation of export receivables for JBF and a reduction in DSO by two to five days. Citi also conducted training sessions for JBF during the on-boarding process to facilitate a smooth transition.

The result

Through its recommended trade solution, Citi generated compelling economic value, reducing turnaround time to improve JBF’s receivables realisation efficiency and reducing aligned expenses.

Cash management

Domestic and cross-border cash pooling is permissible in the UAE but the concept of cash management is relatively new in the area. As such, some of the cash management products on offer are either not yet as sophisticated as in western countries or not widely available.

Interest is paid on call accounts but the majority of current accounts in the UAE are subject to local restrictions on interest. Accounts can however be held in both Emirati dirham (AED) and foreign currency, domestically and abroad:

Type of bank account Location Permitted Notes
AED Abroad Yes Convertible into foreign currency
Foreign currency UAE Yes
Foreign currency Abroad Yes
Non resident foreign currency UAE Yes
Non resident AED UAE Yes Convertible into foreign currency

Where paid, local interest rates are comparable to the US which results in many multinational companies centralising cash.

Other short-term investment options available in the UAE include time deposits in AED or foreign currency with tenors of one, two, three, six, nine or 12 months, certificates of deposit, repos and government issued bills, notes and bonds. Overdraft facilities are available for UAE companies and the central bank also provides overdraft facilities for commercial banks.

Key websites

Government website:
Central Bank of the UAE:
Emirates Banks Association:
Ministry of Economy:
Ministry of Finance and Industry:
Abu Dhabi Securities Exchange:
Dubaï International Financial Centre:

Citi’s capabilities in the UAE

Citi has been present in the United Arab Emirates since 1964 when the bank opened its first branch in Dubai. The bank is directly represented in several markets in the Middle East including the UAE, Egypt, Jordan, Lebanon, Qatar, Bahrain and Kuwait.

Citi’s Markets and Banking (CMB) division successfully combines a top-tier investment bank with world-class corporate banking services. Our investment banking group provides tailored and unique solutions to top corporations, financial institutions and governments worldwide, offering strategic and financial advisory services including acquisitions, mergers, divestures, financial restructuring, equity and fixed income products, loans, foreign exchange and cash management.

In line with its strategy of customising its products to local market requirements, Citi recently unveiled a suite of Shari’a-compliant banking solutions under the Treasury & Trade Solutions business designed to meet the working capital needs of its corporate clients.

Citi has a repertoire of award-winning, leading edge technology platforms like CitiDirect®, CitiConnect®, IntraLinks and Treasury Vision which are offered to a host of multinational, local corporate, financial institutions and public sector organisations. These platforms give clients in the UAE access to globally accepted tools to optimise liquidity and cash management, improve operational efficiency and risk management processes across their requirements spanning their entire working capital cycle.

Citi’s Treasury Services offer retail and corporate clients unique investment opportunities including Gulf currencies FX execution capabilities, access to Levant and North African markets, FX options capabilities on Saudi Riyal and Kuwaiti Dinar and FX swap capabilities in UAE Dirham up to five years. These are backed by structured, value-added solutions to meet customer hedging and investment requirements and an access to in-depth analysis and world-class research on regional and international markets.

Citi consistently ranks as the premier choice for cash management and trade services, foreign exchange products, portfolio products, corporate finance, investment management and custodial services in more markets, including the UAE, than any other bank according to industry surveys.

Citi has won several prestigious accolades in 2008 alone including the Best Treasury and Cash Management Bank and Provider for the Middle East from Global Finance and the Best Cash Management House in the Middle East from Euromoney.

Contact details:
Surendra Bardia
Treasury and Trade Solutions Head – UAE and Iraq
+971 (4) 604-4414

Sanjeev Ganjoo
Global Transaction Services Head – Abu Dhabi
+971 (2) 604 3060

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