United Arab Emirates: The Two Sides of the "Tax-Free Paradise"

In 2025, the uncertainty brought about by the US tariff policy has cast a persistent shadow over global economic and trade exchanges, posing unprecedented challenges to Chinese enterprises going global.

In the face of each shock, Chinese enterprises have always demonstrated greater flexibility and resilience, finding new ways out. From Southeast Asia to Mexico, and now to the Middle East, enterprises seek business opportunities in the gaps of policy changes, and look for certainty in uncertainty, turning each external shock into an opportunity to layout new markets.

In the Middle East, the UAE market has shown particularly prominent performance. It is estimated that by 2030, the bilateral trade volume between China and the UAE will reach 200 billion US dollars.

As the first Gulf country to establish a strategic partnership with China, on January 1, 2024, the UAE officially became a full - fledged member of the BRICS. In the same year, the two countries signed and exchanged 19 cooperation agreements and memorandums of understanding to promote bilateral cooperation in areas such as the Belt and Road Initiative, investment, trade, and technology.

Against the backdrop of the increasingly close cooperation between the two countries, how can emerging economies find investment entry points in the UAE? What are the compliance risks in terms of law, finance, and talent that need attention behind the preferential policies? How can enterprises build an organic business ecosystem locally?

With these key issues that concern overseas - going enterprises highly, recently, 36Kr and Qiantang Construction Investment Group jointly held the 2025 "From 'Ingenuity' to the 'World'" Overseas - Going Conference. Relevant UAE units, overseas - going service providers, and representatives of enterprises going to the Middle East discussed the investment opportunities in the UAE and overseas investment cooperation models at the sub - forum "Investing in BRICS" - Country - to - Country Cooperation Matching Meeting in the afternoon of that day.

1. Chinese Automobile Enterprises "Rush to" the "Blue Ocean" of the UAE Market

In recent years, the UAE has been promoting energy transformation. The new energy vehicle industry has also been included in the key support areas, providing broad market space for Chinese enterprises. However, from the perspective of market layout, Chinese automobile enterprises are still in the initial stage. Currently, only three automobile enterprises, XPeng, ARCFOX, and IM Motors, have entered the UAE, and they have been in the market for less than two years, with sales of only a few hundred units. In contrast, among the top 10 automobile sales in the UAE in 2024, the traditional fuel - powered vehicle brand Toyota ranked first with 84,000 units, followed by Nissan and Hyundai. In the electric vehicle field, Tesla dominated with sales of 11,600 units.

In the view of Liu Yanjun, the vice - president of Zanmei Automobile, the under - performance of Chinese automobile enterprises is reasonable to some extent. On the one hand, Chinese automobile enterprises have entered the UAE market relatively recently, and market penetration is still insufficient. On the other hand, the consumption driving force for new energy vehicles locally is also weak. Not only is the infrastructure (such as charging piles) not yet perfect, but the local fuel price is only about 4 yuan per liter in RMB, and the advantage of new energy vehicles over fuel - powered vehicles is not obvious.

However, many local dealers have seen the strong future demand for high - end new energy vehicles. Vera Tang, the vice - president of the overseas business line of Interlip Group, observed that some local leading dealers are vying for the distribution rights of Chinese electric vehicles, and a certain leading Chinese luxury electric vehicle brand series (luxury electric vehicles priced over 400,000 yuan) also has a strong intention to enter the UAE market.

"In the future, the prospects for Chinese automobile enterprises in the Middle East are bright, but Chinese automobile enterprises of different sizes need to find differentiated tracks when entering the market." Compared with some leading automobile manufacturers' layout in the fields of unmanned driving and intelligentization, niche brands such as Zanmei Automobile choose to focus on segmented markets with lower investment costs and quick returns in a short time.

Liu Yanjun revealed at the conference that in the first half of 2025, Zanmei Automobile invested in and built a commercial vehicle assembly plant in Saudi Arabia, with an initial production capacity of 5,000 units, focusing on commercial vehicles of 6 - 8 cubic micro - vans. At the same time, it also strengthened the layout of charging piles and after - sales service stations, seizing the segmented fields through the "ecosystem driving the market" model.

He also specifically reminded that localized technical adaptation is also an indispensable challenge for automobile enterprises going to the UAE. The extremely high - temperature weather (50 - 60°C) that often occurs in the UAE places extremely high requirements on the battery heat - resistant system, while the operating environment of new energy vehicles in China generally does not exceed 40 degrees. The battery heat - resistant system needs to be optimized accordingly.

2. Compliance "Traps" Behind Policy Dividends

Many foreign enterprises choose to invest in the UAE, largely attracted by its open and friendly investment environment. For example, some free trade zones offer preferential policies such as a corporate income tax as low as 0 - 9%, 0% personal income tax and capital gains, and exemption from corporate tax. However, many enterprises may overlook that transactions between a company registered in a free trade zone where 0% corporate income tax can be enjoyed and its affiliated companies in the taxable area may be taxable. Otherwise, they may easily be subject to back - tax collection or even fines.

In this regard, Bian Jiang, the vice - president of Huizhi Group, analyzed that the basic principle in the field of international taxation is to primarily follow the OECD principle. In 2023, Dubai's new tax law introduced principles related to transfer pricing. If enterprises ignore the importance of transfer pricing in related - party transactions between the non - taxable area and the mainland area, problems may arise. From a more detailed technical perspective, transactions between affiliated companies need to comply with the fair market value, avoiding transferring profits from high - tax areas to low - tax areas through related - party transactions, thus eroding the tax base.

So how can enterprises avoid risks and ensure compliance when conducting transactions with affiliated companies? Bian Jiang, the vice - president of Huizhi Group, summarized 3 key points:

• Enterprises should make a pre - judgment on the rationality of local related - party transactions and do relevant preparatory work;
• The non - taxable area company can act as the brand - holding entity, and the taxable area company as the sales entity. The sales entity needs to undertake substantial sales functions, rather than simply for settlement. Otherwise, offshore companies or "shell companies" established just for book - keeping are likely to be investigated;
• For free trade zone enterprises to obtain the 0% corporate income tax preference, in addition to registering a company in the free trade zone, they also need to meet the criteria for "qualifying income". When it comes to transactions with the taxable area, they cannot both enjoy the tax policy and fail to fulfill their tax obligations. Since the criteria for "qualifying income" allow for offshore business, Bian Jiang suggests that enterprises can also introduce a third - country non - affiliated party in the sales path, such as adopting a sales path of "A to Hong Kong, and then from Hong Kong to B".

In addition to the "tax exemption trap", Li Biliang, a partner of PwC China's international tax practice, supplemented from a broader perspective of tax compliance. Enterprises need to consider the overall tax arrangement even when they have not yet made a profit in the target country. Because enterprises can often enjoy many incentive policies in the entry stage and basically do not need to pay taxes. However, the tax cost has actually been formed and will gradually become prominent in the subsequent holding, operation, and exit stages.

In addition to compliance issues at the tax level, the compliance of talent employment also needs to be focused on. Vera Tang mentioned that enterprises are often cautious when establishing entities overseas. Therefore, in the pre - preparation stage, they can adopt the "employment without entity" model (i.e., the "nominal employer") that is very popular in the international market. Business cannot stop, and talent cannot wait. This model enables enterprises to carry out operations without establishing an entity during the construction of the tax structure. Through the nominal employer program, enterprises' overseas talent recruitment is no longer restricted by time, region, or development stage, truly achieving "talent competition" on a global scale.

For example, when a leading consumer electronics enterprise first entered the UAE and had not yet established an entity locally, it first adopted the "employment without entity" model. Assisted by Interlip, it recruited a local person - in - charge. Within less than a year of employment, this person promoted the enterprise to become a popular brand in the local consumer electronics category, helping the enterprise quickly start talent allocation and business promotion.

When an enterprise has completed its pre - planning, established an entity, and has strong strength, it needs to pay more attention to labor law compliance in terms of employment. For example, labor contract documents are best in Arabic, and local culture and work - rest habits should be respected (Dubai implements a 4.5 - day workweek, and employees can enjoy 2.5 days of rest, etc.).

In addition to the explicit compliance requirements in terms of taxation and talent employment, the "implicit compliance" rules behind local religious culture also need to be understood and adapted to by enterprises in advance. Lily, the director of the marketing department of the Middle East Bridge, emphasized that religious culture in the Middle East market is not a "soft background" but a hard requirement at the institutional level.

For example, in Saudi Arabia, Ramadan not only involves employees' dietary taboos, but the working hours of Muslim employees are shortened to 6 hours a day, yet enterprises still need to settle their full salaries. In the UAE, all catering enterprises must obtain official certification, and imported food and raw materials must meet the halal standard to enter the country. In areas such as Abu Dhabi and Sharjah, the sale of alcohol is strictly restricted.

3. Overseas Financial Solutions: Local Currency Settlement, Overseas Cash Pools, and Islamic Bonds

In the process of enterprises "going global", challenges in the financial fields such as overseas financing and cross - border settlement have always been present. For the new energy vehicle industry going to the UAE, the cash - flow pressure caused by the long capital chain cycle is a prominent problem. "At the front - end client side, there are difficulties in foreign exchange settlement, and at the back - end, enterprises themselves bear relatively large capital pressure," Liu Yanjun said. Different from the situation in China, in the overseas market, suppliers often do not accept payment terms, and automobile enterprises need to settle in full, which places higher requirements on enterprises' capital turnover. It takes 45 - 60 days to transport finished vehicles from China to overseas, further exacerbating the capital occupation pressure.

The African market, which Zanmei Automobile mainly targets, has long been in a trade deficit, with a shortage of US dollar foreign exchange reserves. Coupled with the fact that automobiles are high - value commodities, customers often face the helpless situation of lacking US dollars for payment.

In this situation, local currency settlement has become a supplementary solution. On May 27 this year, China and the UAE signed a memorandum to launch a pilot project for direct RMB - dirham settlement. Li Biliang of PwC said that this shows the UAE's positive willingness to deepen cooperation with China and also helps enterprises reduce settlement costs and save a large amount of expenditure in the exchange process. However, it should be noted that since the dirham is closely pegged to the US dollar, the advantage of local currency settlement is not significant from the perspective of exchange rate fluctuations, and its benefits are more reflected in the simplification of the settlement process and cost reduction.

For large multinational groups with a global layout, building an overseas cash pool can effectively reduce capital settlement costs. Li Biliang mentioned that recently, some enterprises have reduced capital settlement costs by establishing a treasury center in Hong Kong. However, when building such a cash pool, tax compliance needs to be taken into account. Cross - border interest flows will involve withholding tax and corporate income tax. Therefore, while reducing settlement costs and hedging exchange rate risks, a solution to balance tax costs needs to be found.

In this round - table forum, Bian Jiang introduced a characteristic tool suitable for the local financial environment in the Middle East - Islamic bonds, which are widely used in Islamic countries in the Middle East and Southeast Asia.

The main advantages of Islamic bonds are:

• The collateral is mostly heavy assets such as real estate, infrastructure, and energy (such as ports and photovoltaic power plants), and investors have a strong ability to trace physical assets;
• Due to the excess liquidity in the Islamic market, the financing cost is 10 - 15 basis points lower than that of the international standard debt market;
• The bond term is usually 3 - 5 years or even more than 10 years, providing stable and continuous capital support for enterprises;
• It is in line with the green development policy, and enterprises issuing green Islamic bonds can obtain better financing conditions and government support.

Bian Jiang emphasized that Islamic bonds are just one of the enterprise financing tools. Enterprises still need to combine treasury centers, cross - border cash pools and other methods to achieve diversified financing, so as to reduce the pressure and cost of capital use under the premise of meeting the foreign exchange control requirements of the home country and the host country.

4. Localization Strategies for Talent, Supply Chain, and Partners

Globalization and localization are two sides of the ultimate goal of enterprises going global. At the starting point of going global, enterprises should be clear: whether to be a "sales - only company" that only makes a superficial attempt or to aim to be a "globally - born enterprise". This will directly affect the future overseas tax structure, talent selection, and even the overall business strategy.

Vera Tang's view on talent selection is that in the initial stage of channel - going global, the core goal of enterprises is to open up the market and sell products. At this time, allocating Chinese marketing talents familiar with Chinese business can often quickly promote work. When it comes to the brand - going global stage, when in - depth development of the local market and enhancement of brand influence are needed, it is necessary to recruit talents who understand the local culture and have local awareness. In the mature stage of organizational - ability going global, such as building a factory overseas, enterprises need to build a complete local - ized team. If they are still regarded as a "Chinese enterprise going global" rather than a global enterprise integrated into the local area at this time, it means a failure in the talent strategy.

Specifically in the UAE market, compared with countries like Saudi Arabia that have requirements for the "local employment ratio", Dubai is more lenient in issuing work visas. Enterprises do not need to deliberately hire local employees to meet the quota and can more flexibly select talents that truly match the business needs.

Therefore, the core of localization is actually internationalization. In cities like Dubai, local nationals only account for about 10% of the population, and the rest are mostly foreign workers or expatriate employees with work visas or golden visas. Therefore, the local culture, education, and language environment are highly internationalized. The person - in - charge of the aforementioned leading consumer electronics enterprise in the UAE is a German who has settled in the local area for many years and has a deep understanding of the local market. Such "international talents" are actually the "locals" that enterprises need.

In addition to professional human resources agencies, the localization channels that enterprises can seek help from in the UAE also include: reaching local nationals through government - led talent matching platforms; cooperating with universities such as the University of Sharjah and the University of Dubai; actively using organizations such as the Dubai Chamber of Commerce and Industry to release information on local employment trends and talent recruitment needs. Lily also suggests that enterprises participate in their activities to increase local exposure.

For manufacturing enterprises, improving the supply chain and after - sales system is particularly crucial for building a local ecosystem. Liu Yanjun believes that the core lies in in - depth participation in local market operations. Taking the African market as an example, due to the relatively low per - capita wage (about 800 - 1,000 yuan in RMB), limited purchasing power, and insufficient charging facilities, consumers have many concerns about after - sales support and vehicle safety (such as whether the vehicle will catch fire). The acceptance of new energy vehicles in many countries is still at a low level, similar to the early stage of the development of the new energy vehicle industry in China.

Facing such real - world challenges, Zanmei Automobile chose to "get involved personally", personally layout charging piles, and improve the after - sales network. It gradually cultivated the market through heavy - asset investment such as building its own factory and holding its own assets. These practices are different from the practices of domestic enterprises that focus on product strength, create popular models, and deeply develop unmanned driving and intelligentization. He shared: "In the initial stage of the overseas market, enterprises need to make long - term efforts, spending 1 - 2 years or even longer to cultivate the market and drive supporting supply - chain enterprises to jointly improve the overseas ecological layout."

Building a local ecosystem obviously cannot rely solely on the strength of enterprises themselves. It is necessary to rely on the resource support of local ecological partners. Li Biliang said that when considering cooperation methods with local