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Should businesses leave the UAE: analysis of risks and opportunities

Should businesses leave the UAE analysis of risks and opportunities - Makebiz

In recent years, the United Arab Emirates has attracted numerous entrepreneurs due to its strategic location, favorable tax policy, and stable economic environment. However, the military conflict in the Persian Gulf, which began in late February 2026, has become a serious challenge for businesses with interests in this strategically important region. In conditions of instability, companies are forced to reconsider their operations and assess the feasibility of maintaining their presence in the country. In this article, we will examine the key aspects that can help entrepreneurs make informed restructuring decisions.

Assessment of risks

First of all, it is necessary to carefully assess the risks associated with the current situation. The following factors should be taken into account:

1. Political instability. Military conflicts often lead to unexpected legislative changes, which may affect business operations.

2. Economic consequences. The conflict may cause currency fluctuations, rising commodity prices, and reduced demand for certain goods and services.

3. Social factors. Increased social tension often negatively impacts the workforce and the overall business climate.

In this regard, it is recommended to analyze the following aspects:

1. Level of economic substance

It is important to understand where key decisions are made and where directors and key employees are physically located. If the core management team is concentrated in the UAE, leaving the country may result in serious operational consequences.

Attention should also be paid to sales volume, client base, business partnerships, and market position. If your company has already established a strong presence in the local market and built a significant customer base, relocation may negatively affect the business. It is also recommended to evaluate the impact on your reputation among local partners and clients.

2. Corporate tax residency status

The UAE is known for its attractive tax system, including a zero corporate income tax rate for many types of activities. If key employees relocate to another country while continuing to manage a UAE company remotely, there is a risk that the company could be recognized as a tax resident of the new jurisdiction. As a result, the business may face double taxation, significantly increasing financial costs.

Accordingly, it is necessary to evaluate how leaving the country may affect the company’s tax obligations in the new jurisdiction and what incentives may be available.

3. Personal tax residency status

If your business involves foreign employees or shareholders, it is important to consider the personal tax implications. Prolonged absence from the UAE may lead to the loss of residency status, which in turn may affect the taxation of worldwide income. In the new country of residence, all income may become taxable, whereas in the UAE non-commercial personal income is generally not subject to taxation. This is especially important for individuals receiving dividends, royalties, or interest income.

4. Contractual obligations

All existing contractual obligations arising from an exit from the region should be carefully reviewed. This includes agreements with clients, suppliers, and business partners, as well as lease agreements and other commitments.

Unexpected structural changes may result in disputes with counterparties regarding breach of obligations. Restructuring may also create additional legal costs and potential penalties. Therefore, it is essential to review all contractual obligations in advance and notify partners of possible changes.

5. Banking infrastructure

Local banks provide a wide range of services, including financing, foreign exchange operations, and support for international trade. If relocation is being considered, it is important to assess how the banking system will operate in another jurisdiction and what alternatives will be available for the business.

Opening additional accounts in stable jurisdictions is currently one of the fastest and least disruptive protective measures available. This can help ensure the financial security of the business even if the company changes its structure or place of incorporation.

Restructuring options

Businesses that already maintain minimal physical presence in the UAE and rely on outsourcing are generally less exposed to negative consequences. For example, business models that do not require large teams or expensive office premises often continue to operate steadily. This creates opportunities for companies seeking to reduce risks while maintaining access to UAE markets.

If it is decided that continued presence in the country is no longer practical, several restructuring options may be considered:

  • Redomiciliation. This process involves transferring the company to another jurisdiction while maintaining its legal identity. However, not all UAE free zones permit redomiciliation. The process may take several months and requires full corporate readiness, making it a more complex and lengthy solution.
  • Establishing a new structure. A faster option may involve registering a new company in another jurisdiction and subsequently transferring assets and functions. Company registration may take only a few working days, although opening a bank account can involve significant time and financial costs.
  • Structural diversification. Maintaining the UAE company while simultaneously establishing entities in other jurisdictions is often the optimal solution. This may include opening additional bank accounts and using payment agent networks. Such an approach helps minimize risks while preserving access to UAE and international markets.

Hong Kong as an alternative option

If, after evaluating all factors, you conclude that relocation is unavoidable, it is important to understand that there is currently no direct alternative capable of fully replicating the unique combination of factors that made the UAE so attractive. However, based on our experience, Hong Kong appears to be one of the most suitable alternatives for businesses focused on international trade and holding structures.

Hong Kong offers a territorial taxation system that allows trading income earned outside the jurisdiction to remain untaxed. This makes it attractive for businesses operating internationally. In addition, the predictable regulatory environment and English common law system make the jurisdiction transparent and manageable.

However, it should also be taken into consideration that the presence of Russian beneficiaries may significantly complicate the process of opening bank accounts. Many businesses facing this issue choose to open accounts in other countries or use payment systems instead, which should also be considered when planning the transition.

Therefore, in conditions of instability in the UAE, companies should not only react to changes but also proactively develop contingency plans. Before making a decision to exit the market, it is recommended to conduct a thorough analysis of all relevant factors, taking into account the company’s unique circumstances, resources, and objectives.

It is important to understand that the right restructuring strategy can help not only minimize risks but also create new opportunities for growth and expansion in other jurisdictions.

Consultations with Makebiz specialists can help businesses make the right decision, while ongoing cooperation may also ensure a smooth transition to another jurisdiction. 

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