The United Arab Emirates is an important partner of Italy in all areas: from the political (through constant dialogue on bilateral issues and regional security dossiers), to the cultural (the first Italian Cultural Institute in the Gulf area was recently inaugurated in Abu Dhabi), to the economic.
In fact, in recent years, Dubai and Abu Dhabi have represented For many Italian companies, a large outlet market, especially for the luxury, furniture, and construction sectors, so much so that in 2022 the UAE became the MENA Area's top market outlet for Italian exports. And according to the most recent data, then this country there are now more than 600 Italian companies, both large-scale and small and medium-sized enterprises.
If you are reading this article, it is probably because You also identified the United Arab Emirates as the new frontier for Italian exports, capable of generating good turnovers and profits, but you may have wondered where to start and how to go about selling in Dubai and Abu Dhabi. In this article, therefore, we will look together at the gry opportunities offered by this country, and then study in detail which sectors are the most promising, to end our analysis with the latest entry arrangements and requirements imposed by the Emirati government.
As mentioned in the opening of the article, the UAE is a very important destination for Made in Italy, especially in the fashion, luxury, furniture and construction sectors. And thanks to recent reforms regarding foreign investment, opportunities for Italian SMEs have multiplied.
Despite the pandemic crisis, Italy managed to maintain its market share in the UAE, registering a total export share of over €3.8 billion, remaining just behind Germany but surpassing France and Spain. This figure then grew significantly in the post-pandemic period, demonstrating the importance of this country for Italian exports: in the 2021 it came down to 4.8 billion, in the 2022 that figure came to 6.2 billion, exceeding the previous year's values. Finally, Comparing the period from January 2023 to August 2023, the export quota has already exceeded that achieved in the same period at 2022 (€4.18 billion versus €3.8 billion in the previous year).
In addition to the numbers just seen, which project Italy as one of Dubai's main trading partners, the Emirates is implementing important economic reforms to attract more and more innovative companies, including Italy's own.
In detail, the emirate government's new program sets as the country's goal to become a major global investment center for new technology and services activities. For this reason, To encourage precisely foreign investment, the UAE enacted in 2021 a new reform, which abolishes the previous mandatory requirement of an Emirati shareholding of at least 51% in a foreign company on the country's soil, leaving at most 49% of control to the foreign company.
In addition, the requirement for joint stock companies to have an Emirati president and a majority of the board of directors is also removed. However, companies with a strategic impact on the Emirati economy, such as those operating in the oil & gas sector, remain excluded from this reform.
Last but not least, the UAE presents. A taxation system that is extremely attractive to foreign companies, as well as having Free Trade Zones, which are still lower-taxed.
In fact, the UAE government has introduced a federal tax on corporate profits that will be effective for fiscal years beginning June 1, 2023. In detail, corporate profits over 375,000 Dirhams (about 90,800 euros) are taxed at 9%, therefore, at a rate that is the lowest in the world in corporate taxes. In contrast, the rate remains 0% for taxable income up to AED 375,000; while a different tax rate has come into effect for large multinationals that meet specific criteria established with reference to the OECD Project's “Pillar TWO.”.
What about VAT? The value-added tax was introduced starting in 2018 along with Saudi Arabia. The percentage to date is still very low:
- 5% for standard goods;
- 0% for major supplies, such as for the health care sector or public transportation.
VAT returns require registration with the VAT tax authority. However, registration can be compulsory or voluntary. The minimum requirement to apply for voluntary VAT registration are a minimum annual turnover of at least 187,500 dirhams (about €43,600); compulsory VAT registration, on the other hand, is triggered upon reaching an annual turnover of 375,000 dirhams (just over €87,000).
Data that therefore leave room for few interpretations: Made in Italy in the United Arab Emirates is increasingly appreciated, and Exporting to this country is the strategy adopted by many Italian companies to increase their turnovers and profits.
But what products to sell in Dubai and the UAE? Analyzing the data published by the Ministry of Foreign Affairs, we can make a real ranking of the most promising sectors for Italian exporting companies.
At first place place themselves i jewelry, the costume jewelry and related articles, with 729 million euros in exports between January and August 2023, representing the leading sector of total Made in Italy exports, with nearly the 20% Of the total.
At second place we find general purpose machinery and equipment, which with 262 million euros accounted for the 6.3% Of total Italian exports. Closing the podium is the fashion (clothing items, excluding fur clothing), with 230 million euros in value (5.5% of the total and a +0.7% over 2022), but excellent prospects are also offered by the’soap and detergent industry, of cleaning products, perfumes and cosmetics (175 million euros in total). The NEW 2023 bears the name of the footwear, who are awarded a good 4% Of Made in Italy exports to the United Arab Emirates.
As seen, selling Made in Italy products in Dubai and the Emirates has enormous advantages for Italian companies interested in expanding their horizons and accelerating their growth process. But, in fact, How to export to this country?
The options available to businesses are many, between digital channels and traditional offline sales channels. Let us therefore see the main ones:
(a) Have a business license in the Emirates with ID verification for legal purposes;
(b) products must be stored in the UAE , to ensure that Amazon Can pick up the goods within three days;
(c) a account registered in the UAE must be tied to the company holding the business license or the company's legal entities. Alternatively, an account can be opened with a local agent authorized by Amazon.
Made in Italy continues to be highly valued in the United Arab Emirates. Italian products are attributed positive characteristics such as versatility, high quality, and unique design, inimitable in the rest of the world, and harnessing this traction is a necessary condition for creating a competitive advantage for your business.
Internationalizing in the Emirates may therefore be the winning choice in 2024 as well to reinvigorate the future of your business-an almost obligatory path for the chance to consolidate your growth path both in terms of profits and brand recognition.
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Italian exports to the United Arab Emirates increased from 4.8 billion euros in 2021 to 6.2 billion in 2022, when the UAE became the first outlet market for the MENA region for Italy. Between January and August 2023, they reached 4.18 billion, compared to 3.8 billion in the same period in 2022. There are more than 600 Italian companies operating in the country.
The main sector is that of jewelry, precious metals and related items, with 729 million euros between January and August 2023, almost 20% of Italian exports to the UAE. Following are general-purpose machinery with 262 million (6.3%) and clothing with 230 million (5.5%). Good prospects are also expected for soaps, perfumes and cosmetics (175 million) and footwear, around 4%.
No, since 2021 a reform on foreign investments has abolished the requirement of an Emirati participation of at least 51% in foreign companies. The requirement for SPAs to have a president and a majority of the Board of Directors from Emirati nationals has also been eliminated. Strategic impact companies such as those in the Oil & Gas sector remain excluded.
The federal profit tax applies to fiscal years starting June 1, 2023: 9% on the portion over 375,000 dirhams and 0% up to that threshold. For large multinationals, criteria related to the OECD’s Pillar Two apply. VAT, introduced in 2018, is 5% for standard goods and 0% for supplies such as healthcare and public transport.
To sell on Amazon.ae, which has over 75,000 merchants, an Emirati commercial license with ID verification and products stored in the UAE is required, so that Amazon can withdraw them within three days. A registered UAE account in the name of the company holding the license is also required. Alternatively, the account can be opened through a local agent authorized by Amazon.
A SME can rely on a Temporary Export Manager, who operates in the territory as the company’s interface, usually for at least a year. Alternatively, it can gradually establish a presence in the market through commercial missions, industry fairs, partnerships, supply agreements, or spot sales. After achieving initial results, it can establish a company in the UAE, opening an office or a warehouse.
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