Why Is UAE Regulation So Attractive For Online Trading Companies?

The United Arab Emirates has emerged as one of the most tax-friendly countries in the world, making it highly competitive on the global market. However, nowhere has this been more apparent than the financial sector, as the UAE is now home to numerous high-profile fintech firms.

The business-friendly climate in the country has made it incredibly convenient for brokerage firms and online trading fintechs to set up their operations in the UAE. Access to highly skilled workforce from all over the world makes it all the more convenient for companies to be domiciled in the UAE, particularly in the free zones of Dubai, and take advantage of the favorable regulatory and tax regimes.

There are several reasons as to why the UAE has emerged as one of the most attractive destinations for fintech companies and how the country leverages this position to compete on the global market, which we will discuss in further detail below.

Fintech regulations in the UAE

While the UAE is generally considered to be a business-friendly country, the few regulations that exist are strictly enforced, ensuring a fair playing field for hundreds of companies engaged in securities brokerage, asset management and investment services.

Multiple regulatory bodies govern financial licensing and regulatory requirements in the UAE, which are distinct in terms of the areas of the financial services sector that they govern, as well as the free economic zones under their jurisdiction.

Dubai Financial Services Authority

The Dubai Financial Services Authority is an independent regulator of financial services that oversees the compliance of firms in a wide range of financial services, including banking, insurance, securities trading, asset management, etc.

The DFSA issues licenses, supervises financial services firms and imposes sanctions for misconduct within the DIFC. The regulatory body is known for its proactive approach to the fintech sector and consumer protection to align itself with global best practices.

Account segregation, KYC and AML requirements, operating under a valid DFSA license, and prohibitions on insider trading, are all common requirements for firms dealing in securities within the DIFC.

Securities and Commodities Authority (SCA)

The Securities and Commodities Authority, or the SCA, is tasked with overseeing the licensing and regulation of securities trading and capital markets in the UAE. This also includes online trading platforms, such as stock and forex brokerages.

The two primary focuses of the SCA are:

• Virtual asset regulation – Governing the operations of virtual asset service providers (VASPs), including licensing requirements for both exchanges and custodians
• Collaboration with VARA – The SCA works alongside the Virtual Assets Regulatory Authority (VARA) to establish a unified regulatory framework for virtual assets across the UAE

Abu Dhabi Global Market (ADGM) – Financial Services Regulatory Authority (FSRA)

The FSRA oversees financial service firms within the Abu Dhabi Global Market zone, which includes:

• Guidance on regulatory framework for private financing platforms – This guidance regulates crowdfunding activities, setting requirements for capital adequacy, risk analysis, and investor protection
• Consultation of fiat-referenced tokens – In 2024, the FSRA issued a consultation paper proposing a regulatory framework for fiat-referenced tokens, aiming to integrate stablecoins into the financial system

Taxation in the UAE

While the regulations in the UAE are based on international best practices, the low taxation of the country is far more appealing for both traders and investors, as well as financial service providers.

The tax system of the UAE is well-structured and aligned with international standards, such as the minimum corporate tax agreement, which ensures international cooperation with regards to the taxation of multinational corporations.

Historically, most businesses in the UAE operated without paying corporate income tax, with the exception of oil and gas companies and foreign banks, which were taxed under special regulations.

However, as part of its commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) initiatives and to enhance its global competitiveness, the UAE introduced a federal income tax, which came into full effect on 1 June, 2023.

Under the new tax regime:

• A 9% corporate income tax applies to taxable income exceeding AED 375,000
• Income below this threshold remains tax-free to support small and medium-sized enterprises (SMEs)
• Free Zone entities can continue to benefit from 0% tax rates, provided they meet certain substance requirements and do not conduct business with the mainland UAE directly

As we have already mentioned, the UAE has introduced a 15% minimum tax on large multinational companies with revenues in excess of EUR 750 million annually.

There is no withholding tax on dividends, interest, or royalties, and no capital gains tax (unless derived from a business activity that falls under the corporate tax regime).

Such an approach to corporate taxation means that the UAE remains competitive on the global stage, with most corporations, including those engaged in facilitating online trading, having to pay only 9% in corporate taxes, which is considerably lower than most advanced economies globally.

Furthermore, the UAE is an international lifestyle hub and millions of expats from all over the world have primary or secondary residences in Dubai, which makes for a thriving client base of individuals engaged in active trading and investing, which is very attractive for brokerage firms and liquidity providers – cementing the UAE’s position as one of the leaders in terms of fintech innovation and favorable regulatory environment.

Conclusion

The United Arab Emirates is one of the most vibrant financial hubs in the world, which is driven by its common-sense approach to regulation, low taxation, and a large pool of international talent residing primarily in Dubai and Abu Dhabi.

The business-friendly climate, adherence to international best practices, and a mix of business and leisure makes the UAE an attractive destination for fintech firms to set up and offer their services to clients both within and outside of the country.

The new corporate tax regime, which levies a 9% corporate income tax on most corporations in the UAE, as well as the OECD minimum corporate profit tax initiative, make sure that the UAE is able to collect funds for improved infrastructure and services in the country, while complying with the best practices and international agreements.