Selling in the United Arab Emirates: how to do it and what you need to know?
Made in Italy is an increasingly appreciated brand in the United Arab Emirates, and the latest trends indicate that many sectors present great opportunities for Italian companies intending to sell abroad. And if you are interested in this market, you are probably wondering where to start and how to sell in Dubai and the United Arab Emirates: here is Octagona’s complete guide.
The United Arab Emirates are an important partner of Italy in all areas: from the political one (thanks to the constant dialogue on bilateral issues and regional security dossiers), to the cultural one (the first Italian Cultural Institute in the Gulf area was recently inaugurated in Abu Dhabi), up to the economic one.
Indeed, 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 United Arab Emirates became the first outlet market in the MENA area for Italian exports. And according to the latest data, iToday, over 600 Italian companies are present in this countryboth large and small and medium enterprises.
If you’re reading this article, it’s probably because you too have identified the new frontier for Italian exports in the United Arab Emirates, capable of generating good turnover and profits, but you must have wondered where to start and how to go about selling in Dubai and Abu Dhabi. In this article, therefore, we will see together the ggreat opportunities offered by this country, to then study in detail which are the most promising sectors, to end our analysis with the latest entry methods and requirements imposed by the Government of the Emirates.
Business opportunities in the UAE
As mentioned at the beginning of the article, the United Arab Emirates represent a very important destination for Made in Italy, especially in the fashion, luxury, furniture and construction sectors. And thanks to recent reforms regarding foreign investments, the opportunities for Italian SMEs have multiplied.
Despite the pandemic crisis, Italy managed to maintain its market share in the UAE, recording an overall export share of over €3.8 billion, remaining just behind Germany, but overtaking France and Spain. This figure then grew significantly in the post-pandemic period, demonstrating the importance of this country for Italian exports: in 2021 we have arrived at 4.8 billion euros, In the 2022 this data has arrived at 6.2 billion euros, exceeding the values of the previous year. In the end, comparing the period January 2023-August 2023, the export share has already exceeded that achieved in same period In the 2022 (€4.18 billion versus €3.8 the previous year).
Why should your business sell to UAE?
In addition to the numbers just seen, which project Italy as one of Dubai’s main trading partners, the Emirates are implementing important economic reforms to attract more and more innovative companies, including Italian ones.
In detail, the new program of the UAE government sets the objective of the country to become an important global investment center for new technological activities and services. For this reason, to encourage foreign investment, the United Arab Emirates enacted a new reform in 2021, which abolishes the previous requirement of an Emirati shareholding of at least 51% in a foreign company on the country’s soil, leaving a maximum of 49% of control to the foreign company.
Furthermore, the obligation for joint stock companies to have a president and the majority of the Board of Directors of Emirati nationality is also eliminated. However, companies with a strategic impact on the UAE economy remain excluded from this reform, such as those operating in the Oil & Gas sector.
Selling in Dubai thanks to simplified taxation
Last but not least, the UAE presents an extremely attractive tax system for foreign companies, as well as having Free Trade Zones, still with lower taxation.
In fact, the UAE government has introduced a federal tax on company profits which will be effective for financial years starting from 1 June 2023. In detail, company profits above 375,000 Dirhams (approximately 90,800 euros) are taxed. to 9%, therefore, with 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 being for large multinationals that meet specific criteria established with reference to the “Pillar TWO” of the OECD Project.
And what about VAT? The value added tax was introduced starting in 2018 together with Saudi Arabia. The percentage to date is still very low:
– 5% for standard goods;
– 0% for primary supplies, such as the healthcare sector or public transport.
For the VAT return you need to register with the VAT tax authority. However, registration can be mandatory or voluntary. The minimum requirement to apply for voluntary VAT registration is a minimum annual turnover of at least 187,500 dirhams (approximately €43,600); the mandatory VAT registration, on the other hand, is triggered upon reaching an annual turnover of 375,000 dirhams (just over €87,000).
What products to sell in Dubai and UAE?
Data that therefore leave room for few interpretations: Made in Italy in the United Arab Emirates is increasingly appreciated, ed exporting to this country is the strategy adopted by many Italian companies to increase their turnover and their profits.
But which products to sell in Dubai and the United Arab Emirates? By analyzing the data published by the Ministry of Foreign Affairs, we can draw up a real ranking of the most promising sectors for Italian exporting companies.
To the first place they place themselves the jewels, there costume jewellery and related articles, with 729 million euros of exports between January and August 2023, representing the main sector of total Made in Italy exports, with almost 20% of the total.
To the second place we find general purpose machinery and equipment, which with 262 million euros represented the 6.3% of total Italian exports. The podium closes fashion (articles of clothing, excluding fur clothing), with a value of 230 million euros (5.5% of the total and a +0.7% compared to 2022), but excellent prospects are also offered bysoap and detergent industry, cleaning products, perfumes and cosmetics (175 million euros in total). There new for 2023 bears the name of footwear, which are awarded a good 4% of Made in Italy exports to the United Arab Emirates.
How to sell in UAE? The most used channels
As seen, selling Made in Italy products in Dubai and the UAE offers 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 companies are many, between digital channels and traditional offline sales channels. So let’s see the main ones:
- Even though they are there Marketplaces world-class, in the country there is a tendency towards the preferential use of domestic platforms. First of all Amazon.ae: similarly to the Italian version, Amazon.ae can count on a network of over 75,000 merchants, offering the possibility of making online payments, or paying by cash on delivery and free returns. Despite this, to be able to use Amazon in the UAE it is necessary to meet the following requirements, which for some companies can be quite stringent, as they are required to:
a) have an Emirates business license with ID verification for legal purposes;
b) the products must be stored in the UAE , to ensure that Amazon can collect the goods within three days;
c) a account registered in the UAE it must be linked to the company that owns the business license or to the legal entities of the company. Alternatively, you can open an account with a local agent authorized by Amazon.
- For these reasons, many companies still prefer to rely to a Temporary Export Manager: in this way, Italian SMEs can achieve great results by operating remotely. These are professional figures or companies of international trade specialists who operate directly on German territory, and who act as an interface for the company in the United Arab Emirates. In other words, the figure works as a hybrid between foreign salesman and commercial agent, who works for the commercial development of the company for a limited time (usually at least one year): it is an extremely flexible solution that is perfect for companies that want to start an internationalization process.
- Finally, the third option for businesses to sell in Dubai is to start gradually control the market. In fact, the activity begins with a series of missions and commercial trips, participation in trade fairs, to culminate with partnerships and commercial supply agreements, or with spot sales. And if the garrison is conducted in an optimal and effective way, the Italian company can choose, after the first important results, to start a real corporate constitution in the United Arab Emirates, opening an office or a warehouse dedicated to the market.
Conclusions
Made in Italy continues to be highly appreciated in the United Arab Emirates. Positive characteristics are attributed to Italian products such as versatility, high quality and unique design, inimitable in the rest of the world, and taking advantage of this driving force is a necessary condition for creating a competitive advantage for your company.
Internationalizing in the Emirates can therefore be the winning choice also in 2024 to give new impetus to the future of your business: an almost obligatory path for the possibility of consolidating your growth path both in terms of profits and brand recognition.
