United Arab Emirates

Cabinet adopts major reforms related to foreign workers

14 Jun 18

UNITED ARAB EMIRATES

IMPACT – HIGH

The Cabinet of the United Arab Emirates has adopted a raft of reforms aimed at boosting economic activity by eliminating bank guarantees for foreign workers and liberalizing a number of visa rules.

Key reforms:

  • The current system requiring companies to put up bank guarantees for foreign workers’ visas will be eliminated, and the roughly 14 billion Emirati dirhams (about US$3.81 billion) in existing bank guarantees will be released back to private sector companies. This provision will take effect immediately.
  • The guarantees, which amounted to 3,000 dirhams per employee, will be replaced by a comprehensive insurance system providing insurance coverage of up to 20,000 dirhams at a cost of 60 dirhams per year per employee.
  • Foreign nationals will no longer be subject to a “cooling off period” and will be able to renew or convert their immigration status in-country without having to leave and re-enter the UAE. This provision will take effect in the fourth quarter of this year.
  • Two-year residency visas will be available to foreign students once they finish their higher studies.
  • Transit visitors will be able to enter the country for 48 hours exempt from visa fees and may extend their stays up to 96 hours for a fee of 50 dirhams. Express counters will be installed in UAE airports to service the issuance of transit visas to transit passengers.
  • A six-month temporary visa will be introduced free of charge to foreign nationals who overstay their visas but are looking for work.
  • Foreign nationals who overstay their visas may voluntarily depart without being subject to a ban on re-entry or to fines; those who entered illegally may depart with a “no entry” stamp for a period of two years if they show a valid outbound ticket. These provisions will be in effect for a period of three months from Aug. 1 to Oct. 31, 2018.

Background: Recent years of reduced oil revenues and recent burdens imposed on companies, including the imposition of a value-added tax, have taken their toll on the UAE’s private sector. These changes are intended to free up money held as guarantees, stimulate economic activity and reinvestment of those funds, and reduce barriers to recruiting foreign workers and doing business.

BAL Analysis: This is the second set of major reforms the UAE has adopted in as many months. While the first allowed foreign companies to set up fully foreign-owned ‘mainland’ entities, this liberalization of visa rules and release of 14 billion dirhams in bank guarantees are additional welcome developments for the business community.

This alert has been provided by the BAL Global Practice group. For additional information, please contact your BAL attorney.

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