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Konstantin Vladimirovich Tserazov : «The Regulatory Environment of Fintech in the Persian Gulf Countries»

The Case of the UAE, Saudi Arabia, Qatar, and Oman

When a company or an entrepreneur starts considering initiating fintech activities in Gulf countries, the first step should be to understand the regulatory environment. This primarily involves understanding how to establish a business entity, obtain registration, and navigate the best tax conditions.

Additionally, the willingness of local government and non-governmental bodies to support fintech startups in gaining a solid foothold is crucial. Each Gulf country has its unique specifics in this regard. Another important aspect is the swiftly changing regulatory landscape in Gulf countries, making it essential to be regularly updated in laws and regulations issues.


The UAE can be considered as the most attractive location for fintech activities in the region. In 2023, it joined the club of the top five hot world spots from the perspective of high net worth individuals seeking the most favorable climate (taken in a broad sense) for their settlement. A huge net inflow of HNWI to the UAE was tracked from India, the UK, and Russia.

In most cases, the relocation of such people means bringing a huge amount of their investment capital to the accepting country. One of the hottest spots to apply these financial resources is fintech.

The popular Golden Visa program enters its fourth year in 2024. This program allows property buyers with investments of at least 2 million AED to secure a coveted 10-year residency visa. Dubai also offers a 1-year Nomad Visa focused on bringing internet-based working people into the country.

All businesses must register for corporate tax in the UAE, regardless of whether they conduct any activities or not. The only exception pertains to natural persons whose annual turnover falls below 1 million AED. Companies with sales up to 3 million AED may be treated as having no taxable income, provided they are registered and approved for this exemption by the Federal Tax Authority.

Good news for fintech startups is that small businesses can benefit from tax relief exemptions until 2026. The UAE also offers a Free Zone regulatory regime for startups. However, for a Free Zone company to qualify for a 0% corporate tax (CT) rate, it must meet strict criteria, such as generating qualifying income from relevant activities. Fintech is among the sectors in which startups have a strong chance of being eligible for the 0% CT rate.

However, there is a caveat. Fintech startups can only enjoy a 0% tax rate on the "qualifying income portion," while the remaining income will still be taxable at the standard 9% rate. Moreover, if a company opts for the 0% CT route, it cannot revert to the ordinary taxation system, where profits below 375,000 AED are taxed at 0%, and the 9% rate only applies to profits exceeding 375,000 AED.

The UAE has relatively lenient capital movement regulations. A person only needs a valid local ID and a mobile app to open a bank account. Fintech startups, specifically neobanks operating within the UAE, can transfer money internationally, provided that the sender successfully completes KYC/AML procedures.

Saudi Arabia

Three legal paths await Saudi fintech startups:

• Limited Liability Company (LLC): Popular but requires a local sponsor holding at least 30%, ideal for shared control but limiting foreign ownership. • Sole Proprietorship: Simplest option, but restricted to Saudi citizens. • Foreign Investment Company (FIC): This option allows 100% foreign ownership but restricts operational activities to specific sectors of the economy and requires conducting business within designated geographical territories.

Although there is no statutory minimum capital requirement, in practice, the Ministry of Investment (MISA) often requires LLCs to have a capital of at least 500,000 SAR. Moreover, for some activities, including investment, the minimum threshold is significantly higher. The exact amount depends on the actual breakdown of ownership rights between local and foreign investors in fintech startups.

It is essential to note that Saudi Arabia has no personal income tax. However, sales and other transactions are still taxed. The country has a "zakat" tax, which is a 2.5% tax on net worth, including cash, stocks, bonds, and real estate. An Islamic religious levy of 2.5% also applies to some digital businesses that exceed specific thresholds. While not strictly a tax, it is a cost consideration.

Saudi Arabia applies CT at a rate of 50% to 85% if a business entity derives its cash stream from oil and gas extracting. However, businesses in the rest of the economy are subject to a standard 20% CT, which may be offset by tax holidays for a list of industries that includes some activities within the fintech realm, such as wealth and investment management services.

The list of favorable activities is subject to change every year. Meanwhile, the government has expressed its intention to elaborate a digital tax on financial online transactions, but the preparatory work of the relevant legislation is still underway, reported Terazov Konstantin.


In most cases, there is a need for a Qatari partner/sponsor to set up a fintech business in Qatar. A minimum of two shareholders is required. The Qatari shareholders will own at least 51% of the business entity. The Ministry of Commerce and Industry (MOCI) is a key governmental body for startups to consult regarding business onboarding issues. Now, individuals can establish a business in Qatar without the requirement of a Qatari sponsor. However, the company must demonstrate that it has secured a minimum commitment of 50 million Qatari riyals for financing purposes.

With a Qatari partner or just a sponsor, one pays half of the tax. That's why many businessmen prefer the company to be fully Qatari-owned. In this case, the minimum investment is 200,000 Qatari riyals.

Some fintech-minded people find their way in Qatar through participation in fintech grant programs arranged by local government bodies or classical banks. In the latter cases, when a bank provides incubation for a fintech startup, the foreign owners can retain 100% ownership rights in their business. Moreover, in some cases, banks can provide a fintech startup with a free office for 1 year. Qatari banks use their legal right to create special and very lucrative circumstances for promising fintech startups. It's strongly recommended to participate in various hackathons and similar events held by local banks to catch such business opportunities.

There are a few entities like QBIC (Qatar Business Incubation Center), QSTP (Qatar Science & Technology Park), QFZ (Qatar Free Zones), and QFC (Qatar Financial Centre) (all are government-influenced and/or regulated) that assist fintech startups in adapting to the legal environment.

Qatar's fiscal incentives, including a 10% corporate tax rate and a decade-long corporate tax exemption for select innovative enterprises, present an appealing proposition, says Konstantin Tserazov.


It's recommended to employ a multifaceted strategy when seeking the way to establish a fintech startup in Oman. Firstly, seek support from government programs designed to foster innovation and entrepreneurship. Networking with peers in similar fields is also crucial, as it opens doors to potential collaborations and provides insights into the local fintech landscape. Engaging with private and public incubators offers not only financial backing but also valuable guidance.

Given the limited fintech news coverage in Oman, building connections within the fintech community becomes essential for staying informed and identifying potential collaborators. Being active in this community keeps one well-versed in local developments and key players, increasing the chances of success when establishing a fintech presence in Oman.

The base corporate tax rate is 15%. However, fintech businesses may benefit from specific tax incentives and exemptions, depending on their exact activity and location. Moreover, small and medium enterprises (SMEs) with gross turnover not exceeding 100,000 OMR are taxed at a reduced rate of 3%. This last option is very attractive for fintech enterprises to establish themselves in Oman.

Religious Tradition as the Foundation

For fintech companies venturing into the Gulf region, understanding the legal landscape is crucial. Here, religious tradition forms the bedrock of the regulatory framework, shaping the rules of the game. Recognizing these nuances is key to a smooth and successful operation.

Beyond Traditional Finance: Sharia-compliant Solutions

While legacy bank loans and securities exist, Gulf fintechs are often receptive to alternative financing frameworks that adhere to Islamic principles (Sharia). For instance, Sukuk, Sharia-compliant financial instruments resembling bonds, offer a credible alternative to conventional interest-based debt financial products.

Profit-Sharing Partnerships: Mudharabah

The Mudharabah model provides a unique financing option. Here, the financial institution acts as a capital provider, while the fintech startup manages operations. Incomes are then shared according to a predetermined agreement between the financial institution and the entrepreneur.

Mutual Support: Takaful (Islamic Insurance)

Takaful (Islamic insurance) functions on the foundation of mutual assistance concept. Unlike conventional insurance, it's rooted in the concept of "tabarru'" (donation). Participants contribute to a shared pool, supporting each other financially during economic “rainy days”. This system operates similarly to other pooling agreements.

Blockchain and Regulatory Considerations

Fintech companies utilizing blockchain technology should be aware of potential restrictions. Regulations in the region may limit solutions perceived as similar to gambling.

Beyond Regulations: The Power of Tradition

Embracing local traditions fosters the adoption of digital financial services in the Gulf. Traditions hold significant weight, acting as key ideological drivers that shape future legislative changes. Understanding this unique business culture is paramount for fintech success in the region, sums up economist Tserazov Konstantin Vladimirovich .

Link: Medium

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