Do You Need a Local Sponsor in UAE, Saudi Arabia and Bahrain?

As of 2025, the UAE, Saudi Arabia, and Bahrain removed the need for a local sponsor under previous Kafala rules, allowing 100 percent foreign ownership across most sectors. Each market maintains sector-specific licensing, capital, and compliance requirements, with optional use of local agents for administrative or operational support.

As of 2025, foreign investors can establish and fully own companies in Dubai, Riyadh, and Manama without the need for a local sponsor or partner across most sectors. Many economic and sectoral reforms have removed the longstanding sponsorship or Kafala requirements for corporates and investors. Let us walk through the present  sectoral requirements, compliance and capital conditions in these three countries.

Setting up a business in the UAE with full ownership

The UAE has done away with the requirement of engaging a UAE national with 51 percent ownership for most sectors. The Foreign Direct Investment Law of 2018 now allows 100 percent foreign ownership for most activities and thereby removes the need for a local sponsor.

Sector-based application of sponsorship rules

Retail, general trading, and construction

Currently for most retail activities in the mainland, 100 percent foreign ownership is allowed. But retail trading may require some capital requirements to cover setup and license, like AED 25,000 (US$6,8064) to AED 50,000 (US$13,612.8) for small retail shops and can go up to AED 30 million (US$8.1 million) for larger operations like building warehouse facilities. Construction sector also allows 100 percent foreign ownership, but local partners may be of assistance in setting up operations and for license approvals.

You may find interesting: UAE Luxury Market: Legal Trends and Opportunities

Professional services (like consulting, legal, medical)

The UAE has opened professional services to be 100 percent foreign owned. These businesses only require a Local Service Agent (LSA), an Emirati individual or firm, who does not hold equity and serves only in an administrative liaison capacity. The LSA could be of assistance in:

• Helping in licensing and registration through the Dubai Department of Economic Development (DED);
• Handling approvals from regulatory bodies like the Ministry of Health or Dubai Municipality; and
• Supporting labor and immigration paperwork, visa processing, and other PRO (public relations officer) functions.

The foreign investor is supposed to pay the agent an annual service fee, but the investor holds full legal ownership and authority over the business.

Alternative to UAE mainland: Free zones and FDI approval

For companies seeking to gain tax and regulatory incentives, free trade zones (FTZ) offer simplified setup processes in addition to the 100 percent foreign ownership. The UAE has brought a One Freezone Passport, which allows businesses to operate across all participating 30 FTZs under a single license.

From a tax perspective, there is no corporate or personal income tax in FTZs, ensuring take-home pay for employees and foreign businesses remains high. Another major advantage is full capital and profit repatriation, which means foreign investors can freely move profits or investment capital out of the UAE without restrictions. These features make UA a low friction base for international operations.

Full foreign ownership possible in Saudi Arabia

Under the Foreign Investment Law and Vision 2030 reforms, foreign entities may establish 100 percent foreign-owned companies, even LLCs and branches, through a Ministry of Investment (MISA) investment license. This license exempts companies from needing a local partner, but it is subject to approval of the activity and fulfilment of capital requirements.

To qualify, investors must:

• Obtain a MISA Service or Industrial License based on the business type;
• Satisfy minimum capital requirements, usually SAR 500,000 (US$133,236.4);
• Show a track record of operation in their home country for at least one year; and
• Commit to meeting Saudization obligations, which vary by sector and company size.

Retail (franchise and e-commerce)

Foreign investors in the retail and e-commerce market can now establish fully foreign-owned limited liability companies (LLCs) under a MISA Service License. This structure does not require a local sponsor or partner.

To qualify, the foreign company must demonstrate a minimum paid-up capital of SAR 25,000 (US$6,661.8) and show evidence of at least one year of global operations. It has become popular with fashion and electronics retailers, and global direct-to-consumer brands. Under this framework, all legal and commercial operations are carried out directly by the foreign entity, as it retains full control and 100 percent profit rights.

Manufacturing (light industry)

Foreign manufacturers planning to set up local production or assembly units in Saudi Arabia can also apply for a 100 percent foreign-owned LLC license under MISA’s Industrial License framework. A local sponsor is not required.

The investor is responsible for managing the entire setup process, including licensing, industrial land acquisition, factory approvals, and safety/environmental permits. But the company needs to comply with Saudization quotas and industrial regulations of the Ministry of Industry and Mineral Resources.

Professional services (IT, consulting, advisory)

Companies in the IT, consulting, legal, or engineering services sectors may enter the Saudi market as either a foreign branch or a locally registered LLC, licensed under MISA’s Service License category.

These firms do not require a local partner or sponsor and can operate under their parent company’s global name or choose to form a fully owned Saudi subsidiary. In both cases, full ownership and management control remain with the foreign investor.

MISA will help in the registration and interface with other relevant ministries, like the MoHRSD and the Saudi Council of Engineers or Lawyers, depending on the profession.

Safeguards when a joint venture is needed

When entering the Saudi market with a local partner or joint venture, it is necessary to draft a sound partnership agreement that protects the foreign investor’s interests. These contracts should cover:

• The equity split and voting rights;
• The local partner’s role, typically limited to documentation, licensing, and government liaison;
• Mechanisms for profit repatriation, capital exit, and dispute resolution; and
• An agreement to settle disputes under Saudi law, sometimes with arbitration clauses.

Bahrain offers 100 percent foreign ownership, local agents optional

Bahrain remains one of the most open jurisdictions in the Gulf for foreign investors. The country allows full foreign ownership across nearly all business forms.

Under the Commercial Companies Law and the Commercial Agencies Law, there is no obligation to appoint a local partner or sponsor when setting up a company in Bahrain. Foreign investors can retain 100 percent ownership and full management control, regardless of the business structure, whether operating as an LLC or a branch.

The only time a local agent may be involved is under the Commercial Agencies Law, which regulates distributor and franchise agreements. In such cases, the agency relationship is strictly contractual, not an equity partnership.

When a local agent may be useful

While a local agent is not legally required, many foreign businesses choose to engage an agent or distributor to help with bureaucratic processes or on-ground operations. These agents could assist with:

• Government liaison for licenses and permits;
• Customs clearance and import documents; and
• Setting up distribution networks, warehousing, and market entry strategies.

Ownership and licensing process

All company registrations in Bahrain are processed through the Bahrain Investors’ Center (BIC). It acts as a one-stop government platform for licensing and other compliances. Foreign investors can apply directly on the platform, without involving a local sponsor, for:

• Commercial Registrations (CR);
• Sector-specific licenses from relevant authorities; and
• Work visas and employee permits.

Sectors with 100 percent foreign ownership in Bahrain

In the retail distribution sector, like for fast-moving consumer goods (FMCG), companies often set up 100 percent foreign-owned subsidiaries or branches. It requires no local partner but the businesses may choose to engage a distributor or agent to handle warehousing and local delivery logistics. These agents operate purely under commercial contract, with no ownership or control rights.

For construction materials businesses, which often rely on importing and assembling products, foreign investors can incorporate wholly-owned entities without needing a sponsor or agent for commercial registration or import licensing. Even so, a local agent may still play a valuable support role by assisting with customs procedures, facilitating logistics, or introducing contractors and local stakeholders.

In financial and legal consultancy, companies usually operate through representative offices or subsidiaries, with full foreign ownership. A local agent can help with licensing, engaging with regulatory bodies, or securing approvals from professional associations. Again, the agent holds no equity and has no say in operational matters, this remains entirely with the foreign entity.

Across all these sectors, Bahrain’s business environment if guaranteeing flexibility and control for international investors over the old sponsorship model.

In short

The Gulf’s top markets, UAE, Saudi Arabia, and Bahrain, now present a lucrative opportunity for investment, business operation, and profit repatriation. Companies that understand the evolving legal structure, choose right license, and take aid of professionals can build a business with full control and certainty in all three hubs.

(US$1 = AED 3.67)

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