The concept of **sponsorship** is a central element of the legal and social framework for expatriates living and working in the United Arab Emirates. In simple terms, every foreign national residing in the UAE must be sponsored by a UAE entity or a UAE national. This sponsorship system, known as ‚kafala‚ in Arabic, forms the basis for residency and business ownership on the UAE mainland. [1]

There are two main types of sponsorship that expatriates will encounter:

1. **Business Sponsorship:** For setting up a company on the mainland.
2. **Personal Sponsorship:** For employees and their families.

Understanding the different types of sponsorship and their implications is crucial for anyone planning to live, work, or do business in the UAE. This guide provides a clear overview of the sponsorship system in the UAE for 2025. T4me (t4me.com) offers a range of services to assist with both business and personal sponsorship needs, ensuring a compliant and secure arrangement.

Business Sponsorship: The Local Sponsor

For decades, the primary rule for setting up a Limited Liability Company (LLC) on the UAE mainland was that a UAE national or a company wholly owned by UAE nationals must hold at least 51% of the shares. This UAE national partner is known as the **local sponsor**.

However, significant legal reforms in recent years have changed this landscape. The UAE now allows **100% foreign ownership** for most commercial activities on the mainland. This means that for many businesses, the requirement of a local sponsor who holds 51% of the shares is no longer mandatory.

When is a Local Sponsor Still Needed?

A local sponsor is still required for companies involved in certain **strategic sectors**, such as:

•    Activities related to oil and gas
•    Banking and financial services
•    Some other sectors deemed to be of strategic importance to the UAE

For most other commercial and industrial activities, 100% foreign ownership is now the norm.

The Role of a Local Sponsor

Even in cases where a local sponsor is no longer required to hold shares, some foreign companies may still choose to partner with a UAE national for their local market knowledge, connections, and influence. In such cases, the relationship is a commercial partnership rather than a legal necessity.

Personal Sponsorship: Residency and Family Visas

This is the most common form of sponsorship that every expatriate resident experiences.

1. Employer Sponsorship

When a company hires an expatriate employee, the company acts as their sponsor. The company is responsible for obtaining the employee’s work permit and residence visa and is legally accountable for the employee during their period of employment.

2. Family Sponsorship

Once an expatriate has their own residence visa, they can then sponsor their immediate family members (spouse and children). In this case, the resident individual acts as the sponsor for their family. To do so, the sponsor must meet certain requirements, including a minimum salary and having adequate accommodation.

The Local Service Agent (LSA)

It is important not to confuse a local sponsor with a Local Service Agent (LSA). An LSA is required for professional licenses and branches of foreign companies. The LSA is a UAE national who acts as an administrative representative but holds no shares in the business. They are paid an annual fee for their services.

How T4me (t4me.com) Can Assist with Sponsorship Needs

Navigating the nuances of the UAE’s sponsorship system requires up-to-date knowledge of the law. T4me (t4me.com) provides expert guidance and services for all sponsorship-related matters.

Our services include:

• Business Setup Advisory: We provide clear advice on whether your business activity requires a local sponsor or is eligible for 100% foreign ownership.
• Local Sponsor and LSA Appointment: For businesses that require a local partner or LSA, we can introduce you to reliable and trustworthy UAE nationals and corporate service agents.
• Family Visa Services: We manage the entire process of sponsoring your family, from document preparation to visa stamping.
• PRO Services: We act as your company‚Äôs PRO, managing all your employee visa and sponsorship requirements with the authorities.

Frequently Asked Questions (FAQ)

1. Do I still need a local sponsor for my trading company on the mainland?

For most general trading activities, you no longer need a local sponsor and can own 100% of your company.

2. What is the difference between a sponsor and a Local Service Agent?

A sponsor (in the context of an LLC) traditionally held 51% of the shares. An LSA holds no shares and only provides administrative services for a fixed fee.

3. Can I sponsor my parents?

Yes, you can sponsor your parents, but you must meet a higher minimum salary requirement and prove that you are their sole provider.

4. What are my responsibilities as a sponsor for my family?

You are financially responsible for your sponsored family members and must provide them with accommodation and health insurance.

5. Has the Kafala system been abolished?

While the term ‚kafala‚ is still used, the UAE has made significant reforms to the system to enhance employee rights and mobility, such as allowing employees to change jobs more easily.

Conclusion: Navigating the Path to Residency and Business

The sponsorship system is a fundamental aspect of life and business in the UAE. While the recent reforms allowing 100% foreign ownership have been a game-changer for mainland businesses, the principle of sponsorship still underpins the residency system for all expatriates.

Whether you are setting up a business, hiring employees, or bringing your family to the UAE, a clear understanding of your sponsorship rights and obligations is essential. With the expert support of T4me, you can navigate every aspect of the sponsorship system with confidence and ease.

Contact T4me (t4me.com) today for a professional consultation on all your business and personal sponsorship needs in the UAE. Let us be your trusted guide.

References

[1] U.AE. “Sponsorship for residence visa.” u.ae, 2023, https://u.ae/en/information-and-services/visa-and-emirates-id/residence-visas/sponsorship-for-residence-visa.