SLG Newsletter: October
Dear Friends and Clients,
The heat is over, you can enjoy the starry sky again in the evening and have business talks outdoors.
Dubai has always been a pioneer in the UAE in facilitating company start-ups and visa procurement. Now there is a "Virtual Company License" which is reported in detail in the newsletter. However, it does not offer a residence visa for shareholders or directors and it is likely that the opening of a bank account in the UAE will also encounter difficulties. But it is at least worth a try.
Free Zones fight for customers and offer free corporate relocation, even if the companies have been established outside UAE. This could be interesting for BVI or other Caribbean companies, further Jersey, Cyprus, etc., to move out of conspicuous tax havens. Especially now that the UAE has finally been removed from the EU tax haven blacklist.
This makes a re-domiciliation into the UAE even more attractive.
Also from our branches in the Far East we can report positive things besides the constantly rising Thai Baht. Laos has so far been known for its endless waiting times for start-ups. At least in the province of Savannakhet this has changed completely. You get a new company in the register within 2 weeks and you can work with it all over Laos. The Hong Kong riots cause a capital outflow to Singapore. This will probably further strengthen the SGD.
The US-China trade war opens new destinations in the ASEAN region. The Special Economy Zones are booming, many foreign labour-intensive companies are moving from China to Vietnam and also Cambodia, Myanmar, where the labour is still considerably cheaper and there are no restrictions on the export of capital.In this newsletter we have listed the main free zones in the ASEAN countries and are happy to help you choose the right location. With our offices in Singapore and Myanmar we are at the forefront of ASEAN and I myself have been partially living in Thailand for 6 years now, where we carry out large projects in cooperation with our local partners. The expensive Baht reduces cheap - and Rucksack - tourism, which does not really affect the economy. Export-oriented companies, on the other hand, complain rightly. But one sorrow, another's joy. Local income is rising and consumption is also being boosted.
If you now import your raw materials from your home country to Thailand, process them there and sell them on the local market, your profit margin will have increased by 20-30% compared with 2013. Expats are also more likely to seek employment with Thai employers to get paid in Baht and not find their 30% lower salary from the UK or US in the wage bag.
Now that economists are once again talking about the big crash, it can be expected that the now highly developed countries of the Far East will weather recessions better than economies that focus almost exclusively on services and construction booms. Our consulting motto has remained unchanged for 40 years: Earn your money where profit margins are highest and tax it where the tax burden is lowest.
Off to the cool season with a cool head!
Dubai launches “Virtual Company License”
The Virtual Company License was launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, a joint initiative of Dubai Economy, Dubai International Financial Centre, General Directorate of Residency and Foreigners’ Affairs, Smart Dubai, and the Supreme Legislation Committee. The new license type will allow investors worldwide to obtain a digital license to do business in Dubai without being physically present in Dubai. It is projected to boost the Dubai Virtual Commercial City (VCC) with an objective to provide new opportunities for entrepreneurs across the globe.
Qualifications in obtaining a Virtual Company License as stated in the Dubai Virtual Commercial City website:
1. Virtual companies are registered in Dubai to individuals who do not reside in the UAE.
2. The owners of virtual companies must be the nationals or tax residents of approved countries (this refers to countries that have implemented the Convention on Mutual Administrative Assistance in Tax Matters).
3. Virtual companies can conduct location-independent business activities globally in pre-defined sectors.
4. Virtual companies remain subject to corporate, individual income and social taxation in the country of incorporation and/or residence, depending on the location of economic activities and international tax agreements.
5. Virtual companies operate in a transparent manner including a full public registry of the names of the owners, which will be shared with the tax authorities of relevant jurisdictions upon request.
6. A Virtual Company License does not automatically guarantee physical access to the UAE be it in the form of a business or visitor or resident visa to any of the company’s partners, directors or employees. However, Dubai Government authorities are working on a simplified visa process for the holders of Virtual Company License.
7. A Virtual Company License does not automatically guarantee a business bank account in the UAE. Bank account opening will be at the discretion of commercial banks. However, we can facilitate access to account opening processes.
8. All applicants for a Virtual Company License are subject to background checks by Dubai Government authorities.
9. Virtual companies that have the legal form of a sole proprietorship are not subject to local ownership, director, auditor, or qualified business service provider requirement.
10. Tax registration with UAE’s Federal Tax Authority is required if the company’s revenue within the UAE exceeds USD 100,000 per annum. Tax registration is the obligation of the virtual companies. Value added tax (VAT) in the UAE is 5%, there is no income taxes on non-financial entities.
11. Dubai Government has instituted measures against money laundering and tax evasion in line with international agreements and conventions that the UAE is party to.
12. The cost of license start from: AED 850 for 1 year, AED 1510 for two years, and AED 2163 for three years.
Company owners entitled with the license can conduct business transactions, document signing and submissions, which makes their signatures being legally binding in the UAE. If you have further questions about the “Virtual Company License” you can contact us: email@example.com.
UAE were removed by EU from tax haven blacklist
The EU has removed the UAE from its tax haven blacklist including Switzerland, Mauritius and Marshall Islands, Albania, Costa Rica and Serbia. The recent implemented rules on offshore structures have given UAE an all clear removing itself from the list. Previously, the UAE has exempted all entities which the government, or any of the Emirates of the UAE, had direct or indirect ownership (no threshold) in its share capital and this prompted the EU states to require an amendment. Last month, the UAE government made a reform and now only exempts companies in which it owns directly or indirectly at least 51% share of the capital. There are nine more countries left on the EU’s blacklist which are: Fiji, Belize, Oman, Samoa, Trinidad and Tobago, Vanuatu, American Samoa, Guam, U.S. Virgin Islands.
RAKICC: Zero costs for re-domiciliation of companies
RAKICC has announced zero cost re-domiciliation until the end of this year in celebration to UAE’s removal from the EU tax haven Blacklist. Companies can take advantage of the tax neutral environment and Double Taxation Agreements that the UAE provides. It will also be beneficial to relocate in a jurisdiction such as the UAE with a strong groundwork and resources to enable companies to meet Economic Substance requirements which is widely implemented in most countries. Re-domiciliation transactions done by RAKICC in 2019 took an average of 5-7 days.
If you would like to get further information, please contact us: firstname.lastname@example.org.
Long-term (residential) cultural visa launched in Dubai
The Ruler of Dubai has announced the launch of the new long-term cultural visa wherein artists, authors and innovators can now soon apply for. This is to support the Dubai Culture and Arts Authority’s vision to brand Dubai as a global art destination making use of the 6,000 arts and culture companies, five creative clusters, 20 museums and more than 550 annual cultural events. HH Sheikh Mohammed has approved also the setting up of a free zone for creative individuals and artists to be based in Al Quoz, Dubai. The long-term visa for artists has already been announced earlier and is part of the visa that can be availed by persons with specialized talents including scientists, inventors, and specialists.
Law No. 6 of 2019 on Jointly-owned Properties in Dubai
Law No. 6 of 2019 has been passed in Dubai and it will create a register for jointly-owned properties. The register will consist of all “information related to the land owned by developers and real estate units meant for independent ownership”. It includes details of owners, any ownership committee and information such as responsibilities for common areas and maintenance costs. Jointly-owned properties are classified in three categories, namely, mega-projects, hotel projects and any project that requires a facility management company to manage common areas. Rules regarding owner’s committees are not applicable on hotel projects.
Developers are given the responsibility to put building management systems in place which needs to be approved, and sets out roles for owner’s committee. They are also required to maintain accountability for a building structure for up to 10 years after completion. It is part of their obligation to fix or replace faulty items within an owner’s unit within a year after it is finished. Parking spaces must be allocated by them for free and cannot charge for it separately.
Commercial license fees cut by 20% in Umm Al Quwain
The Ruler of Umm Al Quwain has mandated the Department of Economic Development to reduce trade license fees by 20%. HH Sheikh Saud Bin Rashid Al Mualla is keen to support the business sector in the emirate to boost investments and provide more jobs to its residents. The DED started reducing the rates from October 1, 2019.
Laos: Investment permit process shortened
Laos’ Savannakhet Province has made investment procedures simpler since June 2019 to shorten the time required in getting a permit to start a business operation. The one-stop service aims to facilitate investment and businesses in the province.
Myanmar: World Bank’s Report lauds improving business environment
According to the World Bank’s Doing Business 2020 report, Myanmar has been listed among top improvers in the ASEAN. The country was ranked 171 among 190 countries last year and the government has made several reforms and initiatives to improve their rank. Some of the factors that helped with the improvement are:
- Myanmar strengthened its qualification requirements for architects and engineers and investments in its water and sanitation infrastructure.
- An online platform was launched which enabled speedy registration procedures and transactions.
- The government improved processes to speed up property registrations.
- The courts started publishing performance measurement reports.
- The new company law has strengthened minority-investor protections which has increased director liability, requires more corporate transparency and mandates greater disclosure of transactions with interested parties.
Myanmar hopes to be included in the top 100 by 2020-21 and top 40 by 2035-36.
Singapore: The continuing Hong Kong unrest is pushing capital towards rival financial centre Singapore, with at least $4bn transferred
While the estimated $4bn that moved over to Singapore from April to August is "very miniscule" compared with Hong Kong's $1.7trn in total deposits, the "trend will likely continue as the situation worsens in Hong Kong," Ju Ye Lee, a Singapore-based economist with Maybank Kim Eng Securities, told.
SLG’s recommendation: Watch the Singapore currency! It may soar like the Thai Baht because of inflowing money.
Asia: ASEAN member states actively promote the development of special economic zones (SEZ) to attract foreign investment
- SEZs offer various incentives for investors ranging from tax exemptions to streamlining business permit applications.
- Foreign investors looking to invest in this industry will need a strong market understanding.
SEZs – which include industrial parks, special export processing zones, technology parks, and innovation areas – gained increasing prominence after the establishment of the ASEAN Economic Community (AEC) in 2015, and more so now as a tool to attract investors seeking to diversify supply chains because of the US-China trade war. However, investors looking to take advantage of SEZs in ASEAN should seek to develop a base understanding before assessing factors that may impact their business. SEZs in each country comes with their own strengths and weaknesses; investors need to understand the profile of SEZs in each country, before conducting a comparative analysis and site visits and mainly being guided by professional consultants like SLG.
In 2015, Thailand commenced the development of 10 SEZs located across border areas contiguous to Myanmar, Malaysia, Laos, and Cambodia. The aim of the initiative was to take advantage of increasing border trade between these neighbours, which was valued at 1 trillion Thai Baht (US$32 billion) in exports in 2018. The government has claimed that total investments into its SEZs have reached US$23 billion since 2015.
The country currently operates 11 SEZs located throughout the vast archipelago, offering growing opportunities for investments in manufacturing, agriculture, natural resources, and tourism.
The Philippines has 12 SEZs or free port areas, 22 specific agri-business zones and a further 300 proclaimed economic zones spread throughout the country. These economic zones are classified into manufacturing, tourism, digital parks, and medical tourism parks.
Singapore is the world’s largest port by shipping volume. but is too small to have space for zones of its own. Instead, it has partnered with the Government of Malaysia to create the Iskander SEZ in nearby Johore Baru and with Indonesia to create the Batam Export Processing Zone.
Both are highly successful, particularly for Singaporean companies, which now use these zones as bases for factory extensions of their manufacturing operations to sell across Asia and beyond.
Vietnam has begun to expand its development zone policy to include 18 coastal economic zones and 325 state-supported industrial parks. These economic zones offer their own incentives from free tariffs to low personal income tax.
Malaysia has five investment corridors (a new type of SEZ): The East Coast Economic Region (ECER), Iskandar Regional Development Authority (IRDA) for Iskandar Malaysia in Southern Johor; North Corridor Implementation Authority (NCIA) for the North Corridor Economic Region (NCER).
In 2018, the investment corridors had created close to 2 million jobs and have attracted investments worth RM788 billion (US$188 billion). The Iskander SEZ, has positioned Malaysia’s east coast as a key area for the development of ASEAN free trade, having realized the largest investments in 2018 totalling RM150 billion (US$35 billion). Since its inception in 2006, the region has doubled in size and is on track to achieve its investment target of US$91 billion by 2025.
Cambodia has 31 SEZs across the country covering four zones, namely, the Phnom Penh zone, Sihanoukville zone, the Manhattan zone, and the Tai Seng Bavet zone. One of the first notable investors into Cambodia’s SEZ was Coca-Cola, which opened a US$100 million plant at the Phnom Penz SEZ (PPSEZ) in 2016. Since then, other brands such as Apple, Timberland, Puma, and IBM have established a presence at the PPSEZ. By 2018, there were some 340 projects valued at US$2 billion in the country’s SEZs.