Dear Friends and Clients,
First of all, may I wish you a happy, successful and healthy New Year on behalf of all our staff in the offices and, of course, on our own behalf. The traditional family photo, this time from Koh Chang, can be found here.
On 1 February the Chinese Year of the Tiger begins, the Tiger is known as the king of all beasts in China. The zodiac sign Tiger is a symbol of strength, exorcising evils, and braveness.
Times are changing. Yesterday, the UAE have announced the long-awaited introduction of a federal corporate tax. Starting from June 1, 2023, business profits exceeding AED 375,000 per year will be taxed at a rate of 9%. The UAE have long benefited from its tax-free status to carve out a role as an international commercial, energy and tourism hub, so the new tax constitutes a paradigm shift, at least from the perspective of the UAE, and its residents. While it has to be expected that other taxes and higher rates will follow, at least for the time being, the UAE will still keep much of this tax-free regime, including a 0% personal income tax, a tax exemption for UAE businesses for capital gains and dividends received from shareholdings, and a 0% tax on capital gains tax on real estate and other investments. Also, free zone companies will possibly continue to be tax exempt under certain conditions, which have not yet been published. We will further elaborate on the new regime in a special newsletter shortly.
At least it looks like we will be spared the amendment of the double taxation agreement between Austria and the UAE for another year. The ratification to the clients were not exchanged until the end of the year 20-21, so in our opinion these amendments to the DTA, which have already been passed by the Austrian legislator, will come into force on 1 January 2023 at the earliest. In this year, the old DTA should still apply, which is by far more favourable for the taxpayer.
I have also written an essay on the value of this double taxation agreement in the Jubilee Book of the Austrian Foreign Trade Office on the Austria-UAE relations that acknowledges the advantages of the agreement accordingly.
The legal machinery in the Emirates is running at full speed again. After the adoption of the new labour law, the data protection law and the cybercrime law have now come into force.
Another notable change concerns the working days. When I came to the UAE in 2005, the weekend was still Thursday and Friday. Shortly after, it was changed to Friday and Saturday. Now this year we have the international Saturday-Sunday rule and the government authorities have even introduced a two-and-a-half day weekend. With this, the UAE is once again a pioneer in the GCC space. We have adapted accordingly, see the Office News below. I also want to draw your attention to our social media presence.
The free zone policy in this country is unparalleled.
Each free zone is a separate legislative body and largely autonomous in its regulations. Free zones are in open competition with each other, which is of course a very pleasing situation for the client. RAKEZ as well as DAFZ – Dubai Airport freezone, Umm al Quwain, Ajman freezone and finally IFZA are launching new incentives almost every month to attract new customers:
DAFZ offers a new Talent’s Pass to attract freelancers, RAKEZ and RAK DED offer a combined mainland – freezone solution, IFZA promotes a cheaper company formation at the beginning of the year. Abu Dhabi, on the other hand, reduced the license fees for tourism businesses by 90% to now only AED 1,000 per year.
But there is also good news in Southeast Asia: despite the world taxation system provided for in the law, Thailand now only collects taxes if the activity was actually carried out in Thailand or the profits of foreign activity flow into a Thai account. This tax practice corresponds to the Singaporean principle, but there it is firmly anchored in tax law. In principle, pension income in Thailand will not be taxed in the future.
In addition, Thailand was voted the best country for retirement in Asia by an internationally respected International Living magazine, and not without good reason. Apart from excellent healthcare, Thailand offers an ideal environment for retirees in terms of standard of living, price structure and security.
Not only our best wishes for the Year of the Tiger shall accompany you, but also our expertise, experience and legal support.
Yours
Theodor Strohal
Office News:
New work week
SLG is following the government´s example and have changed our work week. Our new office timing is Monday to Friday from 9:00 am to 6:00 pm. In an unprecedented step the UAE recently changed the work week in the public sector as of 1 January 2022 – many private companies followed. This is just the latest example showing how fast the UAE is changing to become a modern, progressive, and investor-friendly society. We can’t wait to see what comes next.
SLG Social Media
Do not miss the latest news and updates. SLG is on LinkedIn and Facebook. Follow us on our social networks to know more about our company activities, free webinars, and legal news in the UAE and Southeast Asia.
Two Companies with active Bank Accounts for SaleWe currently have a mandate from clients to offer 100% of shares of two debt free companies with active bank accounts:
- RAK Free Zone Company with two bank accounts in Euro and AED.
- A Singapore Private Limited Company also with bank accounts in Euro and Singapore Dollar. If you are interested, just drop us a note.
UAE News:
UAE Corporate Tax of 9% effective as of 1 July 2023
The UAE on Monday said it would introduce a federal corporate tax on business profits for the first time starting from June 1, 2023, although it kept the rate low, at 9 percent, to maintain its attractiveness for businesses. The country has long benefited from its tax-free status to carve out a role as an international commercial, energy and tourism hub.
Much of this tax-free regime, including no personal income tax, remains. But the Finance Ministry said it was launching corporate tax to align with international efforts to combat tax avoidance, as well as to address challenges arising from the digitalization of the global economy.
The new tax will be levied on all corporations and commercial activities in the country, except for the “extraction of natural resources” which will remain subject to taxation at the emirate level.
A ministry statement said the new regime implies a standard statutory tax rate of 9%, as well as a 0% rate for taxable profits up to AED 375,000 in order to support small businesses and startups.
The ministry added that the move would pave the way for the introduction of a global minimum tax rate that would apply a different corporate tax rate to large multinationals that meet specific criteria.
Businesses in the UAE are exempted from paying taxes on capital gains and dividends received from shareholdings, the ministry said.
The new program left intact the exemption for individuals from income tax, capital gains tax on real estate and other investments, and other earnings that do not come from a business.
The UAE corporate tax regime will continue to honor the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE, the ministry said, but it did not further elaborate on the requirements.
RAK Municipality launched Upskill
Ras Al Khaimah Municipality introduces Upskill, a training program in sustainable energy intended to address the training needs of people of different career levels and paths. The project was launched in cooperation with RAK Department of economic Development, Human Resources Department of Ras Al Khaimah and Ras Al Khaimah Economic zone. Upskill is a training program in sustainable energy it is designed to expand capabilities and expertise in the field of energy efficiency and renewable energy in Ras Al Khaimah. The training program includes trainings, certifications and workshops provided by local & international training providers.
New UAE Cybercrime Law comes into force
The new UAE Cybercrime Law (Federal Decree Law No. 5 of 2021) takes effect this January 2, 2022 bringing major amendments to Federal Law 5 of 2012. The new reforms aim to protect the rights of citizens and residents against cybercrimes.
Here are some of the major penalties brought by the new law:
- Cryptocurrency
- Promoting, advertising and engaging with unlicensed cryptocurrencies can be subject to detention and, or a fine between Dh20,000 and Dh500,000.
- Promoting an electronic currency or creating a fake company online to collect money from the public without a license for the purpose of investment faces a five-year prison term or a fine starting from Dh250,000 fine up to Dh1 million or both.
- Fake News
- Publishing and circulation of fake news and rumors on social media could result to a minimum fine of Dh100,000 and one-year jail sentence. The penalty increases to two years in prison and a minimum Dh200,000 fine if the crime is committed during pandemics, emergencies and crises.
- Using or modifying electronic robots to share, re-share or circulate fake news can result to a prison term of two years or a fine not less than Dh100,000 up to one million, or both.
- Publishing information that does not meet media content criteria can result to a fine ranging from Dh30,000 to Dh300,000, or both.
- Fake emails, websites and impersonation
- Fake email, account or website in impersonation of another person are subject to a fine ranging from Dh50,000 to Dh200,000 or a jail term or both. The penalty increases to two years in prison if the offender used the fake account to defame the impersonated.
- Online surveys and polls
- Conducting online surveys and polls without a permit can result to a jail term or a fine starting from Dh100,000 to Dh500,000 or both penalties.
- Online begging
- Using online platforms to beg for money or seek illegitimate help from federal and local authorities can land the offender in prison for three months or a minimum fine of Dh10,000 or both.
- Defamation
- Defaming a foreign country can result in a jail term of six months or a fine ranging from Dh100,000 to Dh500,000 or both.
- Interfering with government property
- Anyone who intentionally damages, suspends or stops a website of a government entity or vital facility can be jailed and fined between Dh500,000 and Dh3 million.
- Taking pictures of others
- Taking pictures of someone in public without permission is now a punishable crime in the UAE with six months jail time or a fine between Dh150,000 to 500,000 or both.
Offenders of the law can file a grievance request to the relevant authority within three days of their knowledge of the verdict. In case the grievance request gets rejected, the offender is given the right to appeal in the federal court in Abu Dhabi within a week of receiving the rejection.
Under the new law, the court is allowed to place the offender under surveillance, prohibit the use of social media or online platforms, shut down online platforms permanently or partially, or place the offender under rehabilitation. The court also has the authority to confiscate the devices, software, content or other means used in committing the crime, and delete any breaching material used. The law also allows the authority of the General Attorney to issue a case to block a website or platform that violates the law or commits any of the cybercrimes directed at UAE, regardless whether or not the platform is in the UAE or abroad.
DAFZ launched ‘Talent Pass’ License
Dubai Airport Freezone (DAFZ) launched yesterday the ‘Talent Pass’ license for freelance work which is part of a range of six licenses issued by DAFZ. This new license type will give entrepreneurs and investors the capability to access various business services at competitive prices. The other types of licenses that DAFZ offer includes: Commerce, General, Industrial, Services, and E-Commerce Licenses.
RAKEZ and RAKDED announced new Dual License
Ras Al Khaimah Economic Zone (RAKEZ) in collaboration with Ras Al Khaimah Department of Economic Development (RAK DED), Dual License holders will be able to distribute products and offer services in free zone and mainland areas with a free zone license issued by RAKEZ and a ‘Branch of a Free Zone Company’ license issued by RAK DED.
Tourism business licenses capped at AED 1,000 in Abu Dhabi
Effective January, a revised fee structure has been introduced, capped at AED 1,000 annually, and applicable to tourism business licenses in Abu Dhabi. The changes bring up to 90 percent reduction in total license fee costs. The new business license offers an amended fixed-fee structure, with the blanket costs covering fees payable to several Abu Dhabi Government entities, including Abu Dhabi Department of Economic Development, the Department of Municipalities and Transport, Abu Dhabi Chamber membership fees and the Certificate of Conformity issuance fee. It also covers Abu Dhabi’s regulation fees, with the amount adjustable depending on the type of business applying.
Far East News:
Thai Cabinet Passes New Draft Resolution Easing Restrictions on Cross-Border Transactions and Commercial Activities
On 23 November 2021 The Thai Cabinet Thai Cabinet New Draft Resolution Easing Restrictions on Cross-Border Transactions and Commercial Activities.
The amendments, among other things, includes:
- Allowing permitted persons (business operators) to accept foreign currency via sources other than bank notes (i.e. debit cards, credit cards issued by foreign banks, electronic transfers etc.).
- Previously, only duly licensed operators were permitted to operate or engage in foreign currency exchange activities. This new regulation now paves the way, however, for a registration regime in addition to that for licensing, which greatly simplifies and streamlines the process by which people can start up these types of businesses.
- Allowing FOREX licenses to be used/operated at different locations. Before the introduction of these new rules, for example, a license would be required for each foreign currency exchange branch that were to be opened. Now, a single license may cover multiple branches under the same licensed entity. Nevertheless, the entity permitted for foreign exchange activities through the registration regime shall be subject to proper official registration being given to (and approval duly secured from) the relevant competent authorities for the extra branches.
- Allowing foreign currency derived from export-generated business proceeds to be used by exporters for other transactions in Thailand (such as settling account payables). Before, only THB was allowed for such purposes. The amendments ushered in by this ministerial regulation allow for foreign currencies to be used for the same purpose in Thailand.
The new Regulation will promote heightened cross-border commercial activities in the post-pandemic landscape and remove penalties on non-criminal financial transactions that have become more commonplace.
New firm registration in Thailand to rise 14%
The Commerce Ministry of Thailand is positive with regards to the rise of business registrations for 2022. This year it is expected to grow by 13.7% to 72,000, outstripping the 63,340 last year and the department target of 65,000 to 70,000 for this year. The said increase is due to changing consumer behavior and the impact of the pandemic, causing businesses to opt for more online services, delivery, work from home, herbal medicines, and IT management.
Thailand ranks 1st as best country to retire in Asia
Thailand ranks first as the best country in Asia for retirement in 2022 and ranks 11 out of 25 countries all over the world. The annual global retirement index conducted by the International Living magazine scores the countries on several categories such as housing, benefits, visa and residence, entertainment, and climate. Thailand offers beaches, tropical climate, and variety of affordable living options, reasonable medical costs, and convenient visa process for retirees. According to the index, Bangkok, Chiang Mai, Phuket and Hua Hin are the top cities to stay in.
Long Term Visa approved by Cabinet
The Thai Cabinet has approved the new Long Term (LTR) Visa with the aim to increase investment and boost the economy of the country. The Interior will provide LTR visas, each for up to four family members including children up to 20 years old. The Board of Investment will set the qualifications of the applicants. The new visa regulations will be formally announced soon.
- Visa validity – 5 years and renewable for up to 5 years. Validity period capped at 10 years.
- Annual fee – visa holders will pay 10,000 baht and will need to report their residential address once a year.
- Work Permits – foreigners can start working right away after filing their work permit requests.
- Investors – foreigners who have their own business can seek work permits for up to five years and the permits can be renewed for up to five years each time.
Singapore: RCEP agreement in effect from January 1
The Regional Comprehensive Economic Partnership (RCEP) agreement kicked in on January 1 cutting tariffs for businesses for about 92 per cent of goods traded among signatory parties that have ratified the agreement. Singapore’s Ministry of Trade and Industry has outlined the benefits for businesses operating in the country as follows:
- Trade in goods
• Tariff elimination for about 92 per cent of goofs traded among RCEP parties
• Lowered tariffs for products like mineral fuels and plastics in certain RCEP markets - Investment
• Commitments to prevent performance requirements from being imposed on investors
• Provisions to relax measures in the future and mitigate backtracking - Electronic Commerce
• More conducive digital trade environment for businesses
• Enhancement in areas such as online consumer protection, online personal information and paperless trading - Rules of Origin
• Greater flexibility to tap preferential market access benefits and for businesses to take advantage of regional supply chains - Intellectual Property
• Greater protection for businesses when they venture into RCEP markets, in areas like non-traditional trademarks and industrial designs
• Cost and time savings as a single patent or trademarks and industrial designs - Non-tariff measures
• Enhanced provisions to bring down trade transaction costs for businesses - Customs procedures and trade facilitation
• Simplified procedures for more efficient clearance of goods, including the release of express consignments and perishables within six hours - Competition
• Businesses are protected from anti-competitive activities through competition law regimes and cross-border enforcement cooperation - Trade in services
• Enhanced commitments above existing ASEAN Plus One free trade agreements in areas like professional and business services, research and development, and distribution and logistics
• Greater transparency to improve certainty for businesses - Government Procurement
• New area of cooperation that is not in existing ASEAN agreements
• Increased transparency through the publication of laws, regulations and procedures
The Free Trade Agreement is composed of 15 members, and so far 10 signatory parties have already ratified the agreement.
Thai Exchange Control Act to be amended
The amendments, among other things, includes:
- Allowing permitted persons (business operators) to accept foreign currency via sources other than bank notes (i.e. debit cards, credit cards issued by foreign banks, electronic transfers etc.).
- Previously, only duly licensed operators were permitted to operate or engage in foreign currency exchange activities. This new regulation now paves the way, however, for a registration regime in addition to that for licensing, which greatly simplifies and streamlines the process by which people can start up these types of businesses.
- Allowing FOREX licenses to be used/operated at different locations.
• Allowing foreign currency derived from export-generated business proceeds to be used by exporters for other transactions in Thailand (such as settling account payables).
The central aims of the new Regulation are to promote heightened cross-border commercial activities in the post-pandemic landscape and remove penalties on non-criminal financial transactions that have become more commonplace. The Regulation thus allows such activities to avoid being ensnared and bogged down in unwieldy and complicated licensing and regulatory requirements or strict foreign currency exchange rules. Such rules were more appropriate to the era before the advent of high-speed broadband, 4G mobile networks, innovative fintech technologies, cryptocurrency and more which allowed consumers to become less reliant on ‘bricks and mortar’ style banks and financial institutions. This new Regulation is just one element of the Thai government’s broader efforts to update and adapt the Kingdom’s regulatory frameworks and mechanisms to better address and reflect the realities and commercial modus operandi of the digital payment processing and online service provider spheres along with Thai consumers making increasing use of these products and services in their daily lives.