Newsletter October 2022

Dear Friends and Clients,

The digitalization of business continues. More and more services are offered online, which is probably also a result of the two-year pandemic with many people being forced to work from home. Abu Dhabi even offers an “Investor Journey” program to guide investment-friendly newcomers through the jungle of administration and bureaucracy.

Our own experiences with such offers and programs are rather mediocre. In most Departments of Economic Development as well as in free zones, personal contact, personal interview and the face to face communication is the only way to reach the goal reasonably timely. Even the many corporate service providers that have now established themselves on the market and offer their services online can at best offer “ready-made clothing” but not “tailor-made suits”.  The terse filling out of online forms is not enough to set up a corporate shareholder construct or to open a bank account. This requires contacts and personal commitment on the part of the consultant.

We consultants have often found that clients who initially tried to get a company seat or a bank account by the cheapest way online, ended up using the services of professional consultants, and the original money was often lost. Of course, we also use virtual platforms, but our accounts have been in existence for some time and we are known to the authorities by name, so that in the event that an obstacle arises in a virtual way, the respective official contacts us personally to clear these obstacles out of the way.

Cambodia has raised the minimum wage to 200 USD per month for unskilled workers. Cambodia is still one of the cheapest producing countries in Asia, although at least before the political change, Myanmar and Bangladesh were the cheapest countries with 75 to 100 USD. Cambodia, on the other hand, is the next “tiger” of Southeast Asia due to its rapid economic development, meanwhile good infrastructure, and political security. Our Thai office offers full service for Cambodia, including company formations, branch offices, lease and employment contracts, immigration, etc. And it is no secret that Asian countries ultimately benefit from the state of war under the engagement of the West in the conflicts. In recent times, China has increasingly emphasized its distance from Western values and influences. With the still practiced colonialist way of thinking and the democracy missionarism (what is good for me must also be good for others) neither a population can be convinced nor a war won. The financial power migrates clearly from Europe eastward to the Middle or Far East and whether the USA’s booming armament industry can compensate for the economic downturn remains questionable. The future of the economic world is undoubtedly in Asia.

Jumping on the bandwagon is not difficult as almost all GCC and ASEAN countries offer excellent investment cooperation and laws, many also accompanied by good bilateral agreements so everyone even a little outwardly oriented businessman should consider the Middle or Far East to establish a foothold.

Throughout history, every culture and every economic system has come to an end, albeit for a variety of reasons. We seem to be pretty close to the end of Western domination in world politics and in the world economy.


Theodor Strohal

Our top 5 free zone recommendations

Selecting the right free zone is one of the most important decisions entrepreneurs have to make. The choice of a free zone will also depend on factors such as business activities, costs, facilities, and incorporation requirements and procedures. We have put together our list of the top 5 free zones in the UAE that might help you determine the optimal location for founding a company. Click here to read more.

Excise tax law amendments announced by MOF

On 14th October 2022, the UAE Ministry of Finance announced amendments to some provisions of Federal Decree-Law No 7 of 2017. Certain provisions of the law have been amended to support businesses, facilitate taxable persons’ obligations, minimize tax avoidance, and address challenges associated with the application of excise taxes. New provisions of Federal Decree-Law No. 19 of 2022 amending some provisions of Federal Decree-Law No. 7 of 2017 on Excise Tax include the following:

  1. Persons importing excise goods for purposes other than conducting business will be excepted from tax registration while remaining liable to pay the relevant excise tax on the import. An additional amendment to the same Article requires that the application for exemption from tax registration shall be submitted prior to the import activity and not when the tax is due.
  2. A new Clause has been added confirming that any person who receives an amount as tax or issues an invoice reflecting tax, must settle such amount to the Federal Tax Authority (FTA), and the amount be treated with the same treatment determined for due tax. Therefore, a person subject to tax shall pay the amounts he receives as tax to the FTA, even in cases where the tax was applied by mistake or evasion.

Additionally, the statute of limitation provisions relating to tax audits, tax assessments, and permissible time-frames for voluntary disclosures have also been added. The Statute of Limitation Article determines the maximum time within which Excise Tax can be enforced by the FTA. As soon as this period expires, the FTA is generally unable to take any further action. A tax audit or tax assessment cannot be conducted by the FTA after 5 years from the end of the relevant tax period. However, there are some exceptions to that rule, in accordance with the provisions. The amendments are effective from 14th October 2022.

Dubai Customs issues authorization certificates to free zone companies

Free zone companies receive authorization certificates from the Customs Valuation Department, which helps to speed up and smooth customs clearance for their products. Free zone companies can accept invoices issued in the country of origin. This service can be obtained online through the Dubai Customs website and smart channels. Companies can improve their returns by using the authorization service, which will reduce their operational costs. There are workshops available for companies in free zones to familiarize themselves with the authorization process.

ADDED’s ‘Investor Journey’ program launches phase 2

At Gitex Global 2022, ADDED unveiled Phase 2 of ‘Investor Journey,’ which incorporates more services and business setup tools. There is an informative simulator to guide investors through the process of setting up a business, as well as an interactive map supported by leading real estate portals in the UAE that can be used to identify and select commercial spaces for their businesses. ADDED launched Investor Journey in 2021 to serve current and prospective businesses, entrepreneurs, and investors by facilitating new business ideation and setup through seamless integration and a service ecosystem.

UAE’s private sector encouraged to achieve Emiratisation before the end of the year

The UAE’s private sector has been urged to achieve its Emiratisation target before 2022 ends. A company with over 50 employees must reach the 2% Emiratisation rate by the end of the year to avoid penalties. The penalties for non-compliance will include a Dhs 6,000 fine for every unhired Emirati, which is due to be collected in January of next year. As an incentive package, the ministry offers private sector companies that meet the Emiratisation target a first-category classification and membership in the Tawteen Partners Club, which offers discounts of up to 80 percent on ministry service fees within the establishments’ classification system.

DMCC awarded Global Free Zone of the Year for Eighth Consecutive Year

Global Free Zone of the Year 2022 is awarded to Dubai’s flagship Free Zone, DMCC, by Financial Times magazine’s fDi Magazine for the eighth consecutive year. DMCC also received: Large Tenant Free Zone of the Year – Global; Large Tenant Free Zone of the year – Middle East; Middle East Free Zone of the Year; SME Free Zone of the Year – Middle East; Excellence Award for ESG Practices – Global; and Excellence Award for Infrastructure Development – Global. Meanwhile, Hamriyah Free Zone Authority (HFZA) won three awards at this year’s fDi Global Free Zone of the Year Awards, reinforcing its position as a regional free zone hub. The three accolades include the Free Zone of the Year (4th position globally), Highly Commended Free Zone of the Year (Middle East) and Excellence Award for Key Performance Indicator (Global Winner).

The UAE FTA is launching a new integrated platform called EmaraTax

FTA has announced that its new integrated platform “EmaraTax” will be launched in November 2022 following a period of assessment, consultation, and development. The new platform increases FTA’s abilities to administer taxes in the UAE, enables better, faster decision-making and enables earlier engagement with taxpayers. Using the new platform, government entities such as the UAE Central Bank and national technology-based programs like UAE PASS can integrate with other influential government entities to simplify tax administration and make the most of common data. Thus, a range of user processes, from logging in to preparing tax returns, are simplified.

Far East:

Minimum wage increase in Cambodia

In September 2022, the Ministry of Labour and Vocational Training (“MLVT”) issued Prakas 247/22 to determine the minimum wage for workers in the garment, textile, footwear, and travel product sectors (“Prakas 247”), which set a new minimum wage for 2023, effective on 1 January 2023. The following new minimum wage will be applicable to workers in the above sectors under Prakas 247:

  • for regular workers, USD 200 per month
  • for probationary workers, USD 198 per month

For piece-rate workers, the pay rate is determined on the basis of the level of production of the workers. If production exceeds the minimum wage, the workers are entitled to a higher wage. Employers are responsible for adjusting workers’ pay if their production results in lower than minimum wage (USD 200 for regular workers and USD 198 for probationary workers).

Thailand will increase exports to Saudi Arabia

In the next year, Thailand aims to increase exports to Saudi Arabia by 5% to 65 billion baht – products that could include food, construction, petrochemicals, automobiles, and seedlings. Exports to Saudi Arabia are expected to reach 61.8 billion baht this year, up 20% from last year. In January, both countries agreed to fully restore diplomatic relations, ending three decades of strained relations and paving the way for cooperation. Both countries agreed to organize export clinics for Thai exporters interested in exporting to Saudi Arabia, while the Commerce Ministry and FTI agreed to provide exporters with advice, information about regulations and nontariff measures, as well as information about goods, services, and transportation.

Improvements in consumer confidence continue in Thailand

Consumer confidence reached an eight-month high in September due to the decline in Covid-19 infection rates and the improvement in business activity following the relaxation of pandemic-era restrictions. Data from the University of the Thai Chamber of Commerce (UTCC) reports that in September, consumer confidence rose to 44.6 from 43.7 in August. In July, it stood at 42.4, in June at 41.6, in May at 40.2, in April at 40.7, in March at 42, in February at 43.3, and in January at 44.8. It is expected that the economy will grow by 3.0-3.5% this year, with an inflation rate of 6-6.5% and export growth of 6-8%.

Cambodia, UAE launch CEPA talks

A Comprehensive Economic Partnership Agreement (CEPA) is scheduled for signing between Cambodia and the United Arab Emirates (UAE) on October 24, paving the way for increased bilateral trade and investment. According to him, Cambodian goods, especially agricultural products, would be more marketable in the UAE via a trade agreement, adding that Emirati investors could be enticed to invest in food production, particularly halal, for export to the Arab world. According to the commerce ministry, Cambodian-UAE trade reached $151.547 million in 2020, up 52.66 percent from $99.271 million.

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