Dear Friends and Clients,
I was a little surprised to receive so many positive reactions to our December newsletter. Actually, this was my first introduction to a newsletter which did not refer to the content and news from the law and economy, but was more of a philosophical nature.
Likewise, this time I will leave the classic part of the newsletter to my young colleagues in the law firms. I withdraw to the area that may diametrically oppose the typical lawyer’s newsletter, namely to focus on stimulating thoughts about human behavior.
The world is created by our mind – so is time. But to recognize this essential spectrum of functionality requires an important step: mindfulness and awareness. Awareness means knowledge or perception of a situation or fact.
The fact is that: what is, not what should be.
And here most of us have difficulties, specifically to really face the facts. We integrate all our wishes and needs into our picture of reality. Then it becomes difficult to keep facts and desires in mind. Ultimately, many wrong decisions are based on this non-distinction.
Hence, most statements we make in speaking and writing are assertions of fact, opinion, belief, or prejudice.
It is in human nature to incorporate one’s own opinions, prejudices or the like into the self-constructed world view. Accordingly, our conversations and writings are colored by our subjective “truth”. This is not a critique, it’s just an attempt to expose this fact, with the goal that each of us simply realizes that we are not actually representing the truth. If we integrated this modesty and then acted with the necessary respect for the subjective world view of others, we would save ourselves quite a bit of trouble and stress. I have achieved most of the advocacy for my clients by mentally sitting in the counterpart’s chair and considering what I would do in their place.
There is where tolerance, understanding and wisdom begins, especially if one ignores the conviction that only one’s own truth is the real truth and one does not have to project that truth on the whole world and especially on the other. And as we learn to think about the preferences, opinions, and prejudices of others, we will be far more successful in the intercommunicative world.
I hope that this little digression into a philosophical and psychological level was entertaining for you and may have sparked some understanding for one’s own and others’ behavior.
Truly yours,
Theodor Strohal
Update on VAT:
Taxpayers of the UAE (and Saudi Arabia) are expected to be prepared for full scale tax audits in 2019 after the first year of the VAT implementation. David Stevens, GCC VAT Implementation Partner at advisory EY said, “Businesses need to prepare themselves to be able to completely justify all of their numbers, all of their data, all of their statements, all of their payments, all of their invoices, all of their record-keeping, and all various other aspects of their VAT compliance that will come under increased scrutiny by the authorities as we go into the second year of operation.” The authorities will need to constantly update the rules and regulations as more issues come up in 2019 because VAT is a complex duty that changes and varies over time. Currently, tax returns are being filed online but tax experts expect both countries to adopt a global approach to VAT which includes submission of invoices online.
De-register from the FTA, if your business does not exceed the required annual limit
Businesses who did not exceed the required annual limit of AED 187,000 may deregister 13 months after they have registered from the Federal Tax Authority (FTA). The deadline for the submission of the application for deregistration is on the 20th of February 2019 and failure to apply will result in a hefty fine of AED 10,000. Nevertheless, deregistration means that companies will not be able to refund the VAT for their future expenses but will still be required to pay VAT on the assets they acquired while they were registered. Although not being registered with VAT can provide benefits, experts still advise that businesses should analyze deregistration sensibly.
FTA issues guidelines for foreign businesses’ VAT refund in UAE
The UAE Federal Tax Authority (FTA) issued four rules that would help foreign businesses to get VAT refunds. Firstly, the foreign business must not have a place of establishment in the UAE or any other GCC states that implements VAT. Secondly, such foreign businesses must not be a taxable person in the UAE. Thirdly, said businesses must be qualified as an establishment with a competent authority in the jurisdiction in which they are established. Lastly, they must be from a country that administers VAT and that equally provides VAT refunds to UAE businesses in similar circumstances. The minimum amount for each refund claim is 2,000AED which may be made from single or multiple purchases. For the year 2018, the FTA has announced that the start of refund applications will be on April 1, 2019. For subsequent years, acceptance of applications will start every 1st of March. Original tax invoices should be submitted together with the application.
No new fees and taxes in the UAE in coming years
The UAE Ministry of Finance has announced that no new fees or additional taxes would be introduced in the next three years. The decision made intends to attract more foreign investments and stimulate economic and social stability, as well as support for industrial and commercial sectors. In 2019, the amount of loans will be doubled, which will benefit small and medium enterprises and housing support for Emirati citizens will also be improved. Following the introduction of VAT in 2018, the UAE has launched a series of initiatives to boost investor confidence and attract global talents. Some of the initiatives include longer-term residencies for job seekers and non-residents and a reduction in the cost of self-employment in certain free zones. Being ranked first in the Middle East and North Africa as the best competitive economy according to the recent 2018 Arab Competitiveness Report, the UAE’s national economy is said to prosper in 2019 and is assured to carry out better than it did in the year 2018.
UAE ministry launches new job classification scheme for new work permit applications on the mainland
The Ministry of Human Resources and Emiratisation (MOHRE) has announced job descriptions as part of a new occupational classification scheme which is now used for new work permit applications. The occupational classification scheme has been prepared according to the International Standard Classification of Occupations. It consists of a list of 726 job titles in nine professional categories, comprising of managerial positions, specialists and clerical support staff. Each designation belongs to one of five levels of professional skills that conclude whether a degree or certificate must be provided with a work permit applicant, or not. A brief job description and a unique code are attached to each designation on the list. Foreign nationals can only apply for a work permit with a job title from the new list. Those having employment residence permits with job titles that are not on the new list, will not need to revise their title to renew their employment contract.
Tolerance Section in Ras Al Khaimah and Abu Dhabi Court
The Ras Al Khaimah and Abu Dhabi Courts announced the newly set-up ‘tolerance section’ in their departments to resolve minor issues before taking the matter to the courtroom. Issues related to inheritance and rent, as well as the reconciliation of civil, labour and other matters can be tackled in this new section. There will be a formally approved document by the parties in conflict that they accept the friendly resolution of their minor dispute. However, any person involved in the dispute may still refer to the court in case efforts fail to reconcile the matter. The friendly settlements of these issues will be in accordance with UAE laws and with the consent of all parties. The launch of the center, which is under the Alternative Resolution Division of the ADJD, was done following the announcement of the UAE President declaring 2019 as a Year of Tolerance.
GPS bracelets introduced in the UAE for minor sentences
Electronic tagging will be introduced in the UAE as a substitute to jail time for offenders with minor sentences. A Federal Law was issued last September which paved the way for the introduction of the electronic tagging. Also called GPS bracelets, the device will be able to allow the authorities to track the person wearing it. Prosecutors will be given the right to change police custody with house arrest and will also determine the use of the tag depending on each situation. The law will also allow convicts under house arrest to travel and leave the country as long as the country of destination, reason for travel and return date is provided. However, time spent outside of the UAE will not be taken off the sentenced amount of days.
Dubai: New 2-year Visiting Doctor’s License announced
The Dubai Healthcare City Authority has launched a ‘Visiting Doctor’s License’ which will be valid for a period of 2 years replacing the current 3-month license. This will allow international physicians, dentists and Complementary and Alternative Medicine (CAM) practitioners to engage in any work for up to 3 clinical facilities within DHCC. The 2-year license may be granted upon obtaining the Letter of Acceptance and a contract with a facility, and it also allows sponsorship for families. Dr. Alblooshi, CEO of Dubai Healthcare Authority – Regulatory (DHCR) has expressed, “Attracting global medical expertise to serve the health of our citizens is one of the main pillars of the transformation of Dubai’s medical system. The new ‘Visiting Doctor’s License’ will help achieve this as it provides flexibility and mobility for global, high-caliber physicians wishing to work in Dubai Healthcare City, consequently increasing unique expertise in this free zone”. Applications for the license can now be submitted starting 20 January 2019 by logging on to the Masaar e-services portal.
The Far East
Cambodia: Double taxation treaties set to be implemented
The double taxation agreement between Cambodia and three other countries has come into effect and has been implemented since 1st January 2019. Cambodia and China signed the deal in 2016 in order to avoid double taxation and prevent evasion of income tax, according to the General Department of Taxation (GDT). Cambodia also signed another two agreements with Brunei (2017) and with Vietnam (2018). These agreements grants protection to nationals of both countries from dual taxation and will boost foreign direct investment and trade between the countries.
Bilateral trade between Cambodia and Vietnam reached record highs in 2018 with a trading volume amounting to US 3.06 billion during the first 10 months of 2018, an increase of 36% from the same period in 2017. The bilateral trade between Cambodia and China was worth US 6.06 billion in 2017. Cambodia imported US 5.3 billion from China, while the volume of Cambodian exports to the country reached US 758 million. The Cambodia Chamber of Commerce director-general Nguon Meng Tech said the agreement is a good deal to promote the Kingdom’s economic growth. The Kingdom’s tax department is currently negotiating double taxation agreements with other countries, including Singapore, Thailand, Malaysia, the Philippines, South Korea and Japan.
Singapore: To solve a land problem, Singapore goes underground
Singapore is running out of space and is looking to expand its territory and is currently preparing for an Underground Master Plan in 2019. The focus of the plan is to produce underground space for utility, transport, storage and industrial facilities to be able to free up surface land for housing, offices, community use and green space. The Underground Master Plan will feature data centers, utility plants, bus depots, deep-tunnel sewage systems, warehouses and water reservoirs. A few utilities have already been moved underground like: train lines, pedestrian crossings, retail, air conditioning cooling pipes and some highways.
Myanmar: Hydropower project deal signed
The Ministry of Electricity and Energy has announced the signing of a power purchase agreement (PPA) with Neo Energy Oasis Co Ltd, the builder of the project for the Upper Baluchaung hydropower project. The PPA was signed between Electric Power Generation Enterprise (EPGE), a unit of the ministry and Neo Energy Oasis on 28 December 2018. The Upper Baluchaung project, is being implemented under a build, operate and transfer (BOT) deal and, after having been started in 2011, is now 45.5% completed. The hydropower project features two power plants with a total capacity is 30.4 megawatts and the annual power generation is projected to be 134.482 million kilowatt-hours and once completed will supply electricity to villages in southern Shan State’s Nyaungshwe Township and its surroundings.
It is certainly a step forward, if townships in Shan State are now supplied with electricity. The energy supply in Myanmar has always been a major reason for many investors to avoid the country, at least since we started working there (2012). Even in the biggest city of Yangon there are regular blackouts at peak times and during the rainy season. The rural population is only 30% supplied with electricity. Micro-power plants, which could be operated with the flow of the river, would be a way to supply the village structures. Here, we are looking for innovative investors.