Dear Friends and Clients,
The network of the international community of multinational corporations’ attempt, in particular, to destroy the (legitimate) tax savings models is becoming ever stronger. The UAE has also joined the BEPS project aimed at combating tax evasion, but only with the minimum standard of 5 out of 15 possible conditions.
Action 6 (preventing the granting of treaty benefits in inappropriate circumstances), which is mostly feared by international tax experts, has long been well-known to Europeans: The economic approach in the respective tax laws has made “treaty shopping” illegal for years and days. BEPS is therefore not a spectre of horror for us; we still have sufficient opportunities to show our clients ways to avoid high taxation.
You will also read how to get to the popular “Gold Card”. After all, a residence permit for 10 years is not to be despised. 400 expats have already made it. We are happy to support you.
And not only the strict immigration rules were softened in favour of us investors, but also the strict rule that free zone companies are not allowed to work onshore. Here an agreement between DMCC and the Dubai DED is a new opportunity.
The new turn of the Dubai Land Department seems strange but positive. When we started working here in 2005, every free zone or offshore company could acquire free hold properties in Dubai. A few years later, companies from other Emirates were excluded, only Jebel Ali offshore companies were entitled to do so. Now there is a turn back. Also RAK Free Zone and even RAKICC offshore companies are allowed to buy in Dubai.
The combination of offshore and Freezone structure offered by RAKEZ and RAKICC is not new, but is now officially offered as a package. Apart from the listed advantages, the offshore parent can also be used for other activities such as property acquisition in RAK and Dubai, other holding functions, and etc. If this structure is accompanied by the easier option of opening a bank account, it is recommended. We will test this structure and report again.
And the best news last: The UAE is taking care of the health of their residents: a 50% tax on all products containing sugar and 100% on all electronic smoking devices have been levied.
Now it’s time to wish you a “hot autumn” (in the business sense), as the temperatures are getting cooler, so are people’s heads, and good business shouldn’t stand in the way. Especially since we always provide professional advice in all business matters.
To end, here is a beautiful Arabic saying: “Wealth comes like a turtle and goes away like a gazelle.” We are here to speed up your turtle and catch the gazelle before it runs away.
UAE introduces submition of financial reports for companies
The government of the UAE has announced that companies are now required to submit their financial reports to the UAE Ministry of Finance by December 31, 2019. This is in compliance with the new policy called country-by-country (CbC) reporting with a framework approved by the OECD (Organization for Economic Cooperation and Development) and G20 countries under the Base Erosion and Profit Shifting (BEPS) project aimed to combat tax evasion. The UAE is committed to implementing the 15 BEPS measures which will help enhance its international competency worldwide. The UAE government is keen to implement the following 4 BEPS minimum standards in the immediate to short term span:
– Action 5 – countering “Harmful Tax Practices” more effectively, taking into account transparency and substance;
– Action 6 – preventing the granting of treaty benefits in inappropriate circumstances;
– Action 13 – transfer pricing documentation and country-by-country reporting with a three-tiered standardised approach: local file, master file, and CbC reporting for multinationals; and
– Action 14 – making dispute resolution mechanisms more effective.
CbC reporting to the Ministry of Finance is required if the company is:
- Part of a multinational corporation group (MCG) consisting of a group of companies that are tax residents in more than one country (either through another group company or via a permanent establishment) and has consolidated revenues of 3.15 billion UAE dirham ($857 million) or more. Each entity of the MCG must be identified, and state its tax residence, nature of activities, and its main business activity.
- An ultimate parent entity (UPE) of this MCG.
- A subsidiary of an MCG with a foreign UPE unless the UPE or an assigned alternative parent will submit the report for the relevant year in another country with which the UAE has an effective exchange relationship. A notification from the UAE company is required to be submitted to the Ministry of Finance to indicate the country in which the report will be filed.
CbC reporting will require multinational enterprises (MNEs) to submit reports annually showing a breakdown of tax elements by jurisdiction. Small and Medium Enterprises (SMEs) are not included in the scope. Non-compliance could result in penalties, fines, suspension, withdrawal or non-renewal of licenses, and/or disclosure of an entity’s position to foreign authorities. CbC must contain information on revenue, profit (losses), income before tax, and tax paid for each country where the MCG engages in its activities.
DIFC: New insolvency law
Dubai International Financial Centre (DIFC) has passed a new insolvency law signed by Sheikh Mohammed bin Rashid Al Maktoum which came into effect in June 2019. The new law follows the UNICITRAL Model Law on cross-border insolvency proceedings with modifications made to apply to DIFC. As stated on their website, DIFC’s Insolvency Law No. 01 of 2019 will help balance the needs of all the stakeholders in the context of distress and bankruptcy related situations in DIFC, facilitating a more efficient and effective bankruptcy restructuring regime. The law applies to DIFC Companies which are incorporated in the DIFC Companies Law.
If you have further questions regarding the DIFC Insolvency Law, please do not hesitate to contact us. Our Vienna law firm has concentrated on insolvency law for three decades and has been regularly appointed as liquidators by the commercial court.
Update on UAE Gold Card scheme
The General Directorate of Residency and Foreign Affairs (GDFRA) has announced that not only investors, entrepreneurs, talents, researchers, and outstanding students can get a Gold Card. Expat executives and their immediate family can also get 10-year renewable visas under these provisions:
- must have not less than AED 30,000 monthly salary,
- Bachelor’s degree holder or equivalent,
- at least 5 years work experience, and
- a valid employment contract.
So far, 400 expats have now been given the Gold Card and are exempt from the normal visa rule. It means that having the 10-year visa can let them stay away from UAE for more than 6 months. Applications can be submitted through the immigration office and other accredited centres.
DMCC Introduces Dual Licensing Scheme
Dubai Multi Commodities Centre (DMCC) and Dubai Economic Development (DED) have signed a Memorandum of Understanding (MOU) to help enhance trade and improve the economic activity in Dubai. The MOU allows for a dual license for DMCC companies to do business in the Emirate under a DED license. Freezone businesses will be permitted to do service activities onshore as long as they secure a NOC from DMCC. The MOU also enables both entities to share business information among them with the use of block chain technology.
Long term visa for JAFZA customers
Jebel Ali Free Zone Authority (JAFZA) will start offering long-term visas for its customers in line with Resolution No. 56 of 2018 which was issued by Sheikh Mohammed bin Rashid Al Maktoum. JAFZA will help its clients in facilitating the process for them to meet the requirements, working together with the Federal Authority for Identity and Citizenship and other government agencies. The CEO of JAFZA has announced that this initiative is part of their bigger goal in helping the Dubai Government achieve its visions and objectives.
DLD strengthens ties with RAKICC
Registered companies with RAKICC can now own freehold land and properties in Dubai. An MOU between Dubai Land Department (DLD), RAKICC and RAKEZ will allow companies to invest in Dubai’s real estate market at 23 freehold areas without having to obtain a trade license from the Emirate. For those interested in acquiring property under their company, a No Objection Certificate must be requested from the concerned entity to be presented to DLD upon registration. DLD will grant approval as long as the shareholders are natural persons, juristic persons or a combination of both.
RAKICC launches “Premium Product” with RAKEZ
Ras Al Khaimah International Corporate Center (RAKICC) has launched a Premium Product option with Ras Al Khaimah Economic Zone (RAKEZ). It is catered for clients who usually cannot decide as to whether they will set up an International Business Company (IBC) or Free Zone Company (FZCO). With the new option, investors can set up both by registering their IBC first with RAKICC and then establishing a subsidiary with RAKEZ. The advantages of going with Premium Product are:
- Residence visa can be provided to employees and shareholders.
- Opening a bank account is more likely to be achieved if you own a FZCO.
- You can set up a physical office.
- Trading can be done globally and within the UAE.
- The client can benefit from zero taxation in the UAE and other taxation treaty agreements with other countries.
- The company can now be considered a business enterprise of real substance.
RAKEZ – audit reports required starting in 2020
RAKEZ now requires audited financial statements starting in 2020. The 2019 financial report and the succeeding years after that should be submitted within six months of the company’s financial year end. Companies must make sure that their assigned auditor is one of the auditors approved by RAKEZ. Non-submission of the audited financial statement can result to a fine of AED 2,500 which may cause suspension of services. RAKEZ has the right to request the original copy of the audited financial statements at any time.
Ras al Khaimah will hold an international exhibition for SMEs in November
Ras Al Khaimah will be hosting the first and largest international exhibition for small and medium-sized enterprises (SMEs) from November 14-16. It will be facilitated by RAK Chamber of Commerce and is anticipated to bring 200 companies from 20 countries with other invited entrepreneurs and SME funds from all over the UAE. The exhibition is expected to be able to help build new business partnerships, reinforce communication among private companies, share and discuss business practices, and introduce investment opportunities. By hosting the event, this shows that the government of RAK supports the SMEs contribution to the economy and helps them achieve their goals.
Waiver from VAT for Companies for exhibitions and conferences
Abu Dhabi National Exhibitions Company (ADNEC) announced that the Federal Tax Authority (FTA) is issuing waivers for VAT for all international companies and organizations who are participating in or holding shows and conferences at its venues across the UAE with effect from June 1st, 2019. The VAT waiver will cover exhibitions and conferences held over a period not exceeding seven days. Furthermore, the waiver stipulates that recipients shall not have a permanent base or established business in the UAE and shall not be registered or obliged to register in the UAE as per the UAE VAT Law. According to Humaid Matar Al Dhaheri, Group CEO of ADNEC, “The VAT waiver for ADNEC-hosted event organisers and participants will further stimulate the business tourism sector in the UAE through enhancing the competitiveness of our venues to host major international exhibitions and conferences. This move supports our strategy to attract new and world-renowned events to our venues and increase our direct and indirect contributions to the Abu Dhabi economy.”
Direct connections between Sharjah and Vienna
Air Arabia, Sharjah’s low-cost carrier, has announced the launch of direct flights between Sharjah and Vienna starting 15 September 2019 to cater to both business and leisure travelers at low-priced airfares. Flights will be four times a week every Sunday, Wednesday, Friday and Saturday which will most likely increase in number by mid-December. Air Arabia’s CEO hopes that this will further enhance trade and tourism between the two nations.
Myanmar will establish a trade authority
The Ministry of Commerce (MOC) of Myanmar has drafted a law which is anticipated to be approved by the parliament this year. The drafting was supported by the World Bank and GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit). The law is set to form a trade development body made up exclusively of cabinet ministers, and gives MOC the authority to issue a list of restricted products and non-tariff regulations in relation to the country of origin. The draft trade law strives to promote fair competition and local products as well as acquisition of technology by allowing the Ministry to send trade missions abroad and hold promotional activities locally and internationally. Businesses can import, export, re-export goods if they have been issued trade license certificates by the MOC. The E-market, which is unregulated at the moment in Myanmar, will also be regulated in this draft legislation.
Myanmar: New foreign workers’ and immigration provisions:
Currently, the rules and regulations regarding foreign workers are regularly changing and requirements by the authorities may vary from application to application. We understand that the Ministry of Labour, Immigration and Population (MOLIP) is currently drafting a Foreign Workers Law that will hopefully formalise the detailed requirements for all foreign workers in the future.
Principally there are two different ways to obtain a business visa:
– Electronically – issued for 70 days. Cannot be extended and applicant has to apply again from outside the country for a 70-day visa after expiry.
-By a Myanmar consulate outside the country: The 1st visa will also be issued for 70 days. Then the 2nd visa goes for 6 months (sometimes 3 months) and the 3rd visa then for 1 year. All these visa have to be issued by a consulate. We provide this service in Bangkok, the UAE and Singapore. The fastest consulate is in Bangkok; you can obtain your visa on the same day.
Employment registrations, work permits and residence permits have to be applied for in the country as long as the applicant holds a valid business visa. We are also able to provide business visa without the documents of the future employer. The applicant can therefore enter Myanmar and legally look for a job. As soon as a job is found, our office can take care of the work permits.
Cambodia: Starting from August some jobs are off limits to foreigners
The government of Cambodia will no longer be allowing foreigners to work in jobs considered to be low-income including some white-collar jobs in the private sector. This is to protect the local employment market, as well as small enterprises and family-owned businesses. The new policy will begin the second week of August.