Dear Friends and Clients,
This summer newsletter summarizes the essential information of the last 3 months. There is not much happening in Arabia in the summer heat – at least as far as business is concerned. So we did not want to bore you and therefore are publishing this newsletter for a 3-month- period.
This is also the first newsletter that also provides you with information from Far East, namely from our law firms in Singapore and Myanmar. From these locations, we advise clients in their ventures throughout the AEAN region.
There are major changes in the UAE immigration policy. Long-term visas for professionals and other persons is up to 10 years, retirement visas for 5 years, there will now also be further facilitation for visa exceedances.
Most Emirates fight for investors nowadays. When we opened our office in RAK in 2005, the red carpets were rolled out for new entrepreneurs and investors. Unfortunately, this pleasant business climate has worsened with bureaucratic and legal obstacles. In a time of “challenging business environments” (as H.H. Sheikh Mohamed bin Rashid called it), there has been a rethinking and every Emirate is now happy for new company set up.
Unfortunately, the Banks do not follow this philosophy and it is becoming increasingly difficult to find any UAE banks that open accounts for corporations on reasonable terms. We have been recommending “going astray” for some time and switching to banks outside of UAE. Bahrain is still an exception here. With a company established in in Bahrain, a bank can be found quite fast.
The MLI Convention was quickly adopted by the UAE in order to avoid being blacklisted by the EU again. Here it is necessary to rethink existing legal structures of tax savings, for which we, at SLG, are happy to be available. It is the duty of the tax adviser to always be one-step ahead to help clients save money. The legislation always lags a bit behind in closing any gaps found by our consultants.
Ras al Khaimah still offers a good business and living environment. The 2 new authorities for free zone and offshore companies are developing well and their service improves. Even though the set up costs for new companies are not significantly lower than in other Emirates, the main saving effects are in the far cheaper rent for office and residence.
Further RAK is the only emirate besides Dubai to provide the registration of DIFC wills.
I wish you a successful Autumn.
Far East – turning into a new investor’s heaven
We are not concerned with politics and therefore not with the elections in Cambodia last July. But after all, since the expulsion of the Khmer Rouge, the country has been able to point to a continuous development and certainly has an incentive for investors with its (relatively) new investment law. Company start-ups are relatively quick and unbureaucratic. Foreigners can be 100% shareholders and also directors. No local involvement is necessary. The start-up costs are considerably lower than those of the UAE. Once the company is established, a bank account can be opened within a few hours at well-known, internationally recognized banks. The USD is the country’s main currency, so there are no exchange rate losses. Taxes are considerably low and resident permits easy to obtain. With your UAE Free zone or offshore company you can establish a branch in Cambodia and open the bank account in your company’s name. There are no restrictions for worldwide transfer of funds, you can handle your banking online. If you need support our staff can be on the spot within 2 hours. And with a Cambodian residence permit you are ASEAN resident and can easily obtain visa for other ASEAN countries.
Also property can be purchased by foreigners and businesses are extremely lucrative in this fast developing country. The average ROI for almost any business is less than 2 years. And from Phnom Penh you are in Bangkok, Ho Chi Min City, Hanoi and Vientiane in less than 1 hour, in Singapore and Yangon in 2 hours, in China and Hong Kong in 3.
Thailand also offers 100% foreign companies, tax exemption and even land purchase with the BOI (Board of Investment) system. 100% foreign ownership, tax reliefs, easy and fast setup is guaranteed. Economy is booming, the political system is stable. The security of the ASEAN countries is now guaranteed by China, which is not a disadvantage, especially since the US influence has almost disappeared.Myanmar Companies Law 2017. Enacted and in force since August 01, 2018, represents a marked policy change in the amount and extent of foreign investment that may be held in Myanmar companies. This law modernizes the regulatory framework applicable to every company in Myanmar, lifting Myanmar to a more internationally recognizable standard.
The Ministry of Commerce issued Terms & Conditions for Retail / Wholesale Trading (Notification No. 25/2018) on 9 May 2018, describing in detail which documents and information shall be necessary to apply for retail/wholesale license. This makes it the first time possible for 100% foreign owned companies to engage in wholesale and retail trading.
New three-category system for influencers in UAE
Social media influencers in the UAE are required by law to register for a license or risk having their accounts shut down and face fines of up to AED 5,000.
Bloggers and influencers can now choose, if they are not registered with social media management agencies in the UAE, from the following three-categories: the 1st category includes the “Individual License” for independent influencers, which will cost ca. AED 15,000. It also requires having a separate trade license as well, which comes at an additional cost. The 2nd category is the “Partnership License” for small groups of friends or family who can set up a company together, which would also cost ca. AED 15,000 and it requires a valid trade license as well. The 3rd category is for influencers which will sign up with official “Influencer Agencies” that are certified by the NMC. These influencers will not have to pay any licensing fees or register as a company, however the catch is that they must work exclusively with the clients of the agency and would not be allowed to acquire business independently.
Major changes in immigration:
In June, the UAE Cabinet adopted a number of strategic decisions with regards to foreign worker’s insurance in the private sector as well as visa facilitations:
- Mandatory bank guarantee for labor recruitment is abolished and replaced by a low-cost insurance system.
- New visa facilitation procedures for visitors, residents, families & people overstaying their visa.
- Exemption of transit passengers from all entry fees for first 48 hours. Transit visa extension for up to 96 hours for a fee of AED 50.
- People overstaying their visa are now given a chance to leave the country voluntarily without a “no entry” stamp on their passport, if they present a return ticket.
- New 6-month visa to be introduced for job seekers who overstayed their visa but wish to work in the country. Temporary visas to enhance the UAE’s position as a land of opportunities, and a destination for talents and professionals.
- individuals wishing to adjust or renew their visa can do so for a fee, without having to leave and re-enter the country.
- empowering people with disabilities to gain equal access to the job market
Tax avoidance: Update on the Multilateral Instruments
As mentioned in our May Newsletter, the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting” (MLI) came into force on July 1st, 2018. On June 27, the UAE signed the MLI and therefore regained its position as a cooperative and transparent jurisdiction, which the UAE had lost earlier this year. Later, they were removed by the European Union from the list of non-cooperative jurisdictions for tax purposes.
At the moment, there are 83 double tax treaties in force between the UAE and other jurisdictions (e.g. Austria and Germany) and over 30 treaties in various stages of ratification and negotiation. With the signed MLI, the UAE notified all of these treaties that they will be covered by the MLI and therefore all the minimum standards will be constituted under the Organization for Economic Cooperation and Development (OECD) described in the Base Erosion and Profit Shifting (BEPS) Action Plan.
The UAE had the option to sign up to other anti-tax avoidance provisions in the MLI, but has not chosen to do so. The optional provisions could alter an existing tax treaty only where such provisions apply systematically, unlike the BEPS minimum standards, which applies automatically. At the moment it is not expected to affect any of the UAE’s covered agreements. Beyond that, the UAE has not chosen to adapt the mandatory arbitration provision in the MLI.
After signing the MLI, the effect for the UAE is that its tax treaty network will be updated to include the BEPS minimum standards. The taxpayers should consider revisiting and reviewing their existing investment and legal structures to determine if and to what extent the newly introduced rules will impact those structures. Furthermore, taxpayers should revamp or even overhaul existing structures so as to mitigate the (adverse) impact of those rules. In addition, taxpayers considering making investments out of or through the UAE should take these new anti-treaty shopping rules into account to ensure that the structures being put in place will withstand the scrutiny of these minimum standards rule.
Being experts in international taxation, we believe that the structures we set up for our clients will also be feasible under the new regulations. If you are already our client for tax matters, just feel safe. If you are running your business by employing a legal tax avoidance structure, just contact us and we will be glad to look at it to determine if it is compliant with the present situation.
Retirement visas to be made available in the UAE
The UAE will offer 5-year renewable visas to expats aged over 55 who have retired from working.
Further requirements include:
1. Have investments in real estate worth over AED 2 million,
2. Have financial savings of not less than AED 1 million, or
3. Provide proof of a monthly income of over AED 20,000.00
The application process will open sometime in 2019.
AED 26.2 billion worth of cheques bounced in the first 6 months of 2018
According to the Centrals Bank of the UAE, almost 4.3% of cheques issued by UAE residents and entities bounced during the first 6 month of 2018 with a total value of AED 26.2 billion. In the same time over 12 million cheques worth AED 592 billion were passed through the UAE cheque clearing system. Comparing the first five months of 2018 with the same period last year, 12.9 million cheques worth AED 643.7 billion were processed during the first 6 months of 2017, according to Central Bank data. Of those, 546,000 cheques worth AED 28.9 billion bounced, accounting for 4.5% of the cheques’ total value and 4.2% of the total number of cheques handled by the system. The UAE Central Bank data states further, that the value of the cheques that were circulated from January 2018 to the end of May 2018 represented around 39.3% of the total value of the cheques circulated in 2017, which reached AED 1.5 trillion. The gross credit to the private sector totaled AED 1.11 trillion by national and foreign banks, a month-on-month increase of 1.1% year-on-year growth of 4.5%.
Abu Dhabi: No more buffer on road speed
Since the 12th August, motorists in Abu Dhabi have had to slow down as radars were reset as per the amended speeds on the roads. With the scrapping of the 20 km speed limit buffer on the roads, the Abu Dhabi Police and Department and Transport are trying to curb the road fatalities and educate the public on the importance of road safety. Before the change, motorists were allowed to drive at 140 km/ph on a 120 km/ph speed zone, but as per the amended rule, driving even 1 km over the new limit of 120 km/ph will incur a fine of AED 1,000. The police revealed in January that speeding outrides the list of traffic violations, which comprised 79.8 % of the total fines. Apart from that, speeding caused the death of 230 people out of the total 525 road fatalities in the UAE.
What’s on in Ras Al Khaimah:
Renewal of UAE driving license online only in Ras Al Khaimah
Beginning June 24th, drivers registered in the Emirate of Ras Al Khaimah shall only renewed their driving licenses electronically as the procedure goes completely online. According to Brigadier Adel Ali Al Ghais, director of the licensure department at RAK Police, the move is in line with the Ministry of Interior’s strategy to provide more convenient and smart services to the public. The police further stated that the decision to use an online portal – which covers all types of drivers – will help save money, time and effort, and give a boost to the smart conversion of the RAK police services. In addition, Brigadier Adel Ali Al Ghais pointed out that more eye test centers have been accredited to give customers more options. The renewed driving license shall then be delivered by courier to the customer’s requested address in a short time. Exempt from this rule are two segments, including the elderly and people with disabilities.
VAT questions to UAEs Federal Tax Authority (FTA)
In July RAKEZ informed all clients that they are currently compiling a list of tax-related questions, which shall be shared with the FTA. Therefore, RAKEZ encourages all clients to submit VAT-related enquiries to them. According to RAKEZ this provides a greater opportunity for the clients to learn more about the subject as well as raise queries and concerns. With this project RAKEZ wants to enhance their clients’ understanding about VAT.
Meet the Registry:
On 11th July RAKICC organized a “Meet the Registry” event in order to introduce the new CEO of RAKICC Dr. Sameer Al Ansari and the new Registrar Mr. Alan Bougard. After a short summary about their carriers, the CEO and the Registrar informed everyone about some projects and changes in the near future in line with the data exchange. The main focus of RAKICC at the moment is communication with banks across the UAE and outside, since more and more companies are facing problems with bank accounts closed by their banks.
Furthermore, RAKICC would like to minimize the paper trail and would like to set up digital signatures. We will keep you updated as soon as there is a new development.