UAE Free Zones

News and Information on the UAE by Oxford Global Services

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Expo 2020 expenditure to aid Dubai's economy surpass peers

Based on the International Monetary Fund (IMF), Dubai will oppose the financial economic slump neighboring Gulf countries are experiencing due to Expo 2020 investment flows.

Thanks to the Dubai’s government spending the emirate is set to increase its GDP rate by more than 5% by the year 2020.

The most prosperous of the seven emirates, Abu Dhabi, has cut down on spending because of the plunge in oil prices. Consequently, IMF anticipates that Abu Dhabi’s economic growth will mark a significant drop to 1.5% in 2016 in comparison to the 4.3% it marked in 2015.

According to the IMF’s predictions, Dubai’s inflation rate is set to decline from 4.1% in 2015 to 3.2% in 2016. Furthermore, the IMF believes that the UAE’s economy will record a rise of 2.3% during 2016.

It is also notable to add that Dubai’s diversified economy is aiding the emirate get over the negative factors decreased oil prices have brought.

It is anticipated that due to the slowing economy as well as increased financing requirements, the growth of the private sector credit will ease.

The government and authorities of Dubai plan to further diversify the economy of the emirate. This demands enhancing structural reforms in order to develop the private sector even more so as to develop a knowledge-based driven economy as well as enhance the export industry.

Improvements and modifications should be made to a variety of domestic business environments. For instance, establishing effective private-public partnership structures as well as easing foreign ownership regulations and restrictions. Other ideas is to make financing small and medium enterprises (SMEs) and startups more accessible as well as develop incentives to create employment positions, especially for women. 

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It is a Fact: VAT will be in place in the UAE by 2018

According to recent events, the United Arab Emirates (UAE) have confirmed their intention to introduce Value Added Tax (VAT) at a rate of 5% by the end of 2018. The UAE is also considering introducing a Corporation Tax.

The UAE has also confirmed that VAT will not be imposed on healthcare, education as well as a range of essential food items.

The UAE is also considering introducing a Corporation Tax. Currently, the UAE government is investigating the social as well as economic impacts the introduction of a Corporation Tax will have on the country. The UAE is investigating how a potential Corporation tax will influence businesses as well as the country’s competitiveness.

Even though, the UAE is contemplating on potentially introducing a Corporation Tax, the government has not even come up with a draft law or time it intends on introducing the new tax.

Even though, the UAE’s tax-free environment has acted as a major attraction for companies and businesses setting up within the UAE, the government believes that the tax-free environment is not the dominant reason.

The UAE is aiming to generate tax revenues in order to compensate on oil revenue losses. In basic terms, in order to provide services, a country must finance those services. Similar to the UAE, some countries have been lucky up until recently to be oil-driven economies. However, this needs to change due to the decline of oil prices. Therefore, these countries have to make alterations and find alternative sources of revenue to finance the services they provide.

Based on the National Bank of Abu Dhabi’s estimates, the UAE’s fiscal deficit is presumed to stand at 4% GDP during 2015. Nonetheless, it is estimated that the fiscal deficit rate will in fact widen because of declining oil revenues.

Therefore, the introduction of Corporation Tax will help GCC governments raise additional revenue without affecting households. In contrast, the introduction of Corporate Tax may influence the efforts of the GCC governments to diversify their economies. This is because; the Corporate Tax will discourage businesses from investing. Less investment leads to fewer jobs being created. Given that GCC countries will not be able to create jobs in the following years, they were hoping the private sector would compensate. However, the introduction of the Corporate Tax may influence their plan.

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Dubai is a safe haven for the wealthy

Dubai is viewed as a safe haven for the high-net-worth individual (HNWI). Based on analysts, Dubai is continuously attracting the rich population due to the emirate’s local tax regime, vigorous foreign trade, global financial relations as well as legislation framework allowing 100% foreign ownership.

Dubai is also being praised for establishing a wills and probate registry that benefits non-Muslims in regards to the distribution of properties and assets based in the United Arab Emirates (UAE) upon their death.

Besides being considered as a safe haven from individuals of the Middle East and the Gulf Cooperation Council (GCC), Dubai increasingly regarded as a safe haven amongst HNWIs.

In general, the UAE is currently implementing particular legislations to enhance foreign investments and foreign investors’ confidence. The UAE government are currently amending and updating both the private and commercial legislation framework in order to enhance foreign investment flow. The UAE government believes the amendments and updates will boost exponent throughout the country as the Dubai EXPO 2020 is around the corner.

A large number of HNWIs are currently residing in Dubai. In fact, Dubai was ranked eighth most significant city amongst Ultra-High-Net-Worth-Individuals in 2015, ranking above of leading cities such as Munich, Geneva, Zurich, Los Angeles and Moscow. The report was conducted by Knight Frank. The report reviewed a number of features, such as the quality of life in important cities, in order to evaluate and rank the cities that were included.

Dubai has developed considerably during the last years. For starters the city managed to overcome and rise above the global fiscal crisis in no time at all. Currently, Dubai is considered as an ideal destination amongst HNWIs due to a combination of numerous factors, establishing the city as an ideal haven to invest, especially in property.

As international taxation is increasing and more transparency will be implemented by 2017, more and more HNWIs view Dubai as a safe haven for part of their assets and wealth. Even though consultation on mutual funds, investments in stocks and in general, liquid assets, is provided in Dubai, at present individuals prefer other more established fiscal destinations. However, it is predicted that this will change in the near future and Dubai aims to become an international financial centre.

It should also be mentioned that the Dubai International Financial Centre (DIFC) was one of the first supporters of the idea of the Single Family Office (SFO), as well as the first destination across the Middle East to legally define a family office.

Free Zones

Although, under law foreigners cannot own more than 49% of a business within Dubai, special economic zones (SEZs) and free zones allow 100% foreign ownership. Foreigners benefit from the diverse legislation in place within free zones and SEZs, establishing them as prime jurisdictions to international mobile families. Dubai’s most famed SEZ is Dubai International Financial Centre (DIFC), which was set up in 2002. The DIFC offers 100% foreign ownership and is home to multiple domestic and foreign wealth management service providers.

Dubai Tax

Individuals in Dubai are not subject to Income Tax, Wealth Tax, Inheritance Tax, and Tax on Capital Gains or Tax on Gifts. This fact makes Dubai an incredibly attractive jurisdiction to foreigners.

Inheritance Tax

There have been lots of confusion and discussions concerning foreigners’ inheritance distribution in Dubai. The majority believed that in the occasion a non-Muslim dies, all he/she owned would be allocated based on Sharia.  

The aforementioned is a misconception. Dubai has set up a Wills and Probate Registry in 2015, which engages in the distribution of assets held in Dubai by non-Muslims.

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EXPO 2020 expected to boost Dubai’s growth rate faster than China

Dubai’s EXPO 2020 is expected to boost tourism and business activities to such an extent that it is estimated the emirate’s economic growth rate will surpass China’s growth rate by 2020.

According to the Dubai Department of Economic Development (DDED) estimations, Dubai’s economic growth rate will be recorded at 6.6% in 2020. China’s growth rate is expected to be recorded at 6.33%. Thus, it is obvious, that based on the DEDD’s predictions, Dubai’s economic growth rate will be higher than China’s by 2020. Dubai is working vigorously to become the world’s most business friendly hub as well as a top investor’s destination by 2020.

By 2016, logistics, tourism and hospitality industries are believed to become the emirate’s fastest growing sectors. The industries growth rate will further be powered by EXPO 2020. EXPO 2020 is an exhibition that takes place over a period of a few months. Based on estimations, the EXPO 2020 will generate an additional US$24 billion to the emirate’s GDP. Furthermore, it is believed the EXPO 2020 will generate an additional 227,000 jobs.

A recent HSBC report revealed that despite of plunging oil prices, UAE trade activity will increase faster than any other Gulf country. It is a fact that the UAE has invested greatly in its infrastructure, including Dubai South and Jebel Ali port. According to the HSBC report, the UAE’s economic growth will be attributed to a flow of investment in non-oil sectors such as maritime transport, air as well as industry.

China’s economic growth rate seems to be at easing off as it moves further away from fuelling expansion funded by the state. Experts predict that the Chinese growth rate will slowdown since the country’s real estate bubble seems to be at an end. Another reason for China’s economic slump is attributed to the country’s recent stock market crash.

China’s exports declined by 6.8% from January to November, revealing that matters are worsening for China’s exporters even though the devaluation ought to have made the country’s goods much more competitive.

Similarly, China’s imports also fell by 8.7% during the aforementioned period. This reveals that the Chinese consumer demand has also declined. Therefore, since Dubai’s economic growth rate is predicted to record a 4% increase, the city is expected to overtake China due to its slowdown.

On the other hand, expert economists point out that comparing the two countries economic growth rate is not effective. This is because Dubai’s GDP amounts to $85 billion whereas China’s GDP amounts to about $10 trillion, making the two countries incomparable.

Economists explain that if Dubai’s economic growth rate expands by 6.6%, the economy grows by a few billion dollars, whereas if China’s economic growth rate increases by 6.6%, the economy increases by hundreds of billions. However, some argue that GDP growth rates should not be considered as suitable measures of a country’s welfare.

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Jafza Marks a 10% Growth in Indian Companies

According to the latest data, more than 800 Indian companies have set up business across Jebel Ali Free Zone (Jafza). These companies provide for regional markets via their regional base in Jafza free zone.

Jafza recently held a four-day-long roadshow in Mumbai with the purpose of attracting Indian multinational corporations to the free zone. One of the many seminars coordinated by Jafza included a seminar focusing on investors. According to data, Jafza is home to more than 800 Indian companies. These companies provide regional markets via their regional base within Jafza. The number of Indian companies in Jafza marked a 10% increase in 2014.

During Jafza’s visit to Mumbai, the free zone’s officials stressed the advantages that Indian investors could benefit and take advantage of in the Middle Eastern growing markets.

While the deputy CEO of Jafza and Chief Commercial Officer of Economic Zones World, Ibrahim Mohamed Al Janahi, led the India roadshow, the CEO of a steel company in Jafza, Bharat Bhatia as well as the President of Dubai’s India Business Council, Kulwant Singh, also represented Jafza.

Currently, the United Arab Emirate (UAE) top trading partner is India and Jafza has played a vital role in developing stronger trading ties amongst the two countries. The purpose of the Jafza roadshow was to attract more Indian companies to the free zone, which will also further promote and strengthen the relations between the two countries.

The majority of countries across the Middle East are presently attempting to diversify their economies and nor dependent on oil. These countries are currently investing more than $4 trillion in infrastructure targeting non-oil business fields and activates. Therefore, investments will not only promote the engineering and construction sectors but a variety of other economic fields starting from healthcare, transport, food and beverage to hospitality and communication.

The Expo 2020 that will be held in Dubai will also enhance infrastructure-linked operations across the UAE and other regional countries. it is expected that more than 25 million visitors will visit the emirate during the six months the Expo 2020 will be held in Dubai. This fact offers many business opportunities to Indian investors.

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Green Strategy and New Tax-Free Region in Dubai

Dubai aims to develop into a clean energy and green-economic hub. With the introduction of the Clean Energy Strategy 2050, the emirate is accelerating its plans by investing 100 billion dirham in green funds. During the second phase, Dubai estimates to invest 50 billion dirham for the creation of a Solar Park that will be set up by 2030. Dubai strives to cover up to 75% of its energy requirements and needs with clean energy sources by 2050. However, the transformation will occur in phases as the emirate aims to cover 7 percent of its energy needs with renewable sources by 2020 and 25 percent by 2030. Dubai aims to become the most ecological city across the world by 2050. Dubai accentuates that each investment made in the development and progress of clean energy is simultaneously an investment made to protect and save the environment and its people.

The new innovative green policy was introduced at a ceremony to launch the second stage of the new Solar Park. The new Solar Park has been given the name of Dubai’s sheikh. The Solar Park is the largest-sized of its kind across the world. It is estimated that the Solar Park will have the capacity to produce more than 5,000 MW of installed power by 2030, equivalent to approximately 25 percent of Dubai’s energy production. The construction work regarding the Dewa Innovation Centre was also presented at the ceremony. The Dewa Innovation Centre consists of laboratories that will engage in clean energy research and development.

Dubai’s green policy strategy revolves around five features.  The first is new legislations while the second revolves around infrastructure development. The other three focus on the creation of a tax-free region in order to attract research and development centres and firms engaged in renewable energy, the setting up of a new innovation research centre, as well as the enhancement of technology within the energy sector. Dubai also plans to set up the Dubai Green Fund, a fund that will offer subsidies to investors seeking to invest in clean energy.

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UAE free zones stimulate trade

After being recognized for their great contribution towards the United Arab Emirate (UAE) economy, the free zones are currently focusing on strengthening their global value chain to sustain as well as boost their economic growth. The free zones success lies in the fact that they provide an effective investment and economic development means concerning the global value chain. The role of free zones as economic activity hubs has influenced manufacturing supply chains activity as well as international trade investment flows greatly.

Currently the UAE is home to approximately 40 free zones, each engaging in diverse business and economic sectors including advertising and media to environmental business fields and technology. In 2014 alone, 37% of non-trade activity in Dubai and 33% of non-oil trade across the UAE was attributed to the free zones. The free zones growth has been in line with the UAE’s foreign trade, industry sectors and foreign investment activity growth. In accordance with the UAE Federal Customs Authority During the first half of 2014, total trade activity within the UAE free zones amounted to Dh269.6 billion. In the first six months of 2013, total trade activity within the free zones was valued at Dh250.9.  Although specific data for 2014 has not been given yet, it is presumed that the total trade value of free zones based in Dubai will reach Dh515 billion, marking an increase of 5% in 2015 in comparison to Dh489 billion the free zones generated in 2014.

Other sources expect a 75 increase in the value of trade throughout the UAE’s free zones. The free zones success is undeniable when comparing the total value of trade generated in 2009, which reached Dh286 billion. As figures show the total amount of trade-value doubled through the passage of the years.

Dubai International Financial Centre (DIFC) has been one of the most thriving free zones across the UAE. During the next decade, the DIFC is expected to triple in size as it plans to develop into the most important bank hub within the region. Even though, the DIFC mainly owes its growth success to European companies and US companies, it is anticipated that the free zone will attract companies from emerging markets including India, China, Latin America as well as South Asia and Africa.

It is a fact that the free zone’s continuous growth is attributed to attracting investments from international companies. The free zones also benefit greatly from the UAE’s strategic geographical position, being located between the trading crossroads of the east and west.

Recently, the known developer, manager and operator of all major industrial ports and zones within Abu Dhabi presented the facilities of Khalifa Port and Khalifa Industrial Zone Abu Dhabi (Kizad) to more than 70 prominent businesspeople from India.

Since Indian companies based in India and the UAE are interested in expanding their ventures, Kizad and Khalifa Port are more than happy to welcome them. Kizad is recognized as an important hub, facilitating access to foreign markets, home to top-notch infrastructure and steady investment flows as well as home to Khalifa Port. All these features together attract businesses that seek to expand. Abu Dhabi is confident its prominent free zones have the capacity to support attempts made to increase trading ties between the UAE and India.

Furthermore, Kizad’s Industrial Units and Logistics Park were also shown to India’s businesspeople.

Free zones are focusing on attracting companies based in the G8 group wishing to expand in emerging countries.

It is noteworthy to mention that, Ras Al Khaimah Free Trade Zone (RAK FTZ), home to more than 8000 companies, recently cooperated with a prominent French Business Development Agency, Business France with the purpose of promoting its free zone services during a trade event targeted at companies engaged in the technology sector, named Gitex Technology Week. As a result of this successful cooperation, several French companies are now interested in establishing regional offices within the UAE.

It should also be mentioned that Jebel Ali Free Trade Zone carried out a weeklong presentation in Germany, centering on the most vital commercial hubs including Cologne, Munich and Dortmund.

New Innovative proposals are vital in attracting investment to UAE’s free zones. For instance, Dubai World Trade Centre Free Zone is a new free zone that will grant dual licenses to companies. In this way, the free zone will attract a variety of onshore as well as offshore licensed companies to set up in the free zone. The newly launched, Dubai Design District is the only other free zone that grants dual licenses.

The UAE also rewards innovation. For instance, recently RAK FTZ conducted a business competition with the purpose of cultivating entrepreneurship within the emirate. The prize of this Start-up Champ competition was a business set-up package targeted at innovative business planning.

The UAE free zones play a vital role in the country’s economic development within international trade.  Free zones help in diversifying and globalizing the UAE’s economies and sectors as they boost trade and investment activities as well as transfer knowledge, skills and promote technology.

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Indian Investors attracted to Dubai Property Market

As the World Expo 2020 is round the corner, Indians have shown increased interest in Dubai property market. Outline: • Over the last 4 years, Indians have invested approximately $15 billion in Dubai property market; • Indians are attracted to Dubai real estate because its property market yields are nearly 100% more than those in India’s main cities; • It is expected that Dubai rent demand will rise significantly the closer we get to the World Expo 2020, rising property yields even more across the region. Indians are seeking to invest in Dubai’s real estate because of high rental yields. India’s property market is facing significant problems because of high property prices, unpunctual property delivery dates and slow approval procedures. Therefore, Indian investors seek security and prefer investing in Dubai’s property market. India invested more in Dubai’s property market than any other country during the first six months of 2015. In fact, Indian investors purchased more than 3 thousand properties valued over $2 billion. Actually, India has invested much more than $14 billion in Dubai’s property market during the last 4 years. Indians compare Dubai’s real estate prices to that of other metropolitan cities of Delhi or Mumbai. However, they regard that Dubai real estate returns are much greater. Over the last 4 years, Dubai’s property market has been recording a stable increase in growth, as its rental yield fluctuates between 4%-7% of the capital value every year. In contrast, Indian investors are accustomed to property investments that yield approximately 2%-3% in India every year. Indian investors are not only attracted to Dubai’s property market because it is considered as a solid investment. Indian investors are also interested in Dubai’s real estate because of the UAE tax structure. Those who invest in Dubai benefit from the city’s 0% property tax and 0% capital gains tax. Thanks to these tax benefits, investors obtain far greater profits when compared to property investments made in other countries. Investors who acquire Dubai real estate presently will definitely profit in the long run as the World Expo 2020 is expected to attract more than 20 million people, which will lead to increased property demand.

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The UAE considered a Top Residence

A recent report revealed that the United Arab Emirates (UAE) is considered one of the top immigration destinations in the world. The report included over 23 residency programs across the globe. The UAE is mainly considered as a top destination to reside due to its tax-free environment, which is one of the main factors people tend to consider when thinking of immigrating.

In general, people may not mind paying some kind of tax. What they want to avoid is the tax filing procedures and long bureaucracy. Even though some countries, like Switzerland are organized and bureaucratic in regards to tax filing, people residing in the UAE are not subject to tax filing.

Furthermore, another top feature people tend to consider when relocating is the quality of life. The UAE’s quality of life is high, which is another reason the UAE is amongst the top residence destinations in the world. For instance, other countries across the world also offer tax-free environments like the Bahamas and Monaco, but unlike other countries, the UAE offers top rated infrastructure, facilities as well as health care and education systems. Further, Dubai is no longer viewed as a remote destination located in the faraway Middle East, but rather as an easily accessed cosmopolitan city.

Based on the recent report, individuals (especially Europeans) generally choose to relocate to emerging countries rather than opt for more conventional immigration destinations like Singapore, Switzerland and the United Kingdom. The reason is simple. Several emerging countries, such as the UAE, have become easier to reside in and more accessible than they used to be.

Europeans are especially attracted to emerging countries, which have a high quality of life. Countries located in Asia, such as Thailand and Malaysia, have also attracted increased numbers of immigrants because the quality of life is high, the climate is great throughout the year and the cost of living is low. Europeans seek to immigrate to such countries to when they retire. Both Thailand and Malaysia offer individuals above the age of 50 a variety of visa options. The first offers two kinds of retirement visas while the latter has implemented a special investment program for the 50+.

The Bahamas and Panama are also amongst the most popular immigration countries amongst Europeans. Besides being preferred for good all-year-round climate conditions, and high quality of life, both the Bahamas and Panama are located close to the US where their children are studying. Therefore, those who were not granted a US residency permit, choose countries like the Bahamas and Panama in order to be close to their children as well.

Interestingly, the report revealed that while Europeans prefer immigrating to emerging countries, people from emerging countries are attracted to European countries when considering immigrating. Several European countries like Cyprus, Spain, Malta and Portugal offer non-EU citizens EU status with the future prospect of being granted citizenship. According to the report, such European jurisdictions are extremely popular amongst third-world citizens looking to immigrate.

Even though each destination offers diversified interests and benefits, the UAE remains one of the top immigration jurisdictions attracting both European and third-world immigrants.

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How VAT will influence UAE Consumers

The introduction of a Value-Added Tax (VAT) in the United Arab Emirates (UAE) will influence consumers and consumer behavior. The level at which the VAT will influence consumers depends on a variety of features, such as consumer spending behavior, the rate of tax and consumers’ incomes.

It is generally thought that consumer spending will not be influenced if the VAT rate is set at 3%-5% and essential foods are not taxed. However, if the VAT is set at 10% or even higher, then consumer spending will be negatively influenced.

Consumers who like changing cars or gadgets often will be the ones most influenced by the introduction of VAT. According to experts, the VAT will not influence low-income households as long as the rate is not set higher than 5% and basic food items are exempted.

Therefore, if the VAT rate ranges from 3% - 5% and is imposed only on luxury goods like cars or computers, low-income households will not be influenced. The introduction of the VAT will affect those who often change electronic devices, such as smart phones and computers and other luxury goods like cars.

However, in the case a 5% VAT is imposed on luxury goods such as cars, the price of the car will not increase tremendously. For instance, imagine a consumer wants to purchase a car that costs Dh200, 000. The 5% VAT will increase the cost of the car to Dh210, 000 (Dh10, 000 more). The consumer would probably get a loan to pay off the car; therefore over a time period of 5 years, the consumer would be called to pay about Dh170 more than he/she would have without the tax.

The Gulf Cooperation Council (GCC) member states have long been discussing the introduction of a VAT. In fact, nearly 25 years ago, the GCC conducted a practicability study in order to examine the affects a Corporate Tax and VAT would have on the economies.

Discussions concerning the introduction of taxes faded out over the passage of time. Most GCC states are experiencing budget deficits because of the plunging of oil prices and as a result, the idea of introducing new taxes has resurfaced. According to experts’ opinions, a 5% VAT rate will hardly be noticeable in the UAE. On the other side, experts believe that if the VAT is set at 10% or more, consumer spending will be influenced. Consumer spending will especially be affected regarding luxury goods such as electronic devices, cars or even spending on food at a restaurant.

Experts claim that the UAE must introduce a VAT in order to compensate for oil-profit losses. Therefore, a VAT would generate revenue for the government, which in turn would spend on maintaining investment infrastructure.  It is generally thought that the introduction of a VAT would help the UAE so as not to be dependent on oil or hydrocarbons to generate revenue. The UAE government has also has also reduced its expenditure by cutting off petrol subsidies.

On the other side, UAE businesses are worried that a VAT will put off local consumers and tourists from consuming goods. Some businesses point out that tourists in particular will be discouraged to spend money in the UAE if a VAT is introduced since those who buy imported goods are subject to taxation once they return to their countries. Therefore, it is as if they are paying double taxation, that is they will be imposed VAT in the UAE and again when they travel back home.

The UAE is a shopper’s haven. Tourists travel to the UAE as it is a favourable shopping destination. Tourists’ consumption contributes considerably to the UAE’s GDP. Tourists and expatriates are especially drawn to the UAE because of its tax-free economy and top-notch infrastructure and facilities. Therefore, some argue that the implementation of a VAT will affect the consumption behaviour of both UAE residents and tourist.

In order to ease the affect the introduction of a VAT will bring to consumption patterns, it is advisable to introduce the VAT is stages and not impose a tax on basic goods.

Companies linked to the tourism industry are worried a VAT will limit tourists’ spending power and consumption behavior. From the tourists’ point of view, any money they spend while on holiday in the UAE is considered an expense, regardless of whether it is a tax or VAT. Therefore, tourists will think twice before purchasing a good if the price is higher, not to mention if they have to pay a duty tax when travelling back to their countries.

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Dubai Economy –Strong enough to face Oil Price Instability & Global Growth Challenge

Due to its diversified economy, Dubai is in a much better position to overcome the global growth challenges and instable oil prices in comparison to both emerging and developed economies. 

Even though global growth rate has slowed down, during 2012 to 2014 Dubai economy growth rate has increased by more than 4% each year respectively. Dubai’s success is mainly attributed to its diversified economy. Currently, the economy of Dubai is much more diversified in contrast to previous years.

Generally, the economy of the UAE is more than prepared to face international economic challenges due to the fact the government has altered the structure of the economy the last few years.

For instance, during the last decades, Dubai has developed into an investment, knowledge, trade and services centre. The city’s top-notch infrastructure and business-friendly legislation as well as its ability to adjust to investors’ requirements and constant international economic changes, have all attributed to Dubai’s success. Currently, Dubai stands out in contrast to other global and regional hubs.

Owing to Dubai’s advanced infrastructure in logistics, costs and time-consumption is minimized, allowing businesses and companies to focus on expanding into new markets and growing.

It is noteworthy to mention that Dubai’s infrastructure progression and policy alterations concentrate on the needs and requirements of investors and enhance the participation of the public sector.

Now, Dubai is at the verge of entering a new period where the public and private sector collaborate in developing major infrastructure projects, particularly due to the fact the EXPO 2020 is round the corner. It is evident that Dubai has the ability to link people and trade globally in no time at all.

The private sector is especially interested in investing in the city’s Dubai South project that includes colossal projects related to the EXPO 2020, Logistics City and Maktoum Airport as well as new sustainable living ideas. The new project will cover more than 140 square kilometers.

Numerous new opportunities are available to the private sector due to the Dubai South project for investors interested in diverse sectors such the development of real estate, logistics, the management and handling of cargo. The UAE will develop an international logistics centre with the development of the logistics corridor that will link Al Maktoum Airport and Jebel Ali Free Zone.

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US Residents are Taxed in UAE

According to the US-UAE Foreign Account Tax Compliance Act (FACTA) agreement, the 2014 financial reports of US citizens in the United Arab Emirates (UAE) needed to be submitted by 30 September 2015. The FACTA agreement was created by the US government as a means to control tax evasion from US citizens as well as tax residents, like individuals who hold green cards, abroad.   The UAE met the FACTA agreement deadline. Therefore, the US Internal Revenue Service (IRS) is currently inspecting all US citizens’ accounts within the UAE.

In mid-September, the IRS presented the Notice 2015-2016, allowing the UAE to prolong the submission of US citizens’ accounts if needed. This new agreement signed by the UAE and US, Model 1b IGA, will come into effect on the same day the UAE notifies the US that it has finished with the domestic procedures required to implement the agreement.

Although, the UAE has already signed the IGA during the summer 2014, it has yet failed to send the written notification to the US, informing the US it has completed all the internal procedures required to put into force the new agreement.

If the above scenario is true, the UAE-US IGA agreement has not been introduced yet.

Even though it seems as if the agreement has not been implemented yet, US citizens should not relax and assume they have plenty of time to comply with the tax legislations. According to the law, all US citizens are subject to tax and have always been. On the other hand, those who have not complied with the tax laws of the US government and have avoided to pay their taxes may have a little more time to bring their affairs into order, meaning they may not be caught avoiding tax obligations just yet.

Due to the loophole the US government has provided, the UAE has more time to organize all that is required in order for its financial institution to comply completely with the IGA agreement.

By issuing the Notice 2015-2016, the US has automatically granted US citizens with more time to sort out their finances. Also, 2014 account reports that had to be submitted by 30 September 2015 can now be submitted by 30 September 2016, accompanied by any other information that is required under the IGA on that date.

Taxpayers who fail to comply are still at risk of being caught in other manners, even though more time has been granted to submit their accounts. Therefore, it is advisable for US taxpayers to sort out their affairs as quickly as possible. During this time, all UAE financial institutions are required by law to submit all the information they have on US citizens to the UAE authorities. The UAE authorities will then submit the reports to the US IRS. Financial institutions are required to submit all the information they have obtained regarding the financial accounts of US citizens to UAE authorities unless the UAE state alters the deadline it has set.

The process the financial institutions should use as guidelines to report the information required is not clear.

Tax compliant citizen

Every single US citizen who resides abroad must be a tax compliant citizen. Therefore, US citizens are obligated to report all the amount of income they receive abroad. US citizens must fill in Tax information reports stating all the assets they own abroad.

In occasions where US citizens have failed to be tax complaint, they are given several options to re-enter the tax system. US citizens who have not submitted their taxes for decades, they may correct the problem by paying the sum of taxes they had to for only several of the previous years they owe even though if the IRS wanted to it would require that US citizens pay all the taxes they owe throughout the years.

The IRS introduced the Streemlined Programme, which enables US citizens to become tax compliant by reporting all their offshore assets and accounts. In some cases, a US citizen who has shown non-willfulness in regards to the tax non-compliance, he/she must submit amended or delinquent tax returns for every of the three previous years that the US tax return due date that has already passed instead of all the years.  Nonetheless, it is difficult to show non-willfulness since every individual must be aware of his/her tax duties. Ignoring to file tax duties when an individual is aware of the duties is not viewed as non-willful. Furthermore, the press and media have informed the public about their tax obligations and FACTA. Therefore, failure to comply with taxes or report foreign assets and accounts cannot be considered as non-willful.

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UAE thinking of Introducing VAT

The United Arab Emirates (UAE) has developed into one of the most preferred destinations for expatriates. Recent statistics show that eight out of nine individuals in the UAE is an expatriate. Expatriates choose to move to the UAE because of the tax benefits and career opportunities the country offers.

Currently, the UAE government is speculating on altering its low-tax rate policies. The UAE government is thinking of introducing a VAT tax on the sale of goods and as well as broadening its corporation tax policy, to cover all companies operating across the country.

There are multiple reasons that have led the UAE government towards changing its tax policies. The main reason is due to the decrease of oil prices. For countries such as the UAE that depend on oil trade to boost up their government budgets, the decline of oil prices has led to decreased profits.

In fact, several authorities think that the UAE will mark a budget deficit in 2015, a fact that was almost impossible to occur a couple of years ago.

Other experts claim that the UAE’s decision to introduce taxes is not only to compensate for the decline in oil revenues but also to fund infrastructure projects. According to the experts, this must be seen as an indication that the UAE has developed into a maturing market.

Business experts believe that the implementation of taxes will not influence international investment flow and corporations that choose to set up within the UAE, given the fact that the country is one of the few that does not impose taxes unlike the majority of other business destinations across the world.

On the other side, expatriates are constantly complaining about the rise in the UAE’s cost of living. Therefore, the introduction of a VAT on the dale of goods may lead to a consumption decrease.

The UAE government is positive that the revenue the taxes will generate will assist the country in maintaining its reputation as one of the most favored destinations amongst expatriates. Due to the UAE macroeconomic policies and investments, it is in the position to deal with the decline of oil revenues and establish itself as an international player.

The issue is not if the government’s decision to implement taxes is the right decision, as the majority of business owners support the decision. The issue is why taxes have not been implemented already.

In an effort to remain competitive, the Gulf Cooperation Council (GCC) state members want to reach a mutual agreement. In this way, the taxes would be implemented across the GCC during a short period. Therefore, companies will not leave from one GCC country only to set up in another that has better tax benefits. 

The GCC member states are still discussing the tax policies and have not reached a final decision yet. Thus, the implementation of the taxes under discussion may not be introduced for some time. Even once the states reach an agreement, they will need time to prepare the required systems and infrastructure to help the states collect the taxes.

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Dubai Business Licenses Go Up

As it is well known, the United Arab Emirates (UAE) has created a bridge between the Middle Eastern and Western worlds as it has developed into a prime location for business set ups due to its friendly and beneficial business policies.

The UAE’s efforts to create a top-notch business hub and attract foreign investments and businesses have really paid off. According to the Department of Economic Development (DED) in Dubai, the emirate issued 21,358 business licences in 2014. The number of licences issued was 13% more than those issued in 2013 (18,848). The rise in the number of licences issued reflects the general optimism that exists within the UAE economy. Generally, the majority of licences issued were industrial licences, which was closely followed by commercial licences as well as tourism licences. The fourth greatest amount of licences issued concerned professional licences. When considering Dubai will also be the host of EXPO 2020, the emirate’s repute as the foreign investment hub of the Middle East seems as if it will remain for years to come.

Brief Summary:

The amount of amended licences increased by 14% from 74,859 to 85,548 in 2013 and 2014 respectively

The number of renewed licences increased by 4% from 114,218 to 118,953 in 2013 and 2014 respectively

577,400 total transactions were completed in 2014

The total number of reserved trade names increased by 12% in 2014 compared to 2013. From 74,750 in 2013, the total number of reserved trade names increased to 83,599

Initial approvals marked an increase of 14% when compared to 2013, reaching the total number of 38,580

Licences granted to Limited Liability Companies (LLC) rose by 17% during 2013-2014 from 12,549 to 14,701

Sole proprietorship licences also increased by 6% during 2013-2014 from 5,090 to 5,375

Licences granted to branches of free zone companies marked a dramatic increase of 129% during 2013-2014 from 45 to 103 licences

Generally, the total number of licensed public shareholding companies increased by approximately 35% whereas licensed private shareholding companies and branches of foreign companies showed an increase of 43% and 15% respectively

67% of the total number of licences were issued to LLCs, 27% were issued to Sole Proprietorship Companies and 4% were issued to companies involved in Civil Works

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Dubai Economic Position

Dubai business activity throughout the private sector has witnessed a continuous growth over the last six years. Based on Emirates NBD data, although Dubai’s private sector marked a percentage growth in last July, the pace of growth was slower than other times. According to the bank’s Dubai Economy Tracker, business activity throughout the private sector recorded the least percentage of growth in July since March 2012. Dubai’s main three sectors were analysed by the Dubai Economy Tracker survey.

Dubai Investment

Despite of the slowdown Dubai’s economy experienced in July, business moral and optimism remained high as employment positions continued to open. Dubai-based companies operating within the private sector remain positive about 2015 business prospects. The general optimism is mainly contributed to the fact the International Monetary Fund (IMF) recently hinted that an additional 13 billion will be added to the United Arab Emirates (UAE) economy as trade between the UAE and Iran will increase from now till 2018. According to the IMF, the increase 13 billion increase in trade corresponds to 1% increase in GDP growth every year till 2018. Furthermore, 12% of UAE’s non-oil exports were attributed to Iran in 2013. Most of the trading activity involved re-exports whereby Iran traded through Jebel Ali Port in Dubai.

The Emirates NBD survey evaluates Dubai’s operating conditions by covering the emirates non-oil private sector economy. The survey also provides an additional sector with data concerning Dubai’s tourism, wholesale and retail as well as construction sectors. The recent survey showed that Dubai’s input costs rose while private sector prices fell slightly during July.

Economists attribute July’s business activity slowdown to the influence the plunging of oil prices and UAE’s stronger dirham may be having on Dubai’s private sector production and morale.

Although Dubai’s pace of growth decreased in July, the rate of growth was recorded at 53.1% which indicates that its non-oil sector economy is still going strong. The Emirates NBD Dubai Activity Index is conducted every month.

The data have shown that Dubai’s private sector business activity has been over 50.0 every month since February 2010. June’s survey indicated that Dubai’s private sector business activity dropped to 55.5 indicating that the emirate’s output growth was at the lowest it has been over the last three-and-a-half years. Based on the results of July’s Emirates NBD Dubai Activity Index, the best performing industry was construction.

Dubai’s other key sectors, wholesale and retail as well as travel and tourism, marked slight increases in business activity. In general, employment rose across Dubai’s private sector in July. The upward movement in employment rates has been on-going since January 2012. The results of the report also showed an increase in new work private sector companies received.

Τhe majority of new work was received by the emirate’s wholesale and retail as well as construction sectors. However, the pace of new business set ups was moderate, the lowest it has been since December 2010. Despite the slow-pace in business activity, the private sector is positive matters will turn around as the year unfolds.

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International Monetary Fund Pushes United Arab Emirates to Implement Taxes

The International Monetary Fund (IMF) has recently offered the United Arab Emirates (UAE) a series of suggestions concerning ways in which to compensate oil-based profit losses. It is estimated that the UAE has incurred $42 billion dollars oil revenue loss because of the decline of oil prices. The IMF proposed an increase in Corporate Income Tax, the implementation of a consumer goods tax and the introduction of a 15% tax on cars.

The UAE, which depends on oil profits, has faced a slowdown ever since oil prices plunged in 2014 leading the government to make certain alterations. He IMF suggested that if the UAE introduces the proposals it has made, the country would have the ability to generate 7.4% more non-based hydrocarbon domestic product, which would balance out the losses, incurred from oil revenue losses. Even though the UAE already imposes a 10% corporate income tax, the IMF proposed that the government enforce the tax on more companies. The UAE stated that it would take in to account the IMF’s suggestion after conducting an impact study.

Concerning the IMF’s recommendation on introducing a VAT, the UAE has clarified that GCC countries have discussed and agreed to implement a coordinated plan. However, the UAE did not clarify the exact time the VAT would be introduced. Introducing new taxes will be a new course for the UAE, as up until now it has attracted expatriates mainly for being a tax-free jurisdiction. Therefore, increasing consumer taxations could influence the UAE’s attractiveness. Nevertheless, UAE citizens would not be influenced greatly because of the many benefits they would enjoy, which would be compensating for the increased costs. 

However, the UAE is confident that it will overcome the losses incurred from low oil prices. The UAE has recently introduced a variety of taxes such as the tax imposed on the Sheikh Zayed Road and the tourism tax imposed on hotel bookings as well as the tax imposed aimed to fund innovation projects within the country.

The IMF supported that the UAE’s economy is strong in a report published this month. It is expected that the EXPO 2020 will generate a non-oil growth of 4.6%.

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Strengthening of Ukraine-Cyprus Economic Ties

Upon approval by all European Union (EU) countries, the EU-Ukraine Association Agreement was manifested to serve as a foundation for Ukraine’s widespread reform. The EU-Ukraine Association Agreement is expected to open EU markets even more, resolve competitiveness matters and serve as a guide for Ukraine in order to meet EU requirements and trade regulations concerning EU markets. The EU-Ukraine Association Agreement also includes a broad free trade area.

Cyprus is Ukraine’s leading EU investor. As of April 2015, Cyprus investment towards the Ukraine economy amounted to US $11.7 billion. In order to enhance investments, Ukraine has instigated and introduced several reforms which strive to boost its investments. Despite the present situation which exists in Ukraine, the Cyprus-Ukraine trade dealings maintained stability during 2014. The profits generated through trade between Cyprus-Ukraine marked an increase of 700,000 Euros, whereas in accordance with the Cyprus State Statistical Service the total amount of profits generated amounted to 34,800,000 Euros. Additionally, over 40,000 Ukraine tourists visited Cyprus last year.

Many Ukraine-based companies are seeking to go into partnership with Cyprus in various sectors and industries. For instance, Integro Green Technologies, a Kiev-based company, is eager to aid Cyprus resolve its waste maintenance issues by initiating projects concerning solid waste recycling using plastics and tyres in order to produce minerals like metal, carbon and oil. Furthermore, UniDrillTech, an Lviv-based company, seeks to collaborate with Cyprus in several industries such as the oil, gas, mining, water and drilling industries. The fact Ukraine companies seek to cooperate with Cyprus indicates the two countries’ mutual interest to encourage their business relations.

Due to Ukraine’s current situation with Russia, its economy has been severely impacted. Based on recent data, approximately 80% of Luhansk and Donetsk’s infrastructure and industry have been damaged. Currently, more than 1.4 million Ukrainians are refugees. The country spends approximately US $5-7 million everyday on security and defence against Russia. The Ukraine-Russia situation has negatively influenced Ukraine’s social and economic progression and development.

Currently, Ukraine is focusing on ways to decrease its state debt and boost state profits. The Ukraine government intends to achieve its aim by widening the tax base, strengthening tax evasion measures and reducing law-abiding taxpayers’ load and strain. The Ukraine government has implemented the Register of Payment Transactions aimed at taxpayers who generate more than UAH 1 million income every year. Furthermore, the government also implemented a State Fiscal Service development as well as a VAT electronic system. In order to avert capital flows abroad, the Ukraine government has made attempts to bring Ukraine’s tax cooperation agreements with other EU countries under the Organisation for Economic Cooperation and Development (OECD) Convention.

Based on OECD’s suggestions, Cyprus-Ukraine ministers have agreed on making amendments and alterations to the Convention in order to avoid double taxation. The main features suggested were to increase the rate of tax concerning particular kinds of passive income. These will be put in to effect as of January 2019.

Even though, Ukraine is not a member state of the OECD, the government agreed on a plan to tighten its collaboration with the OECD in February 2013 for the course of three years, starting from 2013 until 2016. Ever since the start of 2013, Ukraine has worked hard to reach the OECD standards and requirements. Relations between Ukraine and Cyprus are anticipated to strengthen even further once the EU-Ukraine Association Agreement is approved by the House of Representatives. Besides being an EU policy, the agreement serves as an indication that the EU supports Ukraine.

With The House of Representatives of Cyprus approval of the agreement, the Cyprus Republic indicates their support concerning Ukraine’s integration in the EU. Having agreed to the agreement, Ukraine will have to work towards meeting the EU standards in various areas, such as finance, economy and taxation. The EU-Ukraine Association Agreement will also boost Cyprus-Ukraine economic collaboration which will benefit both countries.