Month: December 2021
UAE: New modifications to Cheque Regulations
HLB HAMT News Team
Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
The latest revisions to the cheque provisions will take effect on January 2, 2022, according to the UAE’s apex bank, the Central Bank. The CBUAE’s explanation seeks to spread awareness among cheque users about the decriminalisation of authorising a cheque without adequate money, the criminalization of staying away from part payment of the cheque’s sum, and the stringent governmental penalties for authorising a cheque without sufficient funds.
The Commercial Transactions Law has been updated in line with best practices to stay abreast of worldwide changes, according to the apex bank. It also attempts to provide a strict legal framework for these activities, governing the use of checks as a payment method rather than cash.
The modifications have certain objectives, such as strengthening the rule of law by maintaining and protecting the interests of the cheque beneficiary (bearer) in having his rights fulfilled quickly and the drawer’s purpose of having any criminal prosecution brought for non-payment of the cheque dismissed and establishing a solid national economy with a high-quality judicial system and also improving the rule of law and global performance metrics.
Articles 617-627 of the legislation control the payment of cheques, establishing procedures to guarantee that the cheque fulfils its legal and economic functions.
- Where adequate funds are available, the bank (the drawee) is required to pay the cheque’s value upon submission. It cannot refuse to pay since doing so would jeopardise the holder’s primary entitlement to possession of the check in return for money.
- Even though the law allows the bank (the drawee) to refuse to pay if it acquires opposition, the law has shortened the circumstances in which this opposition is acceptable, restricting it to instances of cheque loss and bearer bankruptcy only, to ensure that the cheque serves its primary purpose as a payment instrument.
- Vibrant civil equivalents have been created that contribute to the quickest and shortest feasible recovery of the cheque value.
- A lot of new penalties have been imposed, including the withdrawal of the convicted person’s existing chequebook, the prohibition of the convicted person from obtaining a new chequebook for a period of up to five years, and the suspension of the legal person’s professional or commercial activities.
- The enforcement of a penalty, licence suspension for a term of six months, and licence termination or dissolution of the legal entity for repeated breaches have all been included as new additions for legal persons (excluding banks and financial organisations).
Timeframe for submitting a cheque
The payment of the value of a cheque, according to the CBUAE, is the payment by the drawee bank to the cheque bearer or beneficiary of the amount specified in the cheque.
The fund available in the account, the issuer’s cash in the bank’s custody, a confirmed and specified amount, immediately due and disposable by drawing checks on it, is the consideration for payment.
The legislation set the deadline for delivering a cheque for payment, stating in Article (618) that whether the cheque was drawn in the State or overseas and was due for payment, it must be submitted within six months. This term is calculated from the date written on the cheque (its issue date).
The term is counted from the date mentioned on the cheque as its issuance date, not from the day of partial payment. Because of the extensive procedures involved in preparing a non-payment protest and the low value of some checks, Article 632/1 enables abstention through a method that is faster and easier than a non-payment protest. This is a statement written on a check by a bank staff.
The bank stated that Article 617/2 of the legislation (before to the modification) indicated that: – Where the consideration for payment is less than the value of the cheque, the bearer must request partial payment from the drawee up to the amount available.
- “Where the consideration for payment is less than the value of the cheque, the drawee must pay the amount in their possession partially, unless the bearer declines,” the law states (after the amendment).
- The bank could only make partial payments at the request of the holder under the earlier version of the law. Unless the holder declines, the bank is required to provide partial payment after the adjustment.
Concerning the repercussions of the bank signing the cheque for confirmation, the bank stated that the law describes two consequences of signature for verification, as outlined in clauses (2) and (4) of Article (600) of the legislation:
- The drawee may write an assertion of affirmation on the cheque, indicating that the consideration for payment is available with the drawee on the date of the entry. The signature of the drawee on the check itself serves as confirmation.
- Until the expiration of the time restrictions stipulated for the submission of the cheque for payment, the obligation for payment of a certified cheque shall be frozen with the drawee and under his accountability in behalf of the holder.
Partial payment of a Cheque
In relation to the bank’s participation in partial payment of a cheque, the CBUAE said that, in addition to the bank’s duty described in Article (600), the bank must notify the CBUAE of the account owner’s information in any of the following instances, according to a system that would be distributed soon:
- a) When there is insufficient, existing, and workable evaluation for payment of the cheque’s value at the time of its maturity, b) the drawer pulls back the entire consideration for payment after releasing the cheque, making it impossible to pay the cheque’s value, or c) the bank temporarily pays the cheque’s value.
The CBUAE will shortly distribute the method for implementing the new modifications to the Law relating to part payment of the cheque. Workers and clients of the bank will be informed of the changes by all regular means and techniques, including social media, sites, digital apps, text messages or SMS shown on ATM screens, corporate screens, or other conventional or new digital media. Increasing the level of education and understanding among the bank’s staff and customers so that they may be guided and enabled to grasp the fundamental risks, as well as providing them with all essential information on the new amendments and their consequences.
Furthermore, the processes and techniques for applying partial payment of the cheque’s value, the specific procedures to be followed in these cases, and how to prevent responsibility and fines as a result of breaching this legislation and abusing cheques are all clarified. Providing the required and suitable means and methods to reply to customers’ complaints and questions, as well as to clarify their rights and duties in light of all new Law revisions.
Clause (3) of Article (617) of the law states: In any of the following instances, the drawee should disclose the account owner’s data to the Central Bank, in line with the Central Bank’s policies and standards:
- When there is insufficient, existent, and useable consideration for the payment of the cheque value at the maturity date.
- When the drawer withdraws the entire consideration for payment after writing the cheque, it is impossible to pay its value.
- In line with clause 2, the drawee pays a portion of the cheque’s value.
‘Crowding’ cheques
It is not deemed crowded cheques if cheques are submitted one after the other. The term “crowding” refers to when a bank has two or more cheques in its custody at the same time, each bearer seeking payment of their entitlement to the funds, and the bank determines that the current payment consideration is inadequate to cover all applicants.
The criteria used in this instance are outlined in Article (622) of the statute, which states:
- When numerous cheques are submitted at the same time and the payment consideration is inadequate to cover the whole amount of the cheques, the dates of their issuance must be considered.
- Unless otherwise demonstrated, the cheque with the first serial number is believed to have been written before the others if they all emanate from the same cheque book and have the same date.
The general rule is to examine the cheques themselves rather than the date on which the bearer received the cheque. Because the drawer of the first-issued cheque has paid the regard for payment to the beneficiary, the cheque with the earlier withdrawal date will take precedence; if this cheque covers the consideration for payment, the attention for payment will be transmitted to the benefactor who received the first cheque.
Cheque Forgery
The bank stated clearly that the penalty for forging or counterfeiting a cheque, attributing it to others, or intentionally using a forged cheque is as follows: “Whoever commits any of the acts below shall be punished by imprisonment for not less than one year in addition to a penalty of not less than Dh20,000 (twenty thousand) and not exceeding Dh100,000 (one hundred thousand):
- Forging or counterfeiting a cheque or referring it to a third party by modifying facts by insertion, deletion, or other techniques specified in Article (216) of Federal Law No. 3 of 1987, with the intent to do harm to a third party and to use it for the purpose of forgery.
- Using a fake or counterfeited cheque on purpose.
- Receiving funds paid using a false or counterfeited cheque with knowledge.
- Using a real cheque issued in someone else’s name, improperly profiting from it, or using it in connection with a fraud offence.
- Importing, producing, obtaining, selling, offering, or giving any tools, equipment, software, information, or data utilised in the crime of forgery with knowledge.
The bank came to the conclusion that any criminal case involving these crimes would be dismissed if the full or remaining cheque value was paid before the start of forcible implementation practises, or if the full or remaining cheque value was paid or a reconciliation was reached before the final judgement was issued. If reconciliation is made after a final judgement has been issued, the judgment’s execution will be halted.
These amendments achieve the objective outcomes of substituting decriminalisation with preventative measures and prohibitive alternative penalties to combat cheque fraud and other issues. In addition, the law, which takes effect on January 2, 2022, would incorporate best international practises into the country’s financial sector.
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Nominee Shareholder/Director in UAE
Lavin Nalinababu, Business Consultancy
Phone:- +971 4 327 7775
Mobile:- +971 55 160 1291
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
Any company in the UAE, onshore or offshore, has its own management hierarchy as well as procedures, just like any other legal body. The registered owner of shares held for the benefit of another person is known as a nominee shareholder. A nominee director is a director who is recruited to a company’s board of directors to serve the interests of his or her appointer. A nominee director is chosen by the company’s shareholders and in some situations, a nominee may act on behalf of the company’s beneficiary. A trust agreement or a civil contract between the nominee and the real director or shareholder may govern these arrangements. Nominee directors for businesses in the United Arab Emirates are not directly linked to legitimate owners of the company and do not participate in direct administration of the company.
Nominee Arrangements
In the UAE, nominee arrangements are commonly used to designate someone to fill a position as a shareholder or director in a corporation if the original shareholders or directors are unavailable. The key benefit of a nominee arrangement is that the beneficial owner can maintain their name covert and that the facts will not be made public. This can provide some privacy while also safeguarding one’s identity. Other solutions, such as forming intermediate firms, are available, but they may be more expensive to establish than a nominee shareholder structure. The National Economic Register in the United Arab Emirates now provides basic corporate information, including the name of a firm’s management. The beneficial ownership and shareholding register is primarily closed to the public, however, all corporate registers share information with the Ministry of Economy. The use of nominees decreases the utility of publicly filed shareholder registries for recognizing beneficial owners and controlling people in this scenario. Similarly, authorities will find it more difficult to gather information on a corporate vehicle’s management owing to the accessibility of corporate directors.
Nominated shareholders and directors are a typical occurrence in almost all countries. Concerned citizens can check public registries for firms to find out who their directors and shareholders are in various countries. Certain instances in which nominee arrangements are permissible are also recognised in law in some nations. Nominees are used in a variety of acceptable situations, such as to protect the nominator from public disclosure obligations or to comply with the laws of the nation in which the company is established (such as requirements for companies to have a director residing domestically). It is very critical for you to take legal advice before making any nominee arrangements for yourself, your company, or another entity where you are serving as a nominee shareholder/director, in order to avoid being subject to fines imposed by UAE Ministry of Economy. Penalties and other legal obligation to nominee shareholders and directors in UAE are imposed on those who have not complied as per the current regulation. Fines may be issued by the Ministry of Economy if a company does not follow current rules and regulations. Legal and accounting professionals, Trusts and Corporate Services Providers, and professional nominees are among the service providers recognised to offer formal nominee services.
Risks and Vulnerabilities
The risk involved in use of official nominee services is to hide beneficial ownership. Nominee directors and shareholders in business documents can also impede law enforcement probes by prolonging the confirmation of the beneficial owner or fabricating ties between firms that share nominees. While the employment of nominees is legal in most jurisdictions, the function of the nominee is often to shield or hide the identity of the company’s or asset’s beneficial owner and director. A nominee can aid in the bypassing of corporate ownership controls, the concealment of ownership and control, the circumvention of court-imposed directorship prohibitions, and the evasion of rules governing international business ownership and trade. When various components of a corporate vehicle include many nations, these issues are substantially magnified. Criminals frequently establish, administrate, operate, possess, and economically run businesses in many jurisdictions, prohibiting authorities in any one jurisdiction from getting all essential information about a business. As a result, the practice’s long-term virtues are debatable in light of the enormous money laundering and terrorist funding risks connected.
Informal Nominee Shareholders & Directors
Informal nominee shareholders and directors serve the same purpose as formal nominee service providers, but their relationship with the actual director, shareholder, or beneficial owner is more typically personal in nature than professional. Spouses, children, extended relatives, business colleagues (who are managed by the real owner or controller of the firm), and other personal associates unattached to the beneficial owner’s commercial interests are typical informal candidates. Also, informal nominee shareholders are a fundamental risk, regardless of the lawful goals.
Informal nominee arrangements, in which acquaintances, family members, or colleagues claim to be the beneficial owners of company firms, are frequently used by fraudsters for their criminal acts. Considering the informal and confidential character of such relationships, it could be challenging. Establishing informal relations between the true beneficial owner and the nominee in the absence of a formal document or other evidence would need investigation techniques outside the scope of most business registries. Such problem can be resolved in part by requiring nominees to reveal the identity of the person on whose account they are operating to the business registration and imposing consequences for misleading disclosures, as specified under UAE rules regulating beneficial ownership. Informal nominee agreements, unlike formal nominee arrangements, are almost never controlled by a contract. Informal nominees are more likely to declare themselves to be the beneficial owner of the arrangement in order to sustain the fiction constructed by the genuine beneficial owner.
The connection between an informal nominee and the real owner of a company can be complex. Overseas students and tourists have been persuaded or forced into forming corporations on behalf of other parties, often in exchange for minor fees or other personal benefits, according to law enforcement authorities and FIUs. These persons are listed as directors or controlling shareholders of these businesses, although they are seldom active in the day-to-day operations of the business. Covering the beneficial owner’s connection with an asset varies from establishing complicated ownership and control structures in that it aims to provide a false or misleading impression of the genuine ownership and control structure rather than attempting to establish detachment via legal intricacy. The utilization of formal and informal nominees is one of the most common methods for doing this.
Transparency, Accountability & Enhanced Due diligence
Regard to the risk with the use of nominees, registrars should consider tightening control systems to stabilise nominee arrangements in order to promote beneficial ownership transparency, with the ultimate goal of combating corruption and money laundering, which have been recognised to disguise behind nominees in the UAE and elsewhere. Nominees must clearly define themselves to the company and its regulatory authority, according to UAE legislation. This required self-identification is intended to increase transparency in the quest for beneficial owners and to penalise on candidates who fail to adequately reveal their position.
Registrars in the UAE have the authority to demand a natural or legal person carrying shares to reveal if the person owns shares as a trustee or nominee either on behalf of an individual, and if so, should reveal the person’s identity and any directions related to the transaction. Also, registrars must perform the following actions to restrict the exploitation of nominee shareholders and directors, in addition to maintaining all businesses to declare the existence of nominee shareholders and directors in their framework:
- From a compliance policy standpoint, classify all organisations having nominee arrangements as high risk.
- Examine the reason for employing a nominee arrangement as well as the nature of it.
- Using a risk-based strategy, undertake enhanced due diligence.
- Examine the nominee contract.
- Make certain that all Ultimate Beneficial Owners (UBO) have been declared and validated.
Enhanced Due Diligence (EDD) is a KYC procedure that examines possible business relationships in greater detail and reveals hazards that Customer Due Diligence cannot discover. The whole EDD process must be well recorded, and authorities should have rapid access to the information. Specialists are frequently recruited to evaluate data obtained on clients, and the accuracy of data sources is critical.
The following are examples of red signs that should prompt EDD:
- When it is obvious that a nominee is present, such as through a review of corporate documents, where the declared UBO is listed as the UBO of other licensees in the jurisdiction, and where the declared UBO is a CSP, both indicating the use of professional nominees, the entity fails to disclose nominee arrangements.
- The nominee arrangement’s purpose is unclear.
- Suspicion is raised for a nominee agreement
- Without any legitimate justification, family or close acquaintances operate as nominated shareholders or directors.
- PEPs, their colleagues, family members, or those with adverse findings are considered UBOs.
- The client is unwilling or unable to describe their company operations and corporate history, as well as refuses to collaborate or submit information and papers that are typically necessary for registration.
- Clients are forming businesses that look odd considering the age of the individual (this is particularly relevant for underage or very young customers)
- Companies that are listed under a name that implies they engage in activities or provide services that they do not.
Given that individuals have used and exploited nominee arrangements to disguise their attention in legal entities and to obscure genuine beneficial ownership, registrars must clearly show their potential to gather and scrutinise all attempts to conceal true beneficial ownership, including via the use of nominees and complex corporate structures. All declared nominee arrangements should be evaluated as part of a remedial effort, and the controls described above should be implemented as quickly as possible.
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M&A demand is expected to flourish in UAE’s Healthcare
HLB HAMT News Team
Phone:- +971 4 327 7775
Mobile:- +971 55 807 4568
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
The healthcare industry in the UAE has grown dramatically over the last decade, as indicated by the increasing number of hospitals and clinics around the nation. The emirates of Dubai and Abu Dhabi are leading the way in the sector, which, without a doubt, is one of the UAE’s most rapidly rising sectors. The pandemic put a strain on every element of the industry, but in order to survive and prosper, the UAE’s healthcare organisations devised a well-thought-out strategy for minimising disruption, and it successfully halted the pandemic’s spread to a large extent.
Following COVID-19, Mergers & Acquisition (M&A) operations in the UAE’s health industry is turning the tide with investment firms indicating potential in healthtech and medtech assets. As corporations re-evaluate their business strategy and exhibit healthcare sector investment as ‘caution,’ the current trend shows a move from provider consolidation to strategic asset acquisition.
In the short to medium run, the following regions are expected to be “M&A magnets” in the UAE healthcare industry.
- To resolve crucial challenges and increase employee performance and process optimization, suppliers will constantly find value in implementing HealthTech tools like artificial intelligence (AI), analytics, and cloud technologies.
- Telehealth constitutes a modest aspect of most healthcare solutions, although it has been gaining popularity during the COVID-19 outbreak. Providers will try to discover specific areas where telehealth may be used to supplement current capabilities.
- Providers will strive to incorporate complicated MedTech services as it evolves from experimental to the mainstream, in order to improve patient care. To enhance results, leading institutions are expected to construct their value offer around a series of good physicians and comprehensive MedTech assistance.
- Relevant partners are expected to keep working on standardisation with the goal of compensating for value-based treatment.
Between 2016 and 2021, Provider acquisitions or mergers contributed to 81 percent of agreements; however, after COVID-19, there has been an upsurge in HealthTech/MedTech and Pharma transactions. Investment funds boosted deal activity in the first half of 2021, responsible for 58 percent of all deals, compared to 41 percent between 2016 and 2020. Several investment funds have been involved in the healthcare industry as a result of the COVID-19 impact, motivated by the industry’s stable profitability and long-term growth outlook.
It is expected that in the near future, more decisive transactions will dominate healthcare M&A, with sustained growth in tech-enabled health sector. It is expected that investment funds will play an even more vital factor by taking dominant positions in HealthTech assets. With the basic pillars of the field remaining robust, the forecast for transactions in the UAE remains favourable.
As a result of many enterprises in this health sector establishing their foundation in Dubai, the need for business valuation and due diligence services in this sector is becoming more critical. This shift in attention and increased activity in this sector throughout the world, the requirement and occurrences of value are on the rise.
Financial reporting, acquiring and selling a firm, mergers and acquisitions, and spin-offs are all reasons for business valuations. HLB HAMT has done several such valuations and due diligence exercises for transactions in Dubai, Abu Dhabi and other emirates of the UAE. A business valuation and due diligence performed by a professional firm will highlight areas of opportunity in valuations where you can increase profits and optimize your costs, as well as highlight risks using an exhaustive due diligence process.
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Influencer Marketing and its VAT obligation in the UAE
Adnan Khan, Business Manager – VAT
Phone:- +971 4 327 7775
Mobile:- +971 50 677 5860
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
We’re influenced by what we see and aesthetics are no different. 2021 redefined the role brands play in consumers’ lives, and the way in which consumers relate to brands. Consumer habits have forced brands to prioritize digital and adjust budgets, which has dramatically increased the role influencers play in a brand’s overall strategies.
Influencer marketing has exploded over the past several years with the rise of social media stars. It should be no surprise that the influencer marketing space is expected to grow from just over $13 billion to at least $15 billion by 2022.
With the increasing trend in social media marketing and rising number of Social media influencers the authorities have taken necessary steps in order to ensure the compliances into the industry.
Federal Tax Authority is one of such authorities that has invested time in ensuring tax applicability on SMIs.
Social media influencers and artists in the UAE must pay value-added tax (VAT) on the services they provide, the UAE’s Federal Tax Authority (FTA) has confirmed.
In a bulletin issued by the FTA, services included any online promotional activities, such as blog or social media posts, paid physical appearances, or any marketing activities.
The authority also said that if the artist or influencer recovered costs from their client then these would also be subject to VAT. All artists and influencers are required to register for VAT if the value of the services they provide exceeds AED375,000 ($102,100) in a 12-month period.
In addition, the FTA pointed out that if social media influencers or artists received goods – such as mobile phones or other gifts – in return for their services, instead of cash, then these too must be accounted for in their VAT calculations. VAT was introduced in the UAE on Jan. 1, 2018 at a rate of 5 percent.
To summarise the key takeaways from the bulletin are given below.
- Supplies made by Artists and SMIs will follow the general rule of VAT and will be subject to VAT at the appropriate rate of either 5% or 0% (subject to meeting the zero-rate conditions).
- The recharge of costs incurred by SMIs or Artists in rendering the services will also fall within the scope of VAT.
- As a general rule, tax invoices or simplified tax invoices must be issued for any taxable supplies made by Artists and SMIs.
- All UAE based Artists and SMIs will need to assess their VAT registration liability according to the normal VAT registration rules, which require a business to register for VAT if the value of taxable supplies and imports in the last 12 months exceeded AED 375,000, or if is anticipated the AED 375,000 threshold will be exceeded in the next 30 days.
- Non-resident Artists and SMIs who make any taxable supplies in UAE are also required to register for VAT if there is no other person (i.e. a VAT registered recipient of the supply in the UAE) who is obligated to account for VAT on the supplies on a reverse charge basis.
- There is no registration threshold for non-resident businesses so any taxable supplies made to a non-VAT registered recipient in the UAE will create a VAT liability for a non-resident Artist or SMI.
- The FTA has confirmed that for the purpose of calculating the threshold, the SMIs or Artist should take into account all taxable supplies they make, even if they do not fall under the core artistic or influencer activities.
- Where an Artist or SMI enters into barter arrangements, for instance, receiving goods in exchange for providing services, the goods will be treated as consideration for the service and VAT must be accounted for on the value of this consideration. The VAT legislation provides that where all or part of the consideration for a supply is non-monetary, the value will be calculated as a sum of the monetary part and the market value of the non-monetary part, less the VAT amount.
- Where the Artists and SMIs provide services for free, the transaction needs to be assessed under the deemed supply provisions and treated accordingly.
- As a general rule of input VAT recovery, Artists and SMIs will be eligible to recover the input VAT incurred fully subject to the normal restrictions under the UAE VAT law – such as entertainment services, and the purchase, lease or rental of motor vehicles that are available for personal use.
- The bulletin has addressed specific scenarios of the industry such as:
- Where the Artists/SMIs own an event management company, then supplies made by the individuals will be considered as distinct from the supplies made by the company. Therefore, VAT obligations will be required to be met separately.
- Where intermediaries act as agents on behalf of, and in the name of, Artists or SMIs, output VAT will need to be accounted for by such intermediaries on their commission. Artists and SMIs will then need to account for VAT on the entire consideration charged to their client.
- Where intermediaries act in their own name, and contract with both the client and the Artists or SMIs separately, VAT will need to be accounted for on the full amount charged by the SMI or Artist to the intermediary and the intermediary will account for VAT on the full amount charged to the client.
- Where an UAE resident Artist or SMI is engaged by a UAE based client to provide advertising services outside of UAE, the supplies will be subject to the standard rate of 5%. For instance, the UAE based client owns a resort overseas and contracts with a UAE SMI to promote the resort by vlogging their experiences in the resort or posting stories on social media platforms, the supplies made by the UAE resident SMI will be subject to VAT at 5%.
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Social Contribution Calculation of GCC Nationals Working in UAE
HLB UAE Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
GCC nationals are the citizens holding the nationality of one of the Gulf Cooperation Council countries i.e. UAE, KSA, Oman, Qatar, Kuwait and Bahrain. If any GCC national staff is working in any GCC member countries outside their home countries, social security is extended to them.
The employers in UAE are liable to mandatory pension subscriptions for their GCC employees according to the social security law in their home countries. In terms of subscription, it must not exceed the subscription share designated for the employers to UAE nationals working for them and the GCC employees assume the contribution variances if any.
GPSSA (General Pension and Social Security Authority) law covers the Gulf Cooperation Council national’s social contribution working in UAE.
Here are the Contribution percentage for GCC nationals working in private sector of each GCC country in accordance with the applicable laws in every GCC country.
| Country | Organization name | Contribution Basis | Employer Contribution | Employee Contribution | Total Contribution |
| Bahrain | Social Insurance Organization | Basic Salary + Fixed allowances | 9% | 6% | 15% |
| Oman | Public Authority for Social Insurance (PASI) | Total Salary | 10.50% | 7% | 17.50% |
| Saudi Arabia | General Organization for Social Insurance (GOSI) | Basic salary + Housing allowance | 9% | 9% | 18% |
| Kuwait | The Public Institution for Social Security | Basic Salary + all allowances provided salary does not exceed KD 2750 | 11.% | 7.5% | 18.50% |
| Qatar | General Retirement and Social Insurance authority | Basic salary + Social allowance | 10% | 5% | 15% |
For nations worldwide, social security is a major concern when the equations of the business environment are regularly changing for various reasons across the world. The UAE government is making significant changes in its operations to help its citizens and is taking quintessential effort which benefit employees by allowing them to retain their level of life even after they leave their employment. Also, the contribution to social security ensures financial stability.
UAE PAYROLL PROCESS
The process of payroll is a little complicated and time-consuming; hence it is always recommended outsourcing your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business. One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing pay slips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.
To know more about our payroll process, click here.
Disclaimer
Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subject to change and is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
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UAE; The first country to adopt four and a half day work week
HLB HAMT News Team
Phone:- +971 4 327 7775
Mobile:- +971 55 160 1291
Email:- dubai@hlbhamt.com
The UAE has come up with a historic move with respect to its week off policy. The country is planning to move towards a four-and-a half-day working week from the beginning of next year, instead of the current 5 days working week. As per the new policy, employees in UAE government sector can now enjoy an additional half day leave along with the two days week-off.
Along with Saturday and Sunday full-day off, a half day on Friday will also be granted to employees. The working hours from Monday-Thursday will be from 7.30 am to 3.30 pm and on Friday it will be from 7.30 am-12 pm. Government employees are also provided with the option to work from home on Fridays.
The decision “will better align the Emirates with global markets, reflecting the country’s strategic status on the global economic map”, the UAE Government Media Office said. The new long weekend will “boost productivity and improve work-life balance”.
UAE becomes the first country to adopt a 2.5-day week off on a national level and the initiative looks quite promising. It will not just boost the morale of employees, but also provide UAE with the opportunity to align more closely with global markets.
The government hasn’t given any instructions to the private sector to follow suit and as such the decision is left to the private sector companies. According to official statements “the private sector is not obliged to follow the same system. Private companies and businesses are governed by the new labour law, which grants them that flexibility,”
There is a possibility of other countries in the Mideast region embracing the 4.5 working days policy. When UAE moved its weekend from Thursday and Friday to Friday and Saturday in 2006, Saudi Arabia along with various other countries in the Gulf also adopted the same, gradually.
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Overtime Calculation in KSA
HLB KSA Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
When an employee works more hours than normal, those extra hours are considered overtime, and the payment made for the extra hours worked is referred to as overtime payment.
In this article, we are trying to answer some of the frequently asked questions related to overtime in KSA.
What is the maximum number of working hours in KSA?
Articles 98, 99, and 100 of Saudi labour law state the following about working hours and exceptions: Article 98 states that “a worker may not actually work for more than eight hours a day if the employer uses the daily work criterion, or more than forty-eight hours a week if he uses the weekly criterion. During the month of Ramadan, the actual working hours for Muslims are limited to a maximum of six hours per day or thirty-six hours per week.” Article 99 states that “the number of working hours provided for in Article (98) of this Law may be raised to nine hours a day for certain categories of workers or in certain industries or jobs where the worker does not work continuously. It may likewise be reduced to seven hours a day for certain categories of workers or in certain hazardous or harmful industries or jobs. The categories of workers, industries, and jobs referred to shall be determined pursuant to a decision by the Minister”Article 100 states that “in firms where work is done in shifts, an employer may, with the Ministry’s approval, increase the number of working hours to more than eight hours a day or forty-eight hours a week, provided that the average working hours in three weeks’ time shall not be more or less than eight hours a day or forty-eight hours a week.”
What are the types of overtime in KSA?
KSA Labour law does not specify any type of overtime. Thus, all types of overtime. i.e. daytime, nighttime, weekends, and holiday overtime, are all recognized under one payment rate, i.e., 150%. Overtime hours will be calculated for all working hours performed during holidays and Eid.
How is overtime calculated in KSA?
As per Article 107, the employer shall pay the worker for overtime working hours an amount equal to the hourly wage plus 50% of his basic wage.
What does the law state about the daily rest periods?
Article 101 states that “Working hours and rest periods during the day shall be scheduled so that no worker shall work for more than five consecutive hours without a break of no less than thirty minutes each during the total working hours for rest, prayer, and meals, provided that a worker shall not remain at the workplace for more than eleven hours a day.”It is important to note that the designated period of rest should not be included in the actual working hours.
What does labor law state about weekly rest days?
Article 104 states that Friday is the official rest day for all employees, except in cases where proper notification is made by a competent labor office. The employer may replace this day for some of his workers with any other day of the week. The weekly rest day will not be repaid in cash.The weekly rest day shall be at full pay and shall not be less than twenty-four consecutive hours.
What are the exceptions made to overtime payment in KSA?
According to Article 106, overtime payments are exempted in the following cases:
- Annual inventory activities, preparation of budgets, liquidation, closing of accounts and preparation for discount and seasonal sales, provided that the number of days worked per year does not exceed thirty.
- If the work is intended to prevent a hazardous accident, remedy its impact, or avoid an imminent loss of perishable materials.
- If the work is intended to meet unusual work pressure.
- Eids, other seasons, occasions and seasonal activities specified pursuant to a decision by the Minister.
In these cases, actual working hours must not exceed ten hours per day or sixty hours per week. The maximum overtime hours allowed per year will be determined by the minister.
Which categories of employees are exempted from overtime payment?
According to Article 108 of Labor Law, overtime shall not apply to the following cases:
- Persons occupying high positions of authority in management and policy, if such positions grant the occupants authority over workers.
- Preparatory or supplemental works which must be completed before or after commencement of work.
- Work that is intermittent by
- Guards and janitors, excluding civil security
What is the formula to calculate overtime in KSA?
Basic Wage / Standard monthly hours* Overtime hours* 1.5Please see the below example for a better understanding.OT Hours: 40Standard monthly working hours: 240
Basic wage: 5,000/-OT= (5,000/240 *40 * 1.5) = 1,250
*Note- There are no defined standard monthly hours in Labor law, so we considered 240 hours as standard monthly working hours for our calculation.
In certain circumstances, many professions necessitate that an employee work over a period of time. Working hours differ considerably based on the profession of the individual, but they must be monitored. Every employee has the right to understand how much overtime he or she can work and how much he or she will be compensated once the task is done, according to labour laws. Employee management is an intricate part of all firms as they expand slowly and steadily. It is critical for businesses to keep track of and document employee working hours as it contributes to the invoicing and payroll process.
The process of payroll is a little complicated and time-consuming; hence it is always recommended to outsource your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business. One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing payslips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.
To know more about our payroll process, Click here.
To know more about our KSA payroll process, Click here.
Disclaimer:
Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
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General Pension and Social Security Authority (GPSSA) in the UAE
HLB UAE Payroll Team
Phone:- +971 4 327 7775
Mobile:- +971 50 205 9540
WhatsApp:- +971 56 219 1607
Email:- dubai@hlbhamt.com
GPSSA (General Pension and Social Security Authority) was established in the UAE under Federal Law No. 6 of 1999 to provide pension and social security for the citizens of the UAE. All working citizens are eligible for a pension in the event of old age, disability, or death as a result of a work-related injury.
Here, our payroll experts in the UAE take you through a set of frequently asked questions that pertain to GPSSA in the UAE.
To whom does the GPSSA law apply?
The GPSSA Law applies to all UAE citizens who work in the government or private sectors in Dubai, Sharjah, Ajman, Ras Al Khaimah, Fujairah, and Um Al Quwain.
What is the timeline for registering UAE nationals under the provisions of the Pension and Social Security Law once an employee joins a company?
An employer (whether government or private sector) must register UAE national employees with the authority within one month from the date of joining.
What are the documents required for the registration of UAE nationals with GPSSA?
- Copy of Passport
- Copy of Emirates ID card
- Copy of the Family Book ID
- Birth Certificate Copy or Age Estimation Document
- 3 filled copies of the “service start form” of the insured (service start form no. 1).
- Appointment letter, self-procedure, or employment contract (for the governmental sector).
- Original copy of employment contract attested by the Ministry of Labor for citizens working in the private sector.
- Photocopy of medical examination upon appointment.
What is the minimum and maximum age for registering an employee with GPSSA?
Age shall not be less than 18 and not more than 60 years.
Is there any document proving that a UAE national employee has been registered with the Authority?
Yes, the authority issues an insurance number to the employee upon the completion of his registration by the employer. The employee should confirm with his/her employer that registration is completed within one month of their joining date.
What is the percentage of contribution applied to UAE nationals in GPSSA Government Sector?
- Employer Contribution = 15%
- Employee Contribution = 5%
Private Sector
- Employer Contribution = 12.5%
- Employee Contribution = 5%
- Government Contribution = 2.5%
What is the base amount for calculating social contributions?
Government sector: basic monthly salary, social allowance of a national, allowance for children, allowance for cost of living, and allowance for accommodation.
Private sector: contractual salary stipulated in the employment contract, including basic salary and allowances (to be paid on a regular and monthly basis).
Is there any maximum limit for the GPSSA base amount?
Yes, maximum base amount for calculating GPSSA is AED 50,000/-
Is there any minimum limit for the GPSSA base amount?
Yes, the minimum base amount for calculating GPSSA is AED 1,000.
What is the basis for calculating social contributions in the private sector?
The January salary of each year is the basis of the social contribution calculation for the remaining months (i.e. February to December). After the month of January, no salary increases or decreases will be considered. If the employee joins after January, the salary calculated for social contribution purposes in the month of joining will be the basis for payment of contributions until December.
How will social contributions be calculated for a new hire and a leaver (termination) if he/she joined and left in the middle of a month?
In relation to the private sector, social contributions will be paid to the authorities for the full month in which the service started, other than the part of the month wherein it is terminated.
How will social contributions be calculated in the private sector during special vacations without pay or unpaid vacations for study?
The insured (contributor) shall bear his share as well as that of the employer’s share in the contributions.
How can a company make a payment against their monthly GPSSA Contribution?
The company can deduct the employee portion through payroll and pay the total contribution, i.e., both employer and employee contribution to GPSSA. Employer has to make payments to GPSSA through employer’s bank or through Exchange Houses and all transactions must be done through UAEFTS. Direct deposit, cash payment, cheque payment or wire transfer is not acceptable for GPSSA payment. Employer has to contact their bank to enable the payment process. While creating UAEFTS for GPSSA payment, Emirates ID number, company number, salary information, pension year, and month should be provided as remittance information. All the transactions to GPSSA should be in AED currency only.
When shall the employer pay contributions to the authority?
The deadline for completing the GPSSA payment is the 15th of the following month. I.e., the last date for paying the January contribution is the 15th of February.
What are the consequences of the employer’s failure to pay contributions in a timely manner?
The employer shall become liable to pay an additional amount at the rate of 0.1% of the payable contributions per day of delay without the need for warning or notice by the authorities.
To sum it up, the GPSSA is a significant initiative put forward to protect the rights of citizens as it applies to all companies in the UAE, including free zones, and requires that all qualified employees – UAE or GCC nationalities – be registered with the GPSSA. In order to develop a new long-term strategy in the evolving social environment of the UAE, social contribution has been made mandatory with the goal of serving UAE residents and families.
UAE Payroll Process
The process of payroll is a little complicated and time-consuming; hence it is always recommended outsourcing your company’s payroll function. Outsourcing payroll will ensure the assistance of a team of trained payroll professionals and it frees up the time of the organization, helping them focus on other projects that add value to their business. One should be extra vigilant while selecting their payroll provider, as payroll data is highly sensitive, and one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your payroll complexities through customized strategies. We take care of our clients’ entire payroll cycle that includes preparation of payroll reports, processing salary payment with WPS compliance, accrual management including Gratuity, pension funds, an online portal for accessing payslips, and many more. Our leadership team spends the necessary hours in every project, ensuring our clients get refined consulting services to take your business forward.
To know more about our payroll process, click here.
Disclaimer
Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all-inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subject to change and is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.
Did you find the blog informative?
Related content
Get in touch
Whatever your question our team will point you in the right direction
Start the conversation