Cyber Security Strategies in UAE

Vimal Ramachandran, Director

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UAE, a highly advanced digital economy, has been at the forefront of embracing technologies, be it block-chain, artificial intelligence or cloud. With the advancement in technologies, the question of security arises. To provide a shield to prevent attacks, a national cyber-security strategy is a must.

The UAE National Cyber-security Strategy was launched recently by The Telecommunications Regulatory Authority (TRA), that aims towards a safe cyber infrastructure. According to H.E. Hamad Obaid Al Mansoori, TRA Director General, “The cyber-security strategy is based on a well-known reality, that cyberspace provides vast horizons and endless opportunities for well-being, happiness and sustainable development. However, it also provides a gateway for hackers and phishers. It is obvious that the battle between the two sides is a battle of knowledge and technology, a battle of intelligence, perseverance and patience. Yet, in essence, it is a manifestation of the eternal conflict between good and evil.”

The increase in the number of cyber-attacks across the globe, that results in losing data, money and reputation, has compelled the government to develop the strategy.  The strategy is based on 5 pillars and 60 initiatives, that intends to mobilize the whole cyber-security ecosystem in the UAE.

Pillars and goals of the strategy

  • Implement a framework that will include all types of cyber crimes
  • Protect the current and developing technologies
  • Secure SMEs against most common cyber threats
  • Enabling a vibrant cyber security ecosystem by:
    • Tapping into the opportunity of AED 1.8 billion cyber-security market in the UAE and the AED 18 billion cyber-security market in MENA
    • Enhancing the talents of more than 40,000 cyber-security professionals, motivating professionals and students to opt for a career in cyber-security, developing cyber-security abilities and nurturing a vibrant ecosystem of cyber-ecurity training providers
    • Providing awareness to citizens on cyber-security and help them realize the risks related to the cyberspace. Even institutions should see to it that proper training on cyber-security is imparted.
    • Organizing national awards programme to acknowledge excellence in cyber-security and encourage entities to drive cyber-security programmes.
  • Setup a robust ‘National Cyber Incident Response Plan’ that will aid in instant, coordinated     response to cyber incidents in the country by:
    • Streamlining the identification and reporting of cyber security incidents
    • Setting up standardized severity assessment matrix to mobilize the required support.
    • Establishing advanced capabilities that can respond to all types of cyber incidents.
  • Protecting critical assets of the country that belong to the following sectors:
    • Energy
    • ICT
    • Government
    • Electricity and water
    • Finance and insurance
    • Emergency services
    • Health services
    • Transportation
    • Food and agriculture.
  • Mobilizing the whole ecosystem through local and global partnerships to jointly attain cybersecurity goals and ambitions. This would include:
    • The public sector
    • The private sector
    • Academia
    • International consortia.

The national cyber security strategy is not the sole initiative by the government to enhance security and reduce risk. A strategy specifically intended towards strengthening Dubai’s position as a world leader in innovation, safety and security, has also been on the agenda of UAE government. This resulted in the launch of Dubai cyber security strategy.

Protection against the dangers of cyberspace, support for innovation in cyberspace and the growth of the emirate and its economic prosperity, are the motives of Dubai cyber security strategy.

Adopting latest technologies is a must when it comes to surviving in this competitive world; so is ensuring the security of your data.

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UAE Implements New Law to Support Financially Insolvent Individuals

Jay Krishnan, Partner

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The UAE Cabinet has approved a new Federal Law to manage insolvency cases, wherein support will be offered to debt-ridden individuals to repay debts within a span of three years. This will also ensure that they are protected from facing criminal prosecution.

Along with protecting debtors from legal prosecution and decriminalizing the fiscal obligations of insolvent persons, the new law will also see to it that they are provided with the opportunity to work, be productive and provide for their families.

The news comes as a savior for people struggling with financial difficulties and it will stop them from taking extreme steps.

The law will come into force in January 2020. Court will appoint one or more experts to help debtors take care of their financial obligations. These experts will work with the debtor and creditors and work out a plan, that will help settle the financial liabilities and fulfill all obligations. This will be done within three years.

Special provisions are included in the law that intends to complete the legal procedures quite fast and to reduce the fees charged for rescheduling and restructuring the debt.

The debtor cannot take any loans during this period until the court decides, upon the request of the expert, the debtor or any of the creditors, that the plan has been successfully implemented.

The law will lead to greater transparency, in terms of civil debt repayment transactions, and will reinforce the position of the country as an ideal destination for investment, where equal rights are given to all the parties. It helps in creating an atmosphere that encourages entrepreneurship and creates favorable conditions for doing business.

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New Accounting Requirements bring Leasing into the 21st century

Nithin N. K , Director

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IFRS 16 is an International Financial Report Standard (IFRS) promulgated by the International Accounting Standards Board (IASB) providing guidance on accounting for leases.

It is expected to give many enterprises a significant headache during its initial implementation phase – as teething problems are a common occurrence when it comes to new robust financial regulations.

However, on-hand to help businesses navigate their way around all these tricky implementation issues, is Nithin NK, Director, Audit at HLB HAMT.

NK explained: “IFRS 16 can initially cause trouble to the entities as there are huge changes in the lessee’s books of accounts. It was issued in January 2016 and will be applicable for financial periods starting January 1st, 2019 or later.”

IFRS 16 in a snapshot:

What do you need to know? Potential Impact?

For lessees, most leases will come on balance sheet

Operating leases capitalised with corresponding recognition of the liability & Right-of-use asset

Lease operating expenses will be replaced with Depreciation and In­terest costs

Companies using EBITDA as KPI will see positive impact post 01st Jan 2019

Impact on the presentation of the financial statements and changes to financial ratios will need careful communication

Shareholders/investors will need to be educated on the financial impact at transition

 

According to NK, these are the five implementation issues enterprises can face:

1.Identification of lease

Whether there is an identifiable asset – Supplier has no right to substitute the asset.

Whether there is a right to control the use of asset.

IFRS 16 contains a slightly revised definition of a lease but in practice this is likely to only cause differences at the margins. Where previously there were difficult judgments as to whether a contract contained a lease, those past conclusions may need to be revisited.

However, while the definition might lead to very similar conclusions, it could still cause problems in practice.

For example, whether a contract was an operating lease or a contract for services did not make a big difference under IAS 17; the expense was generally recognized straight line over the term of the contract.

Under IFRS 16 however, if it is a lease, it will affect the balance sheet. One area this could have a practical effect on would be some IT contracts.

For example, software service contracts might contain leases of equipment, such as a dedicated fiber optic connection. Finding and reviewing all these contracts and then applying the standard’s definition of a lease could be time consuming.

2.Completeness of lease information

Many companies with several subsidiaries would find it difficult to identify the leases where regular payment happens. Data analytics are required to identify such leases.

3.Gathering all the documentation

Gathering contracts from several departments like property, IT, legal team etc. Some of these documents can be very long, and occasionally poorly drafted. This can add considerable time to the analysis process.

4.Determining estimates

The standard requires a very large number of estimates to be made, including the stand-alone selling prices of lease and non-lease components; the length of the lease term where the lessee has either an extension or termination option; the interest rate implicit in the lease; and amounts payable under residual value guarantees.

Stand-alone selling prices are to be used to allocate the payments under the contract to the lease and non-lease components pro-rats. For example, a lease contract might contain both the right to use a floor in a property, the lease component, and a payment for services such as cleaning and reception services, the non-lease component.

A practical expedient provides, by class of underlying asset, an election not to separate lease and non-lease components. Although if selected, this election requires all payments to be capitalized as though the entire contract was a lease.

Estimating the interest rate implicit in the lease could also be problematic. If the interest rate implicit in the lease cannot be determined readily, the standard does allow the incremental borrowing rate to be used but estimating this could also be challenging.

When the entity’s incremental borrowing rate is used, it is not simply the entity’s WACC or overall incremental borrowing rate. The incremental borrowing rate is supposed to be asset specific (i.e, what rate would be obtained to borrow the same amount as the right-of-use asset over a similar term and with the same security).

5.Modifications

Modification in lease are accounted either as new lease or adding to the existing lease. Determining this requires obtaining information about whether the modification increases the scope of the lease by adding the right to use one or more underlying assets and whether the consideration for the lease modification represents the stand-alone sales price for the modification.

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Excise Tax in UAE – Scope Expansion

Jay Krishnan & Harish

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In UAE, tobacco and tobacco products, Energy Drinks and Carbonated drinks are subject to Excise tax and the nation has now decided to levy excise tax on all e-cigarettes, e-liquids and sweetened drinks with effect from December 1, 2019. With this introduction a substantial change to businesses that import, manufacture or trade these products is expected. This article intends to explain the new scope of excise tax and what businesses should do.

Healthy lifestyle has always been a top priority for the UAE government and with this initiative, control over diseases arising from the consumption of harmful goods can be expected. According to the Cabinet General Secretariat “The decision comes to support the UAE government’s efforts to enhance public health and prevent chronic diseases directly linked to sugar and tobacco consumption.”

New Products that will be levied excise tax w.e.f. December 1, 2019

  • Electronic smoking devices and tools and
  • Sweetened drinks

Tax for products in uae

ELECTRONIC SMOKING DEVICES AND TOOLS

Electronic smoking devices and tools shall include all electronic smoking devices and tools and the like, whether or not containing nicotine or tobacco. which would be classified on import under Customs HS codes:- 85437031, 85437032, 85437039

All liquid used in electronic smoking devices and tools used in such devices even if they contain nicotine or not will be levied tax under Customs HS codes:-  38249999.

Liquids used in electronic smoking devices and tools will be charged 100 percent tax.

SWEETENED DRINKS

Sweetened drinks that come under excise tax include any product to which a source of sugar or sweetener is added and is produced either as:

  • A ready to drink beverage or
  • Concentrates, powders, gel, extracts or any other similar product that can be made into a sweetened drink

Source of sugar includes white sugar, soft white sugar, powdered sugar, soft brown sugar and glucose syrup. Whereas sweeteners include saccharin and its salts, aspartame, sorbitol, and neotame.

Sweetened drinks that are excluded from Excise Tax

  • Ready to drink beverages that contain at least 75% milk or its substitutes
  • Baby formula, follow up formula or baby food
  • Handling of Foods for Special Medical Purposes
  • consumed for special dietary needs
  • Beverages which include alcohol

What Business Needs to do

The Federal Decree-Law No. 7 of 2017 on Excise Tax stipulates that businesses/ persons that are engaged in any of the below activities must register for tax;

  • Importing of excise goods;
  • Production of excise goods;
  • Releasing goods from an excise tax designated zone;
  • Stockpilers of excise goods, in certain cases; and
  • Warehouse keepers, in certain cases.

Hence accordingly Importers, producers, stockpilers warehouse keepers, etc. of electronic smoking devices, liquids used in such devices and sweetened drinks need to register for excise tax system as soon as possible. Failure in registering within the specified time period can lead to fines and various other obstacles.

Stockpilers are that businesses that holds excise stock on which duty is not paid and it’s available for free circulation in UAE and intends to be sold in UAE and holds “Excess excise goods”. FTA has a prescribed method to calculate excess excise goods and their valuation. Most of the supermarkets and retailers may fall under this category.

A step-by-step guide for businesses concerned

  • Classification of Goods – Identify the Excise Goods
  • Identify the primary conditions for registration as an Excise Tax Taxable Person and if applicable, as a Tax Warehouse and Tax Warehouse Keeper
  • Identify the tax trigger points and the tax liability for flow/transaction after going through the supply chain flows/transactions with regard to the Excise Goods
  • If there is any additional excise tax during the transitional period, this must be calculated.
  • Evaluate the pricing impact across the supply chain
  • Valuation for Excise tax
  • ERP and process readiness

Harish E
Manager, Tax
harish@hlbhamt.com

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Recent updates in UAE

Jay Krishnan, Partner

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World Logistics Passport

The world logistic passport is the recent initiative by the government of UAE, which is a part of the implementation of the first phase of the Dubai Silk Road strategy. It offers certain operational and financial advantages to businesses, specifically the ones into shipping.

The passport aids in connecting government bodies, such as Dubai Customs and Dubai Trade, with logistics service providers like DP World and Dnata, and it also eases the process of commercial transactions among different authority bodies in the city.

With the passport, Dubai’s products, services and integrated transportation systems will witness a rise in its demand. It will also enhance the roles played by Dubai customs in trade, regional as well as global.

According to Sheikh Ahmed bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority, said, “Dubai’s sophisticated logistics services will further enhance its value offering for investors and businesses by saving time and effort and reducing their operational costs. This is a powerful tool that will eventually lead to increased revenues. We are keen to offer investors and businesses new advantages in conducting global trade.”

Nine initiatives and 33 projects will be included in the strategy. This will be in collaboration with authorities that include Emirates airlines, Dubai Airports, Dubai South, Dubai Free Zones (DFZ) Council, Dubai Maritime City Authority, Dubai Roads and Transport Authority, DP World, Dubai Municipality and Jebel Ali Free Zone.

Virtual License

With the recently launched virtual scheme, residency in Dubai is no more mandatory for you to obtain a license. The first of its kind, virtual license is granted to individuals who don’t stay in Dubai, at a cost of Dh850 per year. For two-year visa one will have to pay Dh1,508, and Dh2,161 for three years.

Nationals of countries that have double taxation avoidance agreement with UAE can avail virtual license. According to the Dubai Virtual Commercial City, “Dubai Government authorities are working on a simplified visa process for the holders of virtual company licence. A virtual company licence doesn’t automatically guarantee a business bank account in the UAE and it will at the discretion of the commercial banks. However, we can facilitate access to account opening process.”

Virtual companies can conduct selected professional activities that include services related to printing and advertising; computer programming, consultancy and related activities; and design activities.

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Regulation of the submission of reports by multi-national companies in UAE

Jay Krishnan & Sumesh Krishna

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INTRODUCTION

The United Arab Emirates (UAE) has introduced Country-by-Country (CbC) Reporting (CbCR) requirements, that will be applicable to businesses that have a legal entity or branch in the country and are members of a multinational enterprise (MNE) group with consolidated annual turnover of more than AED 3.15 billion.

DEFINITIONS

MNE Group: Any Group that;

  1. Includes two or more enterprises the tax residence for which is in different jurisdictions or includes an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax with respect to the business carried out through a permanent establishment in another jurisdiction.
  2. and having total consolidated group revenue equal to or more than AED 3,150,000,000 (three billion one hundred fifty million dirham) during the Fiscal Year immediately preceding the Reporting Fiscal Year as reflected in its Consolidated Financial Statements for such preceding Fiscal Year.

Constituent Entity: means any of the following;

  1. Any separate business unit of an MNE Group that is included in the Consolidated Financial Statements of the MNE Group for financial reporting preparation purposes or would be so included if equity interests in such business unit of an MNE Group were traded on a public securities exchange.
  2. Any business unit that is excluded from the MNE Group’s Consolidated Financial Statements solely on size or materiality grounds.
  3. Any permanent establishment of any separate business unit of the MNE Group, provided the business unit prepares a separate financial statement for such permanent establishment for financial reporting preparation, regulatory, tax reporting, or internal management control purposes.

Filing Regulations

Entities that come under the new rule will have to take necessary actions to meet the requirements and review the impact of these rules on the MNE group’s reporting and notification requirements in other countries. The CbC report aims to make it easier for tax authorities to assess high-level risks related to transfer pricing and BEPS for MNE groups.

The Ministerial Resolution No. 32 of 2019 which introduces CbCR rules for MNE groups operating in the UAE, was introduced by the country on 30th April 2019.

The CbC reports include;

  • Financial information related to the amount of revenues
  • Profits/losses before income tax
  • Income tax paid
  • Income tax accrued
  • Stated capital
  • Accumulated earnings
  • Number of employees
  • Tangible assets other than non-cash or cash-equivalent assets,
  • Details about business activities conducted and other disclosures and explanations provided by the MNE, with respect to each jurisdiction in which the MNE operates

A Constituent Entity which is not the Ultimate Parent Entity of an MNE Group shall file Report with the Competent Authority with respect to the Reporting Fiscal Year of an MNE Group of which it is a Constituent Entity, on or before the date specified, if such Entity is resident for tax purposes in the State and one of the following conditions in respect thereof applies:

  1. The Ultimate Parent Entity of the MNE Group is not obligated to file a Report in its jurisdiction of tax residence.
  2. The jurisdiction in which the Ultimate Parent Entity is resident for tax purposes has a current International Agreement to which the State is a party but does not have a Qualifying Competent Authority Agreement in effect to which the State is a party for filing the Report for the Reporting Fiscal Year.
  3. There has been a Systemic Failure of the jurisdiction of tax residence of the Ultimate Parent Entity that has been notified by the Competent Authority to the Constituent Entity resident for tax purposes in the State.

Penalties

An administrative penalty shall be imposed on the Reporting Entity which fails to comply with the obligations set out in this Resolution as follows:

  1. Where a Reporting Entity fails to retain the documentation and information required to be collected in the course of meeting its reporting obligations under this Resolution for a minimum period of five (5) years after the date of reporting to the Competent Authority, the Reporting Entity shall be subject to a penalty of one hundred thousand dirham (AED 100,000);
  2. Where a Reporting Entity fails to provide the Competent Authority with any information requested in accordance with this Resolution, the Reporting Entity shall be subject to a penalty of one hundred thousand dirham (AED 100,000).
  3. One million dirhams (AED 1,000,000); and ten thousand dirham (AED 10,000) for every day during which the failure continues to a maximum of two hundred and fifty thousand dirhams (AED 250,000). where a Reporting Entity fails to report the information required to be reported under this Resolution on the required Reporting Date or fails to notify the Competent Authority on or before the required reporting date of the intention to file a Report in respect of a certain accounting period.
  4. The Reporting Entity shall be subject to a minimum penalty of fifty thousand dirhams (AED 50,000) and a maximum penalty of five hundred thousand dirhams (AED 500,000) if the Reporting Entity fails to report the information required to be reported under this Resolution in a complete and accurate manner.

Deadline

The CbC report must be submitted within 12 months of the end of the reporting period. Accordingly, for the financial years commencing on 1 January 2019, the CbC report must be submitted by 31 December 2020.

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Leading Industries in the UAE

John Varghese, Managing Partner

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The UAE has the most diversified economy in the GCC. The country was reliant on oil and gas for centuries; but of late the government has started giving equal prominence to all the sectors. The move has helped the government in increasing its revenue and has led to an impressive development in sectors that include tourism, retail, manufacturing etc. Some of the leading industries in the UAE, that has been contributing immensely to the economy of the country include;

Retail

The retail industry has been witnessing a massive growth in the UAE, specifically Dubai. With numerous global retail players having established their base in the country, the industry is expected to thrive in the coming years.

According to reports, the value of retail sales in Dubai alone is expected to reach $43.8bn by the year 2020 and a growth of 5.6 percent is expected in the time period 2018-2021.

Dubai hosts some of the biggest shopping festivals in the world, that helps in boosting the local sales of retailers.

Hospitality

Hospitality is another fast-growing sector in the UAE, that has experienced envious growth over the past decade. Dubai attracts visitors from across the globe and is one of the most visited cities, with 15.93 million international overnight visitors in 2018.

The UAE hospitality market is expected to reach $7.6 billion within a span of 3 years at a five-year CAGR of 8.5 per cent. International tourist visits will increase to 25.5 million at a five-year CAGR of 4.3 percent.

 

Healthcare

UAE is home to a highly-developed healthcare system, that aims to become one among the best in the world by 2021. The UAE government’s various initiatives to promote the sector coupled with latest technologies that are being embraced, has helped the healthcare sector evolve rapidly.

A growth of 60 percent is expected in the healthcare industry between the time period 2016- 2021, that will be worth over AED 103 billion.

The highly specialised doctors along with events such as Arab Health Exhibition, that brings together healthcare companies, technology, and products, has helped the industry gain global recognition.

Manufacturing

Manufacturing is the second largest contributor to the economy of the country. It accounts for 80 percent of Dubai’s non-oil trade and 53 percent of the country’s total non-oil exports. Some of the primary sub-sectors of the industry are processed food and beverages, plastics and rubber, electrical machinery and equipment, chemicals and chemical products, minerals and mineral products, publishing and printing, pearls, precious stones and metals.

Organizations that plan to set up a manufacturing plant in Dubai are bestowed with a range of lucrative facilities.

Construction

Construction sector is an inevitable part of UAE economy, that has been flourishing leaps and bounds. The use of robots, unmanned aerial vehicles (UAV) and “intelligent” tools and equipment has helped in the automation of various tasks at construction sites and this has been a contributing factor to the thriving industry.

During the time period 2014-2018, residential construction accounted for the largest construction market in the UAE and it is expected to retain its position in the coming years. More than 15,000 projects worth $791 billion are at various stages across the UAE.

Media

Dubai, a hub for public relations companies, advertising firms, print, production and broadcast facilities, was recently named as the Capital of Arab Media for 2020 by the Arab Information Ministers Council. According to His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, “Media outlets are not mere channels to cover events and disseminate information. Media is a partner in achieving development goals, setting their direction and driving their impact. It is a role that comes with great responsibility.”

The sector experienced an unprecedented rise in 2019, when compared to the previous year.

Setting up business in UAE for any of these sectors are relatively easy and all you must do is seek the help of a reputed business consultant.

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Economic Substance Regulations in UAE

Jay Krishnan & Sumesh Krishna

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The UAE Cabinet recently issued the Cabinet of Ministers Resolution No.31 of 2019, that requires all in-scope UAE entities to maintain an economic substance. This will be applicable to onshore and free zone companies that engage in any of the below mentioned “Relevant Activities”;

  • Banking Businesses as licensed in the State, including Banking Businesses licensed in a Free Zone or a Financial Free Zone.
  • Insurance Businesses as licensed in the State, including Insurance Businesses licensed in a Free Zone or a Financial Free Zone.
  • Investment Fund Management Businesses as licensed in the State, including Investment Fund Management Businesses licensed in a Free Zone or a Financial Free Zone.
  • Lease-Finance Businesses as licensed in the State, including Lease-Finance Businesses licensed in a Free Zone or a Financial Free Zone.
  • Headquarters Businesses as licensed in the State, including Headquarters Businesses licensed in a Free Zone or a Financial Free Zone.
  • Shipping Businesses as licensed in the State, including Shipping Businesses licensed in a Free Zone or a Financial Free Zone.
  • Holding Company Businesses as licensed in the State, including Holding Businesses licensed in a Free Zone or a Financial Free Zone.
  • Intellectual Property Businesses as licensed in the State, including Intellectual Property Businesses licensed in a Free Zone or a Financial Free Zone.
  • Distribution and Service Centers Businesses as licensed in the State, including Distribution and Service Centres Businesses licensed in a Free Zone or a Free Zone.

Activities that must be conducted by a licensee in the State shall include:

In respect of Banking Business:

  1. Raising funds, managing risk including credit, currency and interest risk.
  2. Taking hedging positions.
  3. Providing loans, credit or other financial services to customers.
  4. Managing capital and preparing reports to investors or any government authority with functions relating to the supervision or regulation of such business.

In respect of insurance Business:

  1. Predicting and calculating risk.
  2. Insuring or re-insuring against risk and providing Insurance Business services to clients.
  3. Underwriting insurance and reinsurance.

In respect of Investment Fund Management Business:

  1. Taking decisions on the holding and selling of investments.
  2. Calculating risk and reserves.
  3. Taking decisions on currency or interest fluctuations and hedging positions.
  4. Preparing reports to investors or any government authority with functions relating to the supervision or regulation of such business.

In respect of Lease-Finance Business:

  1. Agreeing funding terms.
  2. Identifying and acquiring assets to be leased (in the case of leasing).
  3. Setting the terms and duration of any financing or leasing.
  4. Monitoring and revising any agreements.
  5. Managing any risks

In respect of Headquarters Business:

  1. Taking relevant management decisions.
  2. Incurring operating expenditures on behalf of group entities.
  3. Coordinating group activities

In respect of Shipping Business:

  1. Managing crew (including hiring, paying and overseeing crew members).
  2. Overhauling and maintaining ships.
  3. Overseeing and tracking shipping.
  4. Determining what goods to order and when to deliver them, organizing and overseeing voyages.

In respect of Holding Company Business, all activities related to that business; and in respect of Holding Company Business that derives income from other sources other than dividends and capital gains from its equity interest, the state Core Income-Generating Activities shall be those activities associated with the income generated.

In respect of Intellectual Property Business:

(a) where the Intellectual Property Asset is a –

  1. Patent or an asset that is similar to a patent, research and development.
  2. Non-trade intangible (including a trademark), branding, marketing and distribution.

(b) If the Relevant Activity is conducted by a Licensee that is regarded as a High Risk IP Licensee, the State Core Income-Generating Activity must include any of the following additional activities:

  1. Taking strategic decisions and managing (as well as bearing) the principal risks related to development and subsequent exploitation of the intangible asset generating income.
  2. Taking the strategic decisions and managing (as well as bearing) the principal risks relating to acquisition by third parties and subsequent exploitation and protection of the intangible asset.
  3. carrying on the ancillary trading activities through which the intangible assets are exploited leading to the generation of income from third parties.

In respect of Distribution and Service Center Business;

  1. Transporting and storing component parts, materials or goods ready for sale.
  2. Managing inventories.
  3. Taking orders.
  4. Providing consulting or other administrative services.

Requirements to meet Economic Substance Test

A Licensee meets the Economic Substance Test in relation to a Relevant Activity in the following cases:

  1. If the Licensee conducts State Core Income-Generating Activity in the State.
  2. If the Licensee is directed and managed in the State in relation to that activity, provided the Licensee’s board of directors meets in the State at an adequate frequency having regard to the amount of decision-making required at that level.
  3. Having regard to the level of Relevant Activity, if there is an adequate number of qualified full-time employees in relation to that activity who are physically present in the State (whether or not employed by the Licensee or by another entity and whether on temporary or long-term contracts), or adequate level of expenditure on outsourcing to third party service providers, whose activities, employees, expenditure, and premises are in the State; and these activities, employees, expenditures and premises are adequate for carrying out the Relevant Activity being outsourced.
  4. If there is adequate operating expenditure incurred by it in the State, or adequate level of expenditure on outsourcing to third party service providers whose activities, employees, expenditure and premises are in the State; and these activities, employees, expenditures and premises are adequate for carrying out the Relevant Activity being outsourced.
  5. If there are adequate physical assets in the State or adequate level of expenditure on outsourcing to third party service providers in the State, for the activities of the Licensee;
  6. In the case of State Core Income-Generating Activity carried out for the relevant Licensee by another entity, if it is able to monitor and control the carrying out of that activity by the other entity.

In relation to a Licensee whose activity is restricted to carrying out a Holding Company Business that derives its income from dividends and capital gains only, such Licensee meets the Economic Substance Test if it meets the following conditions:

  1. Complies with the requirement to submit any documents, records or information to the relevant Regulatory Authority in accordance with the law applicable to the Licensee in the State.
  2. Has adequate employees and premises for holding and managing the Holding Company Business.

The rule won’t be applicable to companies that come under the ownership of the government, directly or indirectly. As such, UAE sovereign investment funds and other UAE government related entities are exempted. There is still no confirmation regarding sole proprietorship and branches.

A relevant entity must report certain information regarding its relevant activities to the regulatory authority concerned (the one that issued the trade license to the entity), annually. Existing companies should have complied with the regulations by now, since the starting date was 30th April 2019. In the case of new entities, regulations must be complied with upon receiving its trade license.

If an entity fails to meet the requirements or if inaccurate information is given to the regulatory authority, annual administrative penalties of AED 10,000 to AED 300,000 will apply. If they fail to meet the requirements for consecutive years, the penalties will increase and might force the authorities to suspend, revoke or deny renewal of an entity’s license.

The UAE was added to the European Union list of non-cooperative tax jurisdictions by the European Commission and this was the reason behind the issuance of the economic substance regulations. These regulations are similar to the economic substance requirements that were recently implemented in jurisdictions that include Cayman Islands and Jersey.

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Implementing MIS Dashboards for Better Decision- Making

Melita Grace, IT

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With all industries evolving at a faster pace than ever before, making the right decisions based on consistent and clear data is key for any company. Way too often, managers have to deal with several different monthly or yearly reports from each department, making data visualization and decision-making strenuous tasks, frequently resulting in poor financial and operational results. In order to facilitate the flow of information and avoid disastrous choices, companies should put in place a consistent and efficient reporting system, such as a dashboard.

A dashboard is a business intelligence tool used to display data visualizations in a way that is immediately understood, by summarizing information from different parts of the organisation to ensure that appropriate decision will be reached. Dashboards fall into three categories: operational, analytical and strategic. Whilst the first two will look respectively at real-time data to understand performance, and past trends that can influence future decision-making, a strategic dashboard tracks performance in relation to a company’s key performance indicators, to better align actions with strategy.

A management information system (MIS) dashboard can help identify the source of a problem in order to determine the future needs of the company. Moreover, it can predict future trends by using various market tools to analyse the current ones, while also helping assess monthly or yearly performance to increase efficiency.

Essentially, this system ensures data collated from different parts of your organisation are processed and then presented in a manner that will help make the right decisions. For example, different banks will have different reporting formats and tools, raising the question of whether integration can happen within the two and whether reported data is accurate.The needs for a strong and customisable visualization tool in terms of charts, graphs and data is fundamental.

By using MIS dashboard, banks can collect and understand consistent reports and financial statements of competitors using external sources, while also comparing assets, such as credit cards, applications or sales being audited across years. This helps identify their position in the market, loopholes, threats and action plans to fix any issue highlighted by the data.

Excel sheets have become a thing of the past, as a dashboard can show a greater and more in-depth amount of internal and external data in one report, avoiding discrepancies between departments. Thanks to this, spending per department can be compared and negative trends identified and corrected, resulting in more effective decision-making.

A business can have various MIS reports to benefit each division of the business, saving them time and gaining total visibility of all systems.

For example, financial MIS can provide financial managers with fixed and standard report formats containing major financial objectives, while also projecting financial needs. Similarly, accounting managers can benefit from aggregated information on accounts payable, accounts receivable and payroll.

Besides banking, other industries can greatly profit from an MIS dashboard. In IT, an MIS dashboard can report on infrastructure or operational issues, as well as calculate how many of these escalated to vendors, or ensuring the IT team is meeting SLAs. Each report can be customized depending on the company’s needs, tailoring frequency or data accordingly.

In retail, a MIS can be used for point-of-sale collection, logistics, inventory control and internal communication, all of which affect retail operations and marketing. The latest can also benefit from MIS dashboards by making sure its strategy is in line with KPIs such as sales effectiveness and sales revenue. The report can include charts, different dashboards, and comparisons between current and past years data and targets.

A similar approach can be applied by HR by analyzing recruitment data, as well as employee retention and month-on-month or year-on-year productivity. In conclusion, MIS reporting should be backbone of any organisation to ensure we achieve our goals and objectives by improving the performances and helping us look forward towards the growth and success of an organisation.

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Business Packages for Women Entrepreneurs in UAE

Lavin Nalinbabu, Business Consultancy

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The Ras Al Khaimah Economic Zone is on a move to make it a women-friendly destination.  The free zone is planning to offer two new business packages (one-year and three-year), that are exclusively dedicated to women entrepreneurs.

The starting price of the package is Dh6,200, which comes with a free zone license, shared workstation and eligibility for a UAE residency visa. It also includes various other support services such as business cards.

If you are opting for the three-year business package, you will be awarded a free investor visa, worth Dh3,950. “We are very proud to launch the RAKEZ Business Women Package, which is a clear testament to our commitment of encouraging more women to achieve their entrepreneurial dreams,” says Ramy Jallad, group chief executive of RAKEZ.

Women applying for the package will be provided with eight license types to choose from. These are commercial, educational, e-commerce, general trading, individual/professional, media, service and freelancer.

RAKEZ, a free zone that houses more than 14,500 companies, has conducted women-centric events before as well. “We have used these events as platforms to get to know what challenges they are facing and what can we do to support them,” says Jallad.

Earlier RAKEZ had come up with start-up business plans for final year students and new graduates. The starting price of the package was Dh650 a month and it includes a business licence, a shared workstation and a residency visa.

RAKEZ is one of the leading free zones in the UAE, that is blessed with a strategic location connecting growing markets of Middle East, North Africa, Europe, and South and Central Asia.

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