A guide for foreigners who aspire to set-up business in Dubai

Jay Krishnan, Partner

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The city of Dubai doesn’t require any special introduction as it is one of the most popular places in the world. We all know the position Dubai enjoys as a tourist destination; but its much more than that. A fertile ground for new businesses, Dubai, is any investor’s dream. Establishing your business in Dubai is not just easy, but highly profitable as well.
There are a couple of things that you should be aware of before you kick-start your business in Dubai.

Economic zone and ownership

Once you decide to setup your business in Dubai, the first step is to figure out the business zone that suits your company. One can choose from mainland, free zone or offshore, to establish their entity, all of which offer diverse advantages.

Free zone
Free zones are the strongest pillars of UAE’s robust economy. They have been fruitful in attracting remarkable amount of foreign investment, generating thousands of jobs and facilitating technology transfer into the country. The business-accommodating laws, easier labour and immigration procedures and tax structures make these free zones the most sought-after business locations in UAE.

Dubai alone is home to more than 30 free zones, contributing significantly to the economy of the city. The free zones accounted for 32 per cent of Dubai’s total direct trade in the year 2015, driving about 500 billion AED of commerce. As per 2015 data, there were 20,000 free zone firms operating in Dubai, with 100 ‘Global Fortune 500’ companies having established their base in JAFZA.

Mainland
A mainland company is an onshore company licensed by the Department of Economic Development (DED) of the related emirate. The companies registered in the UAE mainland can do business in the local market as well as outside UAE without any restriction.

Offshore
An offshore company is a legal business entity that operates outside its registered jurisdiction for the purpose of legally minimizing tax payment.

Types of License

To conduct any form of business in the UAE, one must acquire a trade license. Licenses in Dubai can be divided into three;

  • Commercial licenses covering all kinds of trading activity
  • Professional licenses covering professions, services, craftsmen and artisans
  •  Industrial licenses for establishing industrial or manufacturing activity
    Carrying out business without a trade license is illegal in UAE and is subject to penalties. In addition, the license needs to be renewed every year.

Starting a business in Dubai begins with selecting the category of business. There are more than 2,100 industrial, commercial, professional and tourism activities available in Dubai.

This is followed by finding the right legal form, which will depend on the business activity, location, the number and the nationality of owners and the ownership options. One will have to check the legal forms that match specific business activities.
A trade name that matches the kind of services the company offers, must be selected. The next step involves applying for an initial approval certificate, stating that Dubai DED has no objection in you starting a business.

Depending on the legal form of the company, a Memorandum of Association (MOA) will have to be signed by the partners and owner and in some cases, a Local Service Agent (LSA) / Corporate Agent agreement between the company owner and the UAE national who is in charge of representing your business.

All businesses in Dubai should have a physical address. For this, tenancy contract must be signed with the landlord and registered with Ejari.
Certain business activities demand special licensing approvals, apart from the one from DED. If your business activity requires additional approvals, the relevant government departments need to be contacted.
Non-UAE nationals seeking to establish an entity in Dubai mainland need to team up with a UAE national. The UAE national will own 51 percent of shares and the non-UAE national will own the remaining 49 percent. But of late, the UAE government has announced a new law that will permit complete foreign ownership in certain sectors selected by the government. This will come into force by the end of 2019.
The new law does not apply to free zones and offshores where 100% foreign ownership is already permitted.

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UAE and its expat-friendly initiatives

Six-month Multiple Entry Visa and Permanent Residency

Jaya Krishnan

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The UAE government has recently announced a six-month multiple entry visa for certain categories of individuals. Investors, talented individuals and outstanding students will be granted the visa and this gives them the opportunity to prolong their stay in the country.

The Federal Authority for Identity and Citizenship has activated 3 new services on its portal. All the services grant visa for a period of 6 months, with variations in the number of visits. Investors can make multiple visits to complete residency procedures with the help of a 6-month visa. In the case of entrepreneurs and outstanding students, several trips can be made with their 6-month visa to complete long-term residency procedures. Talented individuals will also be granted a 6-month visa, but the number of visits will be restricted to just one.

The new visa scheme will help individuals in identifying opportunities of their interest. An Emirates ID card will be issued by the ICA to the six-month visa holders that will help them complete procedures such as opening bank accounts, property registration and other transactions, easily.
People who fulfil the conditions for long-term residency can apply through e-channels and through their accounts on the system, without a six-month entry visa.
It’s been just a week since the scheme launched and ICA has already received 6000 applications from investors and entrepreneurs.
The government has also come up with a permanent resident system named ‘Golden Card’, for investors and for exceptional workers in the fields of health, engineering, science and art.

According to Sheikh Mohammed bin Rashid, “Gold Card permanent residence will be awarded to exceptional and talented individuals, and to whoever contributes positively to the UAE’s success story. We want those people to be permanent partners in our journey. All of the residents of the UAE are our brothers and part of our large family.”
The permanent residency scheme will be highly beneficial to the country and its property market. It will change people’s perception about UAE; they will start seeing the country as a home and not just a temporary plan.

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UAE , KSA Double Taxation Avoidance Agreement in Force

Namitha Aiyllath

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The double taxation avoidance agreement between the UAE and KSA is in force now. The agreement, which was signed in May 2018, came into effect in April 2019, nearly a year later. This is the first agreement between two GCC countries and it is expected to ease the two-way investment flow along with boosting bilateral trade and economic ties. It will benefit individuals and corporates of these two countries.

Below listed are some of the key provisions of the agreement;

  • Withholding tax won’t be charged on interest and service fees
  • A cutback on the withholding tax rate on royalty payments
  • A maximum 5% WHT on dividends
  • Transfer of shares or immovable property won’t be exempted from non-resident taxation

It’s not just the natives of these two countries who can benefit from the agreement, even foreign national residents can make use of the provisions.

Residents covered by the double taxation avoidance treaty include any individual who is responsible to pay tax by reason of domicile, residence, place of incorporation or place of management,  corporate entities, sovereign wealth funds and similar government entities and other individuals exempted from tax due to religious, educational, charitable, scientific or any other reasons similar to these.

According to the agreement, a company need not pay tax on profits in the other contracting state unless business activities are conducted there through a permanent establishment(PE). Revenue from services that are not delivered through a PE in the other contracting state should not be levied WHT or any other types of tax in that state.

According to Younis Haji Al Khoori, under-secretary of the Ministry of Finance,  the agreement is a vital move towards enhancing bilateral relations between KSA and UAE, especially in financial and economic spheres. “This agreement will contribute to a more flexible investment climate that will underscore the country’s position as a key destination for Saudi investments. It represents a qualitative leap forward in terms of the framework of financial, economic and tax cooperation between GCC countries,” said Al Khoori.

“These agreements contribute to the elimination of double taxation, facilitate cross-border trade and investment flows, and provide protection to taxpayers from direct and indirect double taxation. This in turn enhances the country’s investment climate and makes it more attractive as a destination for foreign investment,” he added.

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UAE, An Artificial Intelligence Hub

Embracing Innovative Technologies

Namitha Aiyllath

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Embracing technology is no more an option, it’s a must in the ever-changing competitive corporate world. Companies will have to keep pace with the evolving technologies such as blockchain, machine learning, artificial intelligence and robotics, that are reshaping digital businesses.

UAE is a model nation when it comes to adoption of technology. Its most happening city, Dubai, is at the forefront of adopting innovative technologies. A pioneer in the development of artificial intelligence strategy, Dubai has been ranked first globally in attracting FDI for AI. The city had been successful in attracting more than $21 billion of foreign direct investment (FDI) for artificial intelligence and robotics project from 2015 to 2018. The European Union was the major contributor, with $5.7 billion, followed by the United States with $3.9 billion.

The country aims to become the foremost artificial intelligence hub globally, by understanding and promoting the use of the technology.  According to sources, the UAE government is “very much working towards accelerating the pace of AI adoption through strategic partnerships with both the public and private sectors”.

In 2017, the UAE Government launched ‘UAE Strategy for Artificial Intelligence (AI)’ with the objective to make the country first in the field of AI investments in various sectors such as transport, health, space, education, traffic and many more.

In addition to this, the government has come up with an initiative named, Think AI, that includes a series of roundtables, workshops, and panel discussions comprising of governmental officials, private sector, and local and international organisations with expertise in AI. Apart from enhancing the adoption of AI, the programmes aim to educate and attract AI experts and also provide the infrastructure required for the development and application of the technology.

The roundtables are an initiate to improve the trustability and acceptance of AI along with regulating and designing policies to develop the technology.

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50% Reduction on Commercial Fines in Dubai

Namitha Aiyllath

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The Commercial Compliance & Consumer Protection (CCCP) sector at the Department of Economic Development (DED) has announced a reduction in commercial fines by 50 %. Only the first fine issued in a calendar year will be able to avail the offer.

Unlike in the past one need not request for a settlement; the trader will receive a sms notification notifying the discount, once the commercial violation is entered in the system.

According to Mohammed Ali Rashid Lootah, CEO of CCCP, “The Department of Economic Development is proud to launch initiatives based on the vision and directives of our leadership, especially when 2019 begins as the Year of Tolerance. We want to provide best quality services to as many businesses as possible in Dubai. The automatic fine settlement facility will contribute to enhancing happiness in Dubai and the emirate’s position across global competitiveness indicators.”

He further added, “The net value of fines settled under the 50 per cent reduction in 2017-2018 was Dh23.4 million. We believe that the new automated system will be smoother and more flexible as it will automatically adjust the fines and benefit more business owners.”

The Commercial Compliance & Consumer Protection plans to come up with numerous services and initiatives to build a better working business environment in UAE. The government of UAE has been implementing various strategies to make the country business-friendly, which has helped it evolve as a major international hub for business.

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A Surge in the Number of Licenses Issued by DED

Namitha Aiyllath

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Dubai is one of the most preferred investment destinations, that has garnered worldwide attention over the last few decades. This is evident from the number of licenses issued in November; the Department of Economic Development (DED) issued 1,748 new licenses during November 2018. 62.3% of the licenses issued were commercial and 35.2%professional.

In the month of November, the number of Trade Name Reservations stood at 3,037, and the number of Initial Approvals reached 2,265.  The number of Commercial Permits were 2,283. The Business Registration and Licensing (BRL) also issued 136 instant licences.

11,156 transactions were carried out in November, with regard to license renewal and 4,979 transactions were related to Auto Renewal via text messages. The top nationalities that secured licenses in November 2018 were: India, followed by Pakistan, Egypt, Bangladesh, China, Saudi Arabia, Britain, Jordan, Sudan and the Philippines.

The outsourced service centres of DED also plays a significant role in delivering value-added services to Dubai residents; they were successful in issuing 17,399 transactions.

Maximum number of licenses were issued in Bur Dubai, which was followed by Deira and Hatta. The top sub-regions that accounted for 52.7% of the total transactions were: Burj Khalifa, Port Saeed, Al Marar, Garhoud, Dubai World Trade Centre 1, Al Barsha 1, Al Khabaisi, Naif , Umm Ramool, Al Karama and Hor Al Anz

Out of the total licenses issued, 36.9 were to trade and repair services, followed by Real estate, leasing & business services (22.4%), Building & Construction (14.7%), Community & personal services (10.4%), Hotels group (4.9%), Transport, storage & communications (3%), Manufacturing (2.6%), Financial brokerage (2.1%), Health & labour (1.7%), Education (0.6%), Agriculture (0.4%), and Mining & Natural Resources (0.3%).

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HLB Hamt Approved as a Registered Tax Agent in UAE

Sanoop Ramachandran

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HLB HAMT has attained the status of Registered Tax Agency in United Arab Emirates. Hisham Ali Mohamed Taher, founder member & Chairman of HLB Hamt, is the registered tax agent and the tax agency number is (FTA) 30002166.

A tax agent is usually appointed on behalf of another person to represent him before the Federal tax authority. A tax agent takes care of the client’s tax obligations and performs various legal activities prescribed by the laws and orders

Designating a Tax Agent will help share the obligation/responsibility on tax compliance and deal with all tax related affairs.

How can HLB as Tax Agent help you?

  • Negotiating with FTA on fines and penalties, revision of the VAT returns, refund claims etc.
  • Get written clarification for complex transaction
  • Verification of accounting data as per the terms of agreement
  • Maintenance of FTA Audit File (FAF)
  • VAT computation
  • Comply with refund procedures
  • VAT registration
  • Attending any queries from FTA

Our service dimensions

  1. Retainership: Preparing and filing tax return, addressing adhoc queries and filing voluntary disclosure if required.
  2. Specific support: Making appeals and appearing in FTA.
  3. Accounting and records maintenance: End to end accounting of transactions in approved tax accounting software and preparing Tax return.
  4. Return filing: Filing error-free return within due date based on accounting records.

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Executive Regulations on Value Added Tax (VAT).

Manu George Michael

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has approved the executive regulations of Federal Law No.8 of 2017 on Value Added Tax (VAT).

The regulations define VAT rules as 5 per cent tax is imposed on the import and supply of goods and services. It tackles the subject of registration, exemptions, the rules related to supply and defines profit margins. The regulation also explains how to calculate VAT based on profit margins, and addresses zero-rated goods and services.

Regulation can be downloaded from following link: VAT Executive Regulation.

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Value Added Tax training @HLB Hamt

Harish Elimban, Manager

With the announcement by the Ministry of Finance that VAT will be implemented in the UAE by 1st  January, 2018, companies are on a limited timeline to prepare for the first phase of VAT implementation in their business. HLB Hamt tax department have already made substantial progress on preparing their tax administration systems and focusing its clients to develop their business in preparation for VAT.

As such, HLB Hamt hosted a full day training to its staff on 1st April, 2017. VAT specialist & tax expert Mr. Prashanth KL, Partner Guru & Jana (HLB India) took us through the session. The programme demonstrated how VAT works and its implementation throughout the GCC, Latest updates from Ministry of Finance, the mechanics of VAT calculations, VAT registration and who should register for VAT, the goods and services VAT is likely to be taxable and the VAT treatment applicable to different types of supplies etc.

SAGE Middle East joined the training session with Mr. Manas Das, Channel Manger, SAGE ME, explaining the vital inputs on the technological impact of VAT on business and its implications on IT systems & how to adapt to the new VAT rules.

 

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HLB Hamt Wins The DMCC Best Consultant Awards 2017

HLB HAMT

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Dubai Multi Commodities Centre (DMCC) Free Zone Authority, one of the most popular and prestigious Free ZoneAuthority of UAE has held “DMCC Consultant Awards 2017” in appreciation of the consultants support to DMCC and to recognize the top performing consultants during 2016.

HLB Hamt take great pride to be recognised from DMCC as the “Best Consultant for the Year Award”.

 

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