Dubai Open E-Commerce and Design Centres

Dubai’s success is mainly attributed to the fact the emirate continuously launches new free zones which attract businesses and enhance growth across a wide range of sectors. Besides offering business-friendly environments, these free zones focus on particular sectors of business enabling corporations to expand and grow. Currently, the emirate has established the Matajircom and Dubai Design District, two new hubs, which revolve around e-commerce and design respectively.

Promoting Design

The emirate’s luxury, fashion and design sectors are estimated to mark an impressive growth during 2015 as it is anticipated that consumer consumption will reach AED 150 billion. During April 2015, Dubai launched its new design hub known as Dubai Design District (d3), where both local talents as well as internationally known brands are found. The d3 was especially set up to aid local talents to acquire global recognition as well as a means for international corporations to expand within the Middle East and discover local talents. Set up to cultivate and develop design as well as generate profits and economic growth, the d3 is strategically found in the middle of Dubai Mall and the DIFC, Dubai’s renowned financial hub.

The d3 was established to provide free zone and non-free zone licences. Free zone licences offer a tax exemption for 50 years and 100% foreign ownership. The free zone licences are granted by the emirate’s Dubai Technology and Media Free Zone authority. In order to be granted a non-free zone licence, the Department of Economic Department, which is the authority that approves the issuance, requires 51% local ownership. The new d3 hub has been under construction and is anticipated it will be completed by October 2015. Those interested in setting up within the design free and have not yet secured adequate premises may reserve premises that will be completed in later construction stages, allowing them to apply for a free zone or non-free zone licence within d3.

Enhancing E-Commerce

Another sector which has marked remarkable regional growth is the emirate’s e-commerce. It is anticipated that the GCC E-Commerce sector will generate USD15 billion during this year. Dubai strives to maximise its business potential with the launching of Matajircom, the first global manmade e-commerce centre. The purpose of Matajircom is to enhance, attract as well as simplify the setting up of companies conducting e-commerce activities in Dubai. Matajircom is located within TechnoPark, located near Jebel Ali Free Zone. Jebel Ali Free Zone is currently home to more than 7500 corporations. As d3, Matajircom will also provide free zone as well as non-free zone licences.

Matajircom was set up by EconomicZones World. 

The purpose of the new hub is to attract e-commerce orientated businesses to set up within the UAE. The hub will offer rapid company registration, warehouse spaces as well as with agents specialising in logistics. Even though Matajircom will be launched shortly, the free zone will not grant licences till the start of 2016. It is anticipated that Matajircom will grant personalized regulations in order to assist e-commerce activities. Nonetheless, the specific date the legislation will be ready has not yet been confirmed.

Assistance

Dubai is home to more than twenty free zones. The two free zones aforementioned, d3 and Matajircom are amongst the ones which are currently being set up. Dubai continuously establishes new business opportunities for companies looking to expand so as to benefit the emirate economically. Additionally, these ongoing developments also reflect the confidence businesspeople have in both Dubai but also other regional markets.

   

Through the years we have witnessed Dubai grow and develop into a top-notch city. Dubai free zones offer the perfect business environment to corporations seeking to expand their horizons into the region. Our experienced team guides both foreign and local businesspeople through all the procedures and requirements needed to set up companies within the region in order to grow and meet their full business potential.

New Register of People with Significant Control introduced in UK Companies

According to the UK’s Small Business, Enterprise and Employment Act 2015 all UK companies, besides publicly traded companies, must keep a register of people who hold significant control over the specific company. This new policy, known as the register of people with significant control or PSC register will include information on people who are owners or control 25% or more of the company’s voting rights or shares, or who have control over the specific company and management.

Provided that the people who have control over a company tend not to be the same people to those included on the shareholder register, the PSC register will not be the same as the shareholder register.

The PSC register will not only be available to the public but will also be found on the internet under Companies House.

Apart from publicly traded companies, all UKcompanies, both private and public, are subject to comply with the PSC register requirement. Publicly traded companies already report under the DTR 5 regulation.

The UK government has introduced the PSC register in order to create more corporate transparency. The UK is the first to introduce the register, while the EU is also heading towards the same direction in order to comply with the Fourth Money Laundering Directive. 

Dubai Passes Law to create a Free Zone Council

Dubai’s ruler, Mohammed bin Rashid Al Maktoum, recently announced the issuance of two new decrees concerning the creation of Dubai Free Zones Council.

The purpose the Dubai Free Zones Council is to enhance the progression and development of the emirate’s free zones. The council will work towards increasing investment inflows and promoting knowledge exchange and coordination amongst Dubai’s free zones. One of the council’s tasks is to develop and plan a strategy concerning the emirate’s free zones. The council has also been called to reevaluate the free zone legislation.

Dubai is home to many free zones such as the Dubai Multi Commodities Centre (DMCC), the DIFC as well as the Dubai Airport Free Zone (DAFZA). All Dubai-based free zones offer numerous business benefits including exemptions from import and export duties and corporate tax.

The Chairman of the Dubai Free Zone is Ahmedbin Saeed Al Maktoum, which is also the Chairman of the Emirates Group as well as the Chairman of Dubai Civil Aviation Authority.

The Dubai Free Zone Council is made up of esteemed officials including, the CEO of the Dubai Aviation City Corporation, the Director General of the Dubai Creative Clusters Authority, the Secretary General of the Dubai Free Zone Council, the Director General of the Dubai World Trade Centre Authority (DWTCA), the Chairman of Meydan City Corporation, the Governor of the Dubai International Financial Centre (DIFC) and the Chairman of the Ports, Customs, and Free Zone Corporation (PCFC). 

IMF suggests VAT, tax on cars and all companies

After the plunge of oil prices, the UAE is seeking ways to make up for the loss of oil revenue. The International Monetary Fund (IMF) recommends the UAE strengthens its financial position and diversifies its revenue flows by introducing a Value-Added Tax (VAT), impose an excise on passenger vehicles as well as inflict Corporate Income Tax on all firms and companies.

In a recent report, the IMF revealed that the UAE has the capacity to earn additional revenues amounting to 4.1% of Non-Hydrocarbon Domestic Product (GDP) by introducing a 5% VAT, 15% tax on cars according to its value as well as imposing Corporate Tax on all companies.

The UAE is renowned as being a tax-free jurisdiction. The UAE does not impose personal income tax nor VAT o its citizens, which has made it an idyllic destination for working expats looking to increase the income they earn.

Nevertheless, Dubai-based foreign banks are subject to 20% tax, 5% property tax is imposed on rentals by local municipals while a local tax of 10% is inflicted on hotel services.

In an effort to expand government revenue flows, particularly after the fall of the price of oil, the UAE has deregulated petrol price, which has driven prices up by 24%.

Based on the IMF, the UAE’s tax scheme does not generate sufficient funds for its economy. Therefore, the IMF suggests other means should be introduced in order to generate revenue for the country. In accordance to the IMF, the introduction of a VAT will generate additional 2.7% revenue of Non-Hydrocarbon GDP.

The IMF also suggests the UAE generates additional revenue by imposing a tax on passenger vehicle owners. The IMF explains that the use of vehicles causes various expenses for the government including the maintenance costs, road work and productivity losses caused by traffic congestions. In accordance to the IMF, by introducing a 15% ad valorem tax the UAE would generate an additional 0.6% of Non-Hydrocarbon GDP.

In order to avoid imposing Income Tax on UAE residents, the IMF recommends the UAE expands the scale of the Corporate Tax. The IMF suggests that the UAE should impose Corporate Tax on all domestic and foreign companies which conduct business activity in the country, with the exceptions of those based and operating within the free zones.  However, the IMF suggests that the tax rate should decrease to 10% instead of 20%. According to IMF, the UAE could generate an additional 4.1% of Non-Hydrocarbon GDP if it introduces the measure.

The IMF report was drafted as a preliminary paper for the occasional discussions between the UAE and IMF. The report did not reveal when the new taxes would be introduced. Most experts claim that many years will pass till the new tax reforms are implemented.

According to expert economists at the National Bank of Abu Dhabi, VAT will not be introduced in the following three years. the UAE, as well as all oil-based countries are going through a shift at the moment, where oil prices are set to remain around $55-$70 during the next few years.

The IMF states that even though the fall of oil prices has caused some financial fear and upheaval, the UAE has successfully limited the negative impact. The UAE’s beneficial image as a safe haven and foreign buffers has helped the country compensate for the negative impact the drop of oil price has brought.

The IMF also revealed that the UAE’s non-oil based economy has marked a growth of 4.8% in 2014. Nevertheless, due to the drop of oil prices, the growth rate of the non-oil sector is expected to drop to 3.4% in 2015, which is presumed will rise again to 4.6% by 2020 as a result of the World Expo 2020 as well as investment inflows and infrastructure projects. 

UAE economy slowdown in 2015

Analysts estimate that the United Arab Emirates (UAE) economic growth will hit a slowdown period in 2015. According to expert analysts, the UAE will experience the lowest growth rate it has experienced in the last six years.

Analysts use the economic term Soft Landing to describe the UAE’s growth rate. Soft Landing is defined as a slowdown period, which does not aggravate or worsen unemployment or inflation rates of an economy.

Based on analysts’ opinions, the UAE’s economic activities have started to demonstrate signs it is weakening. The UAE is said to face a slowdown period mainly due to the fluctuation of oil prices, which has led to loss of revenues. This fact will inevitably lead to less domestic spending.

In line with the International Monetary Fund (IMF), the UAE will mark a 3% economic growth rate in 2015. The IMF’s initial projections stated the UAE would mark a 4.6% economic growth rate. However, the figure was reevaluated because of the decline in oil prices, which is said will influence the UAE’s the corporate and real estate activity.

Additionally, the government plans to cut down on spending and increase taxes. Both these factors will influence the UAE’s economic growth rate. Some expect the UAE’s GDP rate will fluctuate between 3.5%-4% whereas others project the rate will go as low as 2% in 2015. Overall, economists anticipate the GDP will be lower in 2015 in comparison to 2014.

It is a fact the UAE’s economy is experiencing a slowdown period. On a bright note, the economy is still growing at a healthy rate. As economists confirm, it is better for a country to experience a steady and reasonable economic growth rather than rapid booms and crashes.

 In comparison to other countries in the region, the UAE has created the most diversified economy. In particular, Dubai has succeeded in moving away from the oil sector, creating a diversified economy. Even though Dubai is not as dependent on oil as it once was, the plunge of oil prices has influenced the emirate’s real estate sales, banking liquidity flows, consumer spending as well as the corporate and consumer morale.

Analysts point out that the UAE may reinforce its economic growth through the increase of oil output and state investments. However, the UAE’s home and export demand for oil will influence the economy because oil prices more than halved in 2014.

It is expected that the UAE economic growth rate will fall by 1% every year until 2020 due to government spending cut downs. 

UAE’s Implementation of VAT will boost its Global Competitiveness Level

The UAE plans to implement a Corporate Tax and Value Added Tax (VAT), which has fueled many discussions on what changes the new taxes will bring to both the residents and the country as a whole.

Some argue the introduction of the new taxes will benefit the country’s economy while others hold a different view.

The basic reason the UAE is planning to introduce new taxes is to compensate on the loss of oil revenue the decline of oil prices has brought. The UAE federal government does not generate profits from the sale of oil since it does not sell nor own oil. Abu Dhabi is the UAE’s largest oil-holder; therefore, the fluctuation of oil prices influences the city’s local revenue and not the entire UAE.

Thus, the revenue the federal government will generate from the new taxes will be additional funds that can be used to invest in the country. Finally, the increased federal funds will benefit the country as a whole expand even further.

Simultaneously, a combined approach from all seven emirates towards enhancing the UAE’s economy is beneficial and can only generate profits, as the total amount the new taxes will yield will be more than each emirate would generate individually. 

Most experts argue that the introduction of the VAT on goods will not influence consumer-spending patterns and demand levels will remain steady. Therefore, the VAT will not influence the economy in a negative manner.

In general, when consumer demand drops, consumer spending also falls, leaving producers with less revenue. The aforementioned theory is based on three assumptions, which do not apply in the UAE’s case.

Firstly, it is generally suggested that consumer spending will decline since they will not afford to purchase the same amounts they did before. However, this is only the case when individuals are unemployed or lose many funds in the stock market or investments. The above case does not apply to the UAE. VAT will be imposed on luxury goods and alcohol, therefore the individuals who already afford these goods will still afford them after the VAT is added.

Secondly, most assume that the VAT will increase the general prices of goods and services and that the consumer will have to pay more to cover the tax. However, sellers want to remain competitive, thus cannot increase prices greatly. Therefore, sellers absorb most of the difference the VAT will bring in order for prices to remain steady.

Thirdly, the standard economy model applies to economies where most of the production is domestic. This does not apply to the UAE because the majority of the production is imported from abroad. For instance, if the demand for luxury cars declines in Germany, car manufacturers will go bankrupt.

In basic terms, the revenue generated from taxes will not be transferred out of the economy. The funds simply transfer from the private to the public sector within the economy. If the government uses this money to empower the government, then introducing the taxes is a bad idea. However, if the tax revenue is consumed to expand the country’s infrastructure and social services, than introducing the taxes is a good idea.

When taking into account that the emirates individual governments continuously invest in their economies, experts are positive that the federal government will use the tax funds to enhance the UAE’s economy and general growth.

Other countries impose high tax rates to aid their economies recover from financial difficulties and obstacles. The UAE intends to implement a low VAT and its economy is one of the steadiest in the world. Thus, it is believed the introduction of the VAT will further enhance the country’s competitive level.

UAE Considering Taxes as fiscal reforms

Due to the decline of oil prices, many Middle East and North Africa (MENA) countries have implemented various kinds of subsidy reforms aimed to increase government revenues.

Analysts support the MENA should implement an effective tax regime and cut down on expenditure in order to compensate on the oil revenue losses and increase government funds.

MENA governments are considering introducing new taxes aimed to increase their funds to maintain both economic and social stability. Currently, financial policy ideas aim to increase government revenue, enhance investment concerning projects that generate added value on the existing gas and oil export plans as well as boost investment flows towards non-oil and gas based fields. The majority of MENA countries have undertaken large infrastructure projects including electricity, transport, industrial facilities, water, seaports and rail.

The MENA governments acknowledge the significance of using tax policies to motivate international companies to set up within the region. The decrease in oil prices, and the fact that oil prices may remain low, has influenced countries that usually spend large amounts on infrastructure projects. Countries throughout the region are facing budget deficits because of the loss of oil and gas profits and are now considering introducing new tax schemes to increase their revenue.

GCC countries as well as Egypt are considering introducing VAT. The UAE has recently reported they are working towards introducing a corporate tax and VAT. The GCC have been considering introducing a VAT for many years. Many experts believe that the decline of oil prices, which has led to the loss of revenue, is the incentive the GCC countries needed to introduce a VAT.

It is expected that the new tax regimes will be introduced over the following two to three years. Initially the tax rates will be low and will increase over time. The tax revenues will aid governments make up for the loss of oil revenue.

Countries within the region are concerned that the introduction of taxes will influence their investment inflows and competitiveness. However, experts argue that the implementation of indirect taxes will not affect investments.

Indirect taxes will be added on the price of goods and services. This means the end-consumer will be subject to pay tax on the goods and services he/she consumes. Therefore, the tax imposed will be passed from the business to the consumer, meaning the tax will not influence a business planning to set up in the area.