Except for VAT and corporate tax on oil and gas companies and branches of foreign banks, the UAE does not impose corporate tax on businesses registered onshore. However, recently implemented several transparency initiatives, related to the OECD’s BEPS project, and international exchange of information, could have material impact on business operations (i.e. economic substance rules).
Notable tax developments – Direct and indirect
(e.g. payment deferrals, rate reductions)
- On 26 August 2020, Cabinet Resolution No. 44 of 2020 amended country-by-country (CbC) reporting rules in the United Arab Emirates (UAE), specifically the definition of “reporting entity”, to identify the ultimate parent entity of an MNE group (tax resident in the UAE) as the only entity of the MNE group required to comply with CbC reporting obligations.
- Additionally, on 28 August 2020, the UAE Ministry of Economy published Cabinet Resolution No. 58 of 2020 (the Decision) on the “Regulation of Procedures Related to Real Beneficiaries”. The Decision requires entities licensed in UAE except entities in financial freezones and entities directly or indirectly wholly owned by Federal or Emirate government to maintain registers of their beneficial owners and shareholders. Further, the decision also requires companies to file their registers with the relevant registrar and licensing authorities.
- The Federal Tax Authority (FTA) released Public Clarification VATP020 “VAT-free special offers” to remind taxpayers of their obligations under the UAE’s VAT legislation, where goods or services are sold under certain promotional schemes. Retailers may often advertise promotions where the price for goods or services is discounted by the equivalent of the amount of VAT that would ordinarily be charged as offers that are “VAT free” or “the VAT is on us”.
- Further, Public Clarification VATP021 “VAT registration of sole establishments” provides clarity on the VAT registration obligations of natural persons operating a number of sole establishments. Sole establishments are businesses owned and operated by natural persons and are not legally distinct from their owners. Where a natural person owns a number of sole establishments, the sole establishments are not required to be registered separately for VAT. The FTA has clarified that a single VAT registration in the name of the owner should be obtained.
- On 22 October 2020, the UAE Ministry of Finance (MoF) published templates for filing notifications and reports under the UAE Economic Substance (ES) Regulations (Cabinet Resolution No 57 of 2020 Concerning Economic Substance Requirements and Ministerial Decision No. 100 of 2020 on the Issuance of Directives For the Implementation of the Provisions of the Cabinet Decision No. 57 of 2020) . Pursuant to release of the new UAE ES Regulations, all UAE businesses (including those that had earlier filed the ES notifications by 30 June 2020) are now required to file (or re-file, as the case may be) notification through the MoF’s dedicated portal. While the ESR portal is yet to be launched, the MoF has published templates for re-filing such notifications and the ES report required to be filed within 12 months following the end of the licensee’s financial year (first report due by 31 December 2020, for the financial year ended 31 December 2019).
(e.g. state compensation schemes, training)
- Dubai free zones have relaxed regulations around the transfer of employees between different entities to give employers an alternative to temporary lay-offs and maintain workers’ employment.
- Employers are also permitted to implement the following measures in the Dubai International Financial Centre (DIFC) free zone:
- Reduced working hours
- Imposed vacation
- Imposed unpaid leave
- Temporary remuneration reduction
- Restricted workplace access
- Remote working requirements
- Extended residency visas where employees are made redundant
- In addition, the DIFC is maintaining a “DIFC available employee database” of all employee terminations since March 2020
- Further, various employers across the UAE are encouraging employees to receive vaccinations in the hope that people will feel more secure and resume their normal responsibilities with fewer restrictions
- The Department of Government Support has approved reduced attendance at the workplace in Abu Dhabi government offices and semi-government entities to 30%. The goals is to bolster precautionary measures implemented in the emirate and protect the health of employees and their families.
Economic stimulus measures
(e.g. loans, moratorium on debt repayments)
- The UAE government will extend its AED 250 billion stimulus package by six months, starting from 01 Jan 2021.
- The total economic support packages and initiatives provided by the federal and local governments since the beginning of the pandemic to date has reached a total of AED 395 billion.
- UAE national banks have returned close to AED 14.47 billion from the stimulus they garnered from the country’s central bank to combat the fallout of the Covid-19 pandemic, per the authority’s statistics.
- An AED 100 billion Targeted Economic Support Scheme (TESS) initiative was launched by the Central Bank of the UAE (CBUAE) in March 2020 to support the local economy during the pandemic. This comprised zero-interest, collateralized loans worth AED 50 billion for local banks and an additional AED 50 billion freed up from banks’ capital buffers
- Dubai announced additional stimulus for January-June 2021, in an amount of AED 315 million. Other emirates employed similar measures to support trade and businesses and to provide advantages to sectors that suffered the most from the current pandemic.
Measures to ease the lockdown
- The UAE has covered over 40% of the population as part the national vaccination drive and in line with the plan to provide vaccinations to 50% of the total population during the first quarter of this year.
- The country's Ministry of Health and Prevention (MoHAP) said the total doses administered now stands at over 5 million. This takes the rate of doses per 100 people to 50.61 (as of 13 February 2021)
Entertainment and tourism
- The Abu Dhabi Crisis and Disaster Committee has announced that it is working with local authorities to resume all economic, tourism, cultural and entertainment activities in the emirate by 23 December, 2020
- This is an attempt revitalize the dampened economy, which the International Monetary Fund (IMF) further revised down the economic forecast due to impact of Covid-19 on the country's vital sectors and fall in oil prices, projecting a 6.6 per cent contraction in 2020 and a growth of 1.3 per cent for the next year.
- Dubai has received global recognition for keeping tourists and tourism workers safe from the United Nations World Tourism Organisation (UNWTO)
Consumer protection and business continuity
- The government established a dedicated task force to ensure smooth and uninterrupted supply of consumer goods and has enforced strict monitoring standards to prevent manipulative pricing practices
- The Ministry of Economy also set up an interactive online tool to help companies address the impact of Covid-19 by providing updates regarding precautionary measures for business continuity. These include suggestions on how to increase sales and an overview of “most affected” vs "promising" sectors.
Ministry of Economy announces list of violations & fines for money laundering, financing of terrorism
- Urgent call to action for real estate brokers and agents, dealers of precious metals and stones, company service providers, and auditors and accountants in the UAE. Do register by 31st March to avoid any penalties.
Testing and inspection measures
- Hundreds of school buses transporting children across the Abu Dhabi are being inspected daily to ensure proper implementation of anti-Covid-19 measures for the safety of children, according to authorities
- The Integrated Transport Centre (ITC) announced on Twitter that it was carrying out inspections, including approximately 1,500 school buses operating in different schools in Abu Dhabi
- Dubai Municipality (DM) has been on the move to ensure that safety protocols are followed. From March 2020 onwards, it has carried out half a million inspections across the city. As the DM inspected malls, hotels, tourist atrractions, salons, cafes and other outlets over the last 10 months, 6,500 establishments were either shut down, fined or warned.
Test requirements to fly
- Emirates Airline has updated its travel requirements for all arrivals into Dubai. The latest update on the airline's official website notes that all travelers flying to Dubai will need to produce a negative PCR test result with a validity of no more than 72 hours at the time of departure effective, 31 January 2021
- Airlines Emirates and Etihad to roll out IATA’s Travel Pass for Covid-19 test results and vaccination certificates. The IATA Travel Pass app enables passengers to create a ‘digital passport’ to share Covid-19 test and vaccination certificates with authorities and airlines
Steps to adopt a new reality
- Companies in the UAE are moving increasingly towards a new, digital reality
- Many have offered internships remotely with students over the last six months
- In response, universities have also made changes, embracing ‘borderless recruitment’, even introducing entirely new courses for the digital world
- Overall, the Institute of Student Employers (ISE) predicts a 14% rise in graduate opportunities in the UAE in 2021. This is a partial recovery after a 30% contraction in the market this year
International Monetary Fund: Policy responses to COVID-19
White & Case: UAE's Government Financial Assistance Measures
Time Out: Abu Dhabi set to resume entertainment and tourism activities
Forbes: A New Beginning For The UAE
Institute of Student Employers
Khaleej Times: Coronavirus news bulletin from UAE
Entrepreneur Middle East