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NEWSLETTER,U.A.E

Private Client Trends in the Middle East: Domestic Structuring, Environmental, Social, and Governance Policies and Emergence of Family Offices

May 30, 2023

Middle Eastern private client industry is rapidly evolving, showing an increased interest in domestic structuring, ESG/impact investing and family offices. These trends reflect a generational shift in the region as younger individuals recognize the significance of financial security and family governance.

One striking trend in the Middle East is the explosion in domestic structuring. International structuring at offshore finance centres was long the norm; local structuring only recently caught on. A prime example is the recent rapid expansion of DIFC, ADGM and RAK ICC Foundations Regimes which have registered over 550 foundations as of September 2022. These UAE foundations provide unique asset protection features including holding UAE real estate as private wealth vehicles while also functioning as orphan structures allowing asset transfers out of own names, which enables protection and intergenerational planning of assets between generations.

Another notable trend in the Middle East is an increasing interest in impact investing and ESG, particularly among younger family members. This shift is forcing families to reevaluate traditional investment strategies in light of an ever-evolving landscape and adapt accordingly; similarly, their focus on ESG and sustainability influences not only what types of investments they pursue but also their wealth management structures.

Family offices in the Middle East are continually growing more diverse, serving a range of purposes beyond investments. Where once family offices were used primarily as investment vehicles, today they’re being utilized for wealth protection, succession planning, intergenerational planning and governance – reflecting both professionalisation needs within family offices as well as increased demand for services that support such complex structures.

Middle Eastern private client industry presents numerous opportunities, as evidenced by domestic structuring’s increased popularity, impact investing and ESG investing’s increased prominence, and family offices emerging throughout the region. However, as this market develops, it’s essential that families and high-net-worth individuals work alongside experienced advisors to navigate all of the complexities of wealth management.

Families and high-net-worth individuals should enlist the services of an established private client family advisory in Dubai like IMC Group for tailored, expert advice and support. With an understanding of both the region and wealth management complexities, they can help clients take full advantage of all that the Middle East private client market has to offer.

As the Middle Eastern private client industry is continuously developing, it is crucial for families and high-net-worth individuals to remain up-to-date with its trends, working alongside knowledgeable advisors who can navigate its complexities effectively. Domestic structuring, impact investing and ESG strategies as well as family offices present plenty of investment opportunities in this region.

NEWSLETTER,U.A.E

Impact Investing and ESG on the Rise for Middle Eastern Families

May 30, 2023

New generations of wealthy families and individuals in the Middle East are embracing impact investing and ESG principles, leading to significant changes in investment outlooks and strategies. However, this rise in sustainable and ethical investing has exposed a ‘generation gap’ between family members – with younger generations much keener to put their assets behind responsible causes. Next-gen family members are eager to transform both their investments and family businesses to align with ESG and sustainability goals. These individuals are demanding more diverse portfolios that include impact investments, crypto currencies and other alternative assets.

Domestic Structuring Attracts New Interest

Traditionally, Middle Eastern high-net-worth families have structured their offshore assets through jurisdictions like Singapore and the Caribbean. However, domestic structuring through UAE foundations is now on the rise. The number of foundations registered in the DIFC, ADGM and RAK ICC has grown dramatically in recent years. UAE foundations offer certain advantages like the ability to hold domestic real estate – making them attractive to next-gen family members focused on asset protection and inheritance planning.

Family Offices Becoming More Professional

Alongside overseeing investments, family offices in the Middle East are increasingly being used for planning succession, governance and philanthropy. Next-gen family members seek to professionalise the family office to manage these complex needs. Advisers are seeing greater demand for family office services from multi-family offices and outsourced family office solutions. These provide expertise in managing family wealth, businesses and estates alongside philanthropic goals.

As family priorities shift and investment strategies evolve, tailored family office and family advisory services can help wealthy individuals navigate the complex challenges that impact their wealth, assets and legacy. Experienced advisers can provide custom structures, governance solutions and expertise – ensuring family values and visions are translated into strategies that bolster financial security for generations to come. The rise of impact investing and other trends show that a new era has dawned on private clients in the Middle East.

Private Client and Family Advisory services can provide invaluable support to high-net-worth individuals and families seeking to navigate complex financial and legacy challenges. IMC Group offers customized solutions tailored to your unique needs and goals, with a focus on long-term financial security and impact investing.

NEWSLETTER,U.A.E

Navigating Wealth Preservation and Succession Planning Strategies for Middle Eastern Family Businesses

May 29, 2023

Middle Eastern private and family businesses have experienced rapid expansion over time. Without proper planning, though, fragmentation could occur, and family businesses might split. With that being said, high-net-worth individuals often seek to preserve family businesses for future generations while passing them on to subsequent generations, so in this article, we will look at strategies which may help achieve such goals.

Ownership Structure

Although direct ownership might appear to be the easiest and most flexible option, it may not suit all types of assets. Your goals could range from maintaining control over certain assets to safeguarding them against creditors or family members. So it is crucial that you fully comprehend any legal ramifications that accompany any chosen ownership structure.

As families consider which vehicle to use and where to establish it, several considerations need to be taken into account when making this important decision. Tax implications, legal considerations, public disclosure requirements, asset protection measures and legal ownership restrictions all need to be considered when selecting the most appropriate structure for them. Trusts and foundations provide structured solutions, offering some asset protection as well as succession planning benefits.

Wills can simplify probate proceedings and provide certainty to heirs, yet in parts of the Middle East wills are not recognized and Shariah law takes precedence when allocating assets upon death. Non-Muslims living in Dubai or Ras Al Khaimah can register DIFC Wills that cover immovable and movable property as well as guardianship of any children habitually resident there.

Corporate and Family Governance

Good governance is critical to protecting and managing sustainable growth for any family business and ensuring its future generations. A robust governance model should promote transparency, clarity, accountability and fairness. Shareholder protocols or family councils may help to facilitate continuity, smooth succession or address family concerns as they arise.

Transparency and Privacy for Better Transaction Experience

Global tax transparency measures such as the OECD Common Reporting Standard and Ultimate Beneficial Ownership registers have dramatically increased the amount of information about financial assets owned by individuals that are available to authorities and the public. It is crucially important that you are aware of any information publicly accessible that poses threats to the security of yourself or your family, which could compromise security measures.

Establishing a family office can be an effective solution to effectively managing wealth and assets for any family. A family office may take different forms depending on your family’s specific needs and objectives. More families are now turning to family offices in order to maximise financial interests, decrease complexity, and manage personal affairs efficiently.

Family offices provide essential administrative support as well as more comprehensive services that incorporate strategy, asset management and governance. Since each family has unique needs and requirements for its family office services, there can be as many different kinds of family offices as there are families.

At its core, wealth preservation and succession require careful planning and strategic execution. At IMC Group we can assist in setting up a family office tailored specifically to your specific needs and objectives to ensure the successful continuation of your family legacy into future generations.

NEWSLETTER,U.A.E

UAE Anti-Money Laundering Laws: What Businesses Need to Know

May 15, 2023

Recent years have seen significant strides taken by the United Arab Emirates (UAE) to strengthen its legal and regulatory framework in combatting money laundering (ML), terrorism financing (TF), proliferation financing (PF) and other forms of financial crime. Recent changes to relevant laws have increased coverage of regulated entities while prompting businesses to become more familiar with their obligations.

Historically, regulated companies consisted of financial institutions, insurance companies and banks; however, due to recent amendments to anti-money laundering (AML) laws, more obligations have been extended to designated nonfinancial businesses and professions (DNFBPs), such as lawyers, accountants, real estate brokers, dealers in precious metals and corporate service providers.

To ensure compliance, new authorities have been charged with monitoring DNFBPs’ reporting and registration requirements, including lawyers and notaries registering with the Ministry of Justice as well as businesses registered with the Ministry of Economy for most other businesses. Furthermore, over the last three years, both Executive Office for Control & Non Proliferation (EOCN) and the National Anti-Money Laundering and Combatting Financing of Terrorism and Financing of Illegal Organizations Committee (NAMLCFTC) were established resulting in more frequent inspection visits as well as training sessions for businesses.

Companies operating in the UAE must now take steps to comply with AML, CTF, PF and sanctions policies. These steps include:

Regular risk evaluations should be undertaken, at least every year or when introducing new products and services, to create policies specific to their business and client base
Implement effective Know Your Customer (KYC) procedures that include an organized framework for rating client risk and collecting any necessary documentation
Establishing an Anti Money Laundering Reporting Officer (MLRO) or Compliance Officer can assist organizations with ensuring adherence to laws and regulations as well as communicating with relevant authorities
Training team members on the importance of tracking and reporting any suspicious transactions are paramount to their safety and the success of your business

As compliance operations become more sophisticated and costly, businesses should dedicate a specific budget for compliance activities. Acknowledging and fulfilling AML/CTF/PF and sanctions obligations promptly is crucial; any delays could cause increased costs and difficulties in the long run.

Businesses must embrace emerging technologies for KYC and screening purposes, particularly artificial intelligence compliance solutions that help companies reduce human errors while streamlining operations and accessing cutting-edge technologies.

Businesses operating in the UAE must take compliance obligations seriously and be cognizant of any associated risks, particularly penalties and fines that may ensue from breaches. Penalties or fines aside, breaches can have devastating repercussions for partnerships, banking relationships and the ability to access funding as well as retain clients.

NEWSLETTER,U.A.E

Navigating the Complex UAE Freezone Landscape

May 15, 2023

The United Arab Emirates has become a leading international business hub. Part of what draws businesses here is its myriad Freezones. UAE has over 45 economic zones focused on specific sectors, but this may prove confusing for companies that wish to set up operations in the country.

Companies seeking Dubai free zone company formation must take several important factors into account when selecting their location. Businesses should first ensure their industry meets the infrastructure and support offered in their Freezone. They should then consider factors like transportation access and proximity to target markets as they might affect operations.

Cost is another key element, with each free zone offering different fee structures and operating expenses that must be considered when choosing their ideal Freezone location. Businesses should select an environment that fits within their budgetary constraints while providing future growth potential, and the legal and regulatory environment varies between Freezones. Thus, it is essential that businesses choose one which fits their requirements while being aware of any possible restrictions or constraints that might limit growth potential.

Networking opportunities and additional support services should also be a top priority, with some Freezones providing mentorship programs, access to funding sources, and assistance for business setup assistance.

Dubai is home to two of the oldest and most established Freezones: International Free Zone Authority (IFZA) serves a diverse set of sectors while remaining cost-effective and flexible; Dubai Multi Commodities Centre (DMCC) specialises in commodities trading and precious metals, offering world-class infrastructure and boasting an active business community.

Dubai International Financial Centre (DIFC) serves as a premier hub for finance, banking and insurance firms seeking access to Middle Eastern and South Asian markets, while Abu Dhabi Global Market (ADGM) on Al Maryah Island supports the finance, professional services, and technology industries via an English common law-based legal framework.

Businesses can successfully establish their presence in the UAE with minimal risk by opting for a business setup in Dubai free zone tailored to their individual requirements. Careful consideration is essential when selecting a free zone to navigate this complex landscape efficiently and avoid potential pitfalls. Companies seeking expansion into Middle Eastern markets or access to global hubs will find numerous benefits from UAE free zones. Professional guidance, such as that provided by IMC Group, can make all the difference in streamlining the company setup process in Dubai free zones, ensuring a smooth and successful entry into this thriving business environment.

NEWSLETTER,U.A.E

Dubai Real Estate: Ideal Time for Investment

May 15, 2023

Dubai’s real estate market has experienced tremendous growth over the past decade, making it an ideal investment opportunity, according to experts in the city’s property industry. Dubai has become a sought-after destination for international investors and first-time buyers looking for investment opportunities within the UAE. Experts suggest that the sector is not showing any signs of slowing down while offering valuable advice for individuals looking to enter the market.

In 2022, Dubai’s real estate market experienced an astonishing 36% expansion, with over 88,000 transactions totalling AED240 billion completed, representing 61% growth compared to 2021. Rental prices also saw an average rise of 21% since 2021, making this an excellent time to enter the purchasing market. Rental yields can range between 5-9% with no property tax burden, enhancing its attractiveness further.

Dubai’s real estate market offers several key advantages for investors. The cost per square foot is much lower than in other highly desirable cities, providing more value for money. Furthermore, relaxed visa regulations allow investors to secure residency visas when purchasing properties of certain values.

When investing, it is imperative to conduct thorough research. Carefully consider a variety of factors, such as the developer’s track record, location, and potential return on investment (ROI). Location plays an instrumental role in ROI. When selecting prime locations to invest in, it is vital to consider amenities available such as retail stores, dining options, transport links, recreational activities, healthcare facilities, and schools in their evaluation. Also, familiarize yourself with local laws and regulations related to investment and real estate ownership to avoid legal complications.

When purchasing, also consider and compare all financing options available, taking into account maintenance and additional costs such as RERA service charges.

Partnering with an agent who specialises in the area or community you are researching is invaluable, providing answers to queries and up-to-date information on its location. These representatives can answer your questions quickly while offering valuable insight. If you’re considering a new business setup in Dubai, IMC Group can provide expert guidance and tailored solutions to help you navigate the process. With their extensive knowledge and experience, IMC Group ensures a seamless transition into the thriving Dubai market.

NEWSLETTER,U.A.E

UAE Introduces Small Business Relief to Support SMEs and New Businesses

May 15, 2023

The United Arab Emirates (UAE) Ministry of Finance has announced a new initiative to reduce the corporate tax burden and compliance costs of small and micro-businesses, including startups. Small Business Relief Ministerial Decision No. 73 of 2023 will be applicable to periods beginning after the 1st of June 2023 and ending on the 31st of December 2026. The relief is intended to promote the expansion and diversification of the UAE’s economy, as well as an environment conducive to investment and entrepreneurship.

Lower Tax Burden on Small Businesses

According to the Ministerial Decision, taxable persons with revenues of less than AED 3 million during the relevant tax period and all preceding tax periods will not be considered to have generated any taxable income. The revenue calculations will adhere to the UAE’s accepted accounting standards. However, Qualifying Free Zone Persons and members of Multinational Enterprise Groups (MNE Groups), which are groups of companies with operations in more than one country and consolidated group revenues exceeding AED 3.15 billion, will not be eligible for Small Business Relief.

How to Calculate the Payable Corporate Tax in the UAE?

The government of the UAE has announced a nine per cent tax on profits exceeding AED 375,000. When planning their finances and ensuring compliance with UAE tax laws, it is crucial for businesses to understand how to calculate their taxable corporate income.

Before calculating their corporate tax liability, businesses must determine their revenue according to the UAE’s accepted accounting standards. The Small Business Relief will apply to eligible small businesses with revenues below AED 3 million, and no corporate tax will be due. Profits exceeding AED 375,000 will be taxed at a rate of nine per cent for businesses with revenues exceeding AED 3 million.

Protecting Against Artificial Business Separation

The Ministerial Decision emphasizes that if the Federal Tax Authority (FTA) determines that taxable persons artificially separated their business or business activity to exceed the AED 3 million thresholds, such electing persons will be considered to have engaged in an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 of the Corporate Tax Law’s general anti-abuse rules.

Conclusion

The Small Business Relief is a significant step towards assisting SMEs and new businesses in the UAE. To make the most of this tax relief, it is highly recommended that businesses seek the expertise of a corporate tax advisory in Dubai. IMC Group, with years of experience handling tax matters for numerous businesses in Dubai, offers exceptional advisory services tailored to the unique needs of each client.

NEWSLETTER,U.A.E

UAE Introduces Tax Relief Measures for Small Businesses and Government Entities

May 5, 2023

The United Arab Emirates (UAE) Ministry of Finance has recently introduced several measures aimed at reducing the compliance burden for small businesses, government entities, and non-residents. These initiatives include Small Business Relief (SBR) under Article 21 of the Corporate Tax Law, Single Taxable Person (STP) treatment for government entities, and exemptions from tax registration for specific entities under Decision No. 43 of 2023. While a corporate tax advisory in Dubai can help you get the best out of the relief measures, below are the important points you need to understand.

Small Business Relief for Corporate Tax

To support small businesses and startups, the UAE Ministry of Finance has introduced SBR under Decision No. 68 of 2023, allowing eligible resident taxpayers to be treated as having no taxable income if their revenue falls below a specified threshold. To qualify for SBR, businesses must have revenues equal to or less than AED 3 million in the current and the previous tax period. The threshold applies to tax periods from June 1, 2023, to December 31, 2026. However, if a business’s revenue exceeds AED 3 million in any given tax period, SBR won’t be applicable.

Notably, certain businesses are excluded from SBR, such as qualifying free zone persons, non-resident branches of foreign companies, and group companies of MNE groups with consolidated revenues above AED 3.15 billion.

Businesses not utilizing SBR can carry forward tax losses and disallowed net interest expenses for future tax periods without SBR. Despite the relief, small businesses must still register for corporate tax with the Federal Tax Authority (FTA) and file corporate tax returns. SBR exempts eligible small businesses from Transfer Pricing Documentation requirements under Article 55.

Single Taxable Person Treatment for Government Entities

Decision No. 68 of 2023 allows government entities to treat all businesses and business activities they undertake as a Single Taxable Person (STP), reducing the compliance burden and administrative formalities. To qualify for STP status, the businesses and business activities must be conducted under a license issued by a Licensing Authority and should operate within the same Emirate for local governments.

When adding new businesses or business activities to an STP, they are directly treated as STP if the prescribed conditions are met. Notification to the FTA is required within 20 business days from the date of occurrence of such an event.

What is Corporate Tax? Why does the UAE introduce CT? When will the UAE CT regime become effective?

Qualifying Companies for Tax Exemptions in UAE

The Ministry of Finance has issued Decision No. 43 of 2023, providing exemptions from tax registration for specific entities under the Taxation of Corporations and Businesses (CT Law), Federal Decree-Law No. 47 of 2022. Entities exempt from corporate tax registration include:

These exemptions relieve eligible organizations from the responsibility of tax registration and filing of corporate tax returns. Non-resident entities without a PE in the UAE are neither required to obtain corporate tax registration nor file a corporate tax return if they solely earn UAE-sourced income. This decision significantly reduces the compliance burden for non-residents.

How to Calculate the Payable Corporate Tax in the UAE?

In the UAE, corporate tax is calculated at 9% of net profit after all deductions and adjustments are made for exempted income. Foreign taxes will be deducted from the profit in the financial statements. Taxable income is the net profit after all deductions. Only if your taxable value is greater than AED 375,000 will you be charged the 9% corporate tax.

Conclusion

The introduction of SBR, STP treatment for government entities, and tax registration exemptions under Decision No. 43 of 2023 are positive steps for the UAE, as they reduce compliance burdens and support the growth of businesses in the region. Businesses should carefully consider whether to opt in or opt out of the relief schemes based on their specific circumstances and consult with corporate tax advisory professionals in Dubai for guidance. Moreover, organizations should assess their eligibility for these exemptions, maintain appropriate records, and stay updated on any future changes in the CT Law and related regulations to ensure continued compliance with UAE tax laws.

NEWSLETTER,U.A.E

Understanding UAE Corporate Tax: Exemptions, Qualifying Companies and More

April 11, 2023

The United Arab Emirates (UAE) will introduce a Corporate Tax regime in June this year, in line with global trends for a minimum corporate tax rate. Before the new law commences, businesses must determine if they are subject to the tax and qualify for an exemption. The UAE declared its plans to establish a new Corporate Tax (CT) regime in January 2022. Subsequently, in December, Federal Decree-Law No. 47 was issued to provide a legislative framework for introducing the Federal Corporate Tax in the country.

The UAE will adopt the global minimum tax rate envisioned by the OECD, effective June 1, 2023, to enhance its appeal to businesses. The Corporate Tax regime will apply to all activities and interactions, except natural resource extraction, which will remain subject to Emirate-level corporation tax. The UAE’s new CT regime taxes businesses on their accounting net profit adjusted for specific items, with a 9% tax rate applied to taxable profits instead of gross revenue. Small businesses will receive a tax exemption on earnings up to AED 375,000 (approx. US$100,000).

Categorizations: Taxable, Exempt or Qualifying Free Zone Person?

Under the new system, businesses will be classified as Taxable, Exempt, or Qualifying Free Zone Persons (QFZP) and must determine their category and register accordingly. Some exempt entities may also need to apply for approval.

In the following section, we will examine the impact of the new CT regime on each of the three categories: Taxable, Exempt, and Qualifying Free Zone Persons (QFZP).

Taxable Person

For tax purposes, a person can be classified as either a resident or a non-resident taxable individual.

Resident person:

A resident individual is a legal entity incorporated or recognized in the state, including free zone persons or foreign entities managed and controlled within the state.
An individual who engages in a business or business activity within the state is considered a natural person for tax purposes.

Non-resident person:

Non-resident individuals have a nexus in the state, derive income from sources, or have a permanent establishment as per Cabinet Decision
For taxation purposes, a branch within the state will be considered a single taxable entity with its parent company

Exempt Person

Certain exemptions are granted automatically by a cabinet decision, while others require an application, as outlined below:

Automatically exempt:

The list of government entities and government-controlled entities will be specified in a cabinet decision that has not yet been published
Natural resource businesses are exempt from taxation by notifying UAE Ministry of Finance
Entities may be exempt from taxation if they are included in a Cabinet Decision (which has not yet been published) as Qualifying Public Benefit organizations

Approved by the Federal Tax Authority, an entity can be exempted:

Pension and social security funds that are either public or private
Eligible investment funds
UAE subsidiaries that are entirely owned and controlled by exempt entities

Qualifying free zone person (QFZP)

To be eligible for the 0% CT rate, a Qualifying Free Zone Person (QFZP) must fulfil the following requirements:

Ensure sufficient presence in the UAE
Calculates the qualifying income based on criteria defined in a forthcoming cabinet decision
The individual has not chosen to be liable for a 9% CT
Adheres to relevant transfer pricing regulations (if any)

The tax rates applicable to Qualifying Free Zone Persons meeting the specified conditions shall be as follows:

0% on income that Qualifies
A tax rate of 9% applies to taxable income that falls outside the scope of the qualifying income definition

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Organizational Support

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Accounts

Financial Insights

Tax Solutions

Corporate Complaince

Blog

Domestic Structuring Attracts New Interest

Family Offices Becoming More Professional

Ownership Structure

Corporate and Family Governance

Transparency and Privacy for Better Transaction Experience

Lower Tax Burden on Small Businesses

Protecting Against Artificial Business Separation

Conclusion

Small Business Relief for Corporate Tax

Single Taxable Person Treatment for Government Entities

What is Corporate Tax? Why does the UAE introduce CT? When will the UAE CT regime become effective?

How to Calculate the Payable Corporate Tax in the UAE?

Conclusion

Categorizations: Taxable, Exempt or Qualifying Free Zone Person?

Taxable Person

Resident person:

Non-resident person:

Exempt Person

Automatically exempt:

Approved by the Federal Tax Authority, an entity can be exempted:

Qualifying free zone person (QFZP)

The tax rates applicable to Qualifying Free Zone Persons meeting the specified conditions shall be as follows:

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