NEWSLETTER,U.A.E Archives

NEWSLETTER,U.A.E

A Comprehensive Guide to Purchase Off-Plan Property in Dubai

January 10, 2024

Planning to invest in off-plan properties in Dubai? As a forward-thinking investor, you would like to secure your investment. Successful investors habitually seek due diligence services in Dubai to ensure they remain on track with legalities. At the same time, it’s imperative to assess your ROI and secure your property at the lowest cost, besides benefiting from a favourable payment plan.

However, capitalizing on such lucrative opportunities calls for a deep understanding of the country’s regulatory framework regarding these dealings.

In this edition, we are going to explore the key guidelines mentioned in Dubai Law No. 13/2008 regarding Real Estate Registers. This will present you with a comprehensive roadmap for acquiring off-plan properties successfully in Dubai.

Key Aspects to Focus on While Purchasing Off-Plan Property

In the first place, you must be aware of the norms governing foreign ownership in freehold areas. The process starts with exploring the designated areas for foreign ownership. Under the existing laws in the UAE, these are referred to as freehold properties. As a foreign investor, you need to select a property located in a freehold area to legally secure your investment.

1. Registration and Compliance

In Dubai, it’s essential to register all off-plan property transactions in the Interim Real Estate Register. Failure to comply within the 60-day timeframe may jeopardize the validity of the sale or property transfer.

2. Acquiring the Land

Both primary and subordinate developers need to obtain the necessary land and approvals from competent authorities in Dubai before initiating or selling off-plan units. The property register must record the development.

3. Legal Due Diligence

Legal due diligence buying property in Dubai involves a verification process with the government authorities like the Real Estate Regulatory Agency or the Dubai Land Department. During this step, the property is registered in the presence of an escrow account while the necessary permits are obtained.

4. Transparent Application Processes

Property buyers need to follow the legal procedures meticulously as they apply to register an interim real estate unit. They should furnish the necessary documents and information as requested by the Land Department of Dubai.

5. Protecting the Rights of Buyers

Legal actions on registered off-plan units are facilitated, allowing for legal transfers, mortgages, or other actions under the law. Developers are strictly prohibited from imposing additional fees for selling or reselling completed or off-plan units. Any administrative expenses must obtain prior approval from the Land Department.

6. Completion and Registration Protocols

Developers are mandated to get the finished project registered in the property register. This ensures the seamless transfer of off-plan units into the name of the buyer as per the contractual requirements.

7. Stringent Contract Formalities

Brokers and developers should refrain from engaging in informal contracts without obtaining prior approval from competent authorities to uphold the integrity of off-plan property transactions. Under the regulatory framework, such contracts will be considered invalid.

8. In Cases of Violation

Article 11 of Dubai Law No. 13/2008 explains that developers should inform the Department of violations, if any. If the issue remains unresolved in the next 30 days, the Department will issue an official document verifying the completion percentage and agreement of the developer. Developers can request public auctions, maintain the contract, or cancel them based on the rates of completion. Full refunds will be necessary in case the project isn’t initiated or cancelled.

Seeking professional support for legal due diligence

For prospective investors, it’s imperative to understand the norms under Dubai Law No. 13/2008. The IMC Group continues to be one of the leading partners for developers offering legal due diligence services. With professional support on the side, developers can proceed with their ambitious investments with confidence.

NEWSLETTER,U.A.E

Effortless Corporate Tax Registration: Your Ultimate Guide to a Smooth Process!

December 18, 2023

Please consider us your allies, ensuring a smooth and compliant corporate tax journey. At IMC, we are committed to delivering indispensable insights, ensuring your readiness for the approaching fiscal year with confidence and compliance.

Essentials for Corporate Tax Registration:

Comprehending the Corporate Tax Law holds great importance, and we’re dedicated to assisting you in smoothly navigating this process. Here, we outline essential vital points to consider:

Enrollment and Withdrawal: It’s highly recommended that all eligible taxable person register for Corporate Tax through the Federal Tax Authority (FTA) without delay. Non-residents earning income from the state have specific factors to note. Timely submission of a Tax Deregistration application is crucial to evade penalties.
Financial Reports and Accounting Approaches: The significance of financial statements in assessing taxable income is paramount. Your choice between a Cash Basis or an Accrual Basis of Accounting depends on your revenue. Adherence to International Financial Reporting Standards (IFRS) and meticulous record-keeping are vital.
Submitting Applications and Making Choices: Businesses aiming to capitalize on Corporate Tax Law provisions might need to apply or make specific elections. Determining when FTA approval is necessary for exemptions, joining tax groups, and specific relief applications is essential.
Filing Taxes and Settling Payments: Corporate Tax functions through a self-assessment system. To prevent penalties, it’s crucial to submit tax returns and payments promptly, within nine months after the relevant tax period’s end. In the case of tax groups, the parent company takes charge of filing.

Key Dates to Mark in Your Calendar: (Registration Process Already started)

End of Financial Year	Initial Reporting Period	Date of Registration	Deadline for Submitting Initial CT Return and Payment	Deadline Initial Submission of Transfer Pricing Disclosure Form
Dec-23	Jan 2024 to Dec 2024	Registration Process Already started	30^th Sep 2025	30^th Sep 2025
Jun-23	Jul 2023 to Jun 2024	Registration Process Already started	31^st Mar 2025	31^st Mar 2025

Get Started on the Path to Smooth Tax Registration

Required Documents for UAE Tax Registration

In the UAE, corporate tax applies to businesses with taxable income. The corporate tax rate stands at 0% for earnings up to AED 375,000 and 9% for earnings surpassing AED 375,000.

In readiness for corporate tax registration, individuals liable for taxation require the following documents:

Photocopy of a valid Trade License
The license-owning owner/partners must provide copies of their valid Passport and Emirates IDs
Power of Attorney (POA) / Memorandum of Association (MOA)
Contact information of the relevant individual and the company
Report on the annual financial audit

Reasons to Consider Why IMC?

Navigating the complexities of corporate tax can be daunting, which is where the IMC team excels. Armed with in-depth knowledge of the latest UAE Corporate Tax regulations, we will simplify the process for you.

Leverage our team’s extensive experience to ensure precise and punctual compliance with Corporate Tax Law. Entrust us with the finer intricacies while you focus on your core business operations.

Navigating the complex landscape of corporate tax registration in the UAE can be challenging. However, with our IMC expertise in taxation and regulatory compliance, we empower businesses to navigate these complexities confidently. Our commitment to you is to provide the necessary knowledge to ensure seamless integration into the UAE’s tax framework.

For any queries or further clarification, reach out without hesitation. Please consider us your allies, ensuring a smooth and compliant corporate tax journey.

NEWSLETTER,U.A.E

Strategic Insights for Incorporating Your Business in the UAE

December 13, 2023

The UAE continues to stand out as a strategic business hub for global businesses of all sizes. Its supportive business environment and tactical location make it a preferred destination for organizations seeking scalability and growth. When you explore viable ways of a company formation in Dubai, you need to choose between the mainland and the free zone. However, your decision largely depends on several factors, including your target market, the nature of your business, and your goals. These factors often sum up to pose a challenge so overwhelming, that forward-thinking businesses count on professionals to remain on the right track.

As you brace up to incorporate your business in the UAE, check out these key insights that should help you make informed decisions and lead you to success.

Choosing the Right Setup: Free Zone vs. Mainland

In the first place, global businesses striving to expand in the UAE should choose between the mainland and a free zone. This choice should align with your business objectives. For instance, if you are running an export-oriented business and need foreign talent, opting for a free zone might be a strategic decision. This way, you can benefit from waived corporate tax, 100% foreign ownership, easy financing, and a more favorable regulatory environment.

On the other hand, if you are targeting the UAE market directly, particularly sectors like real estate, retail, hospitality, construction, and healthcare, setting up your business on the mainland will be a logical move.

Crafting Effective Strategies for Market Entry

Explore some of the highly effective market entry strategies when you eye a business venture in the UAE.

1. Market Analysis with Research

As a prerequisite of entering the market in the UAE, carry out thorough research to comprehensively understand your target audience, the local business environment, regulatory norms, and overall competition. Once you identify your opportunities along with market gaps, narrow down upon the ones aligned with your goals.

2. Networking and Building Partnerships

Foster strong bonds with local suppliers, distributors, partners, and industry networks. These connections go a long way in offering valuable insights and help in establishing your visible presence in the Middle East. Nurturing fruitful partnerships goes a long way in facilitating your market entry.

3. Regulatory Compliance

While expanding your business overseas, getting entangled in legal hassles is the last thing to expect. Staying informed on legal and regulatory norms is imperative, and you may consult professionals on this matter. Make sure to obtain the necessary permits and licenses and reach out to legal consultants if you aren’t too confident about your approach.

Choosing the Right Legal Structure

A pivotal domain of incorporating your business in the UAE involves selecting the appropriate legal structure for your company. The most common options in the UAE include:

Free Zone Company
Limited Liability Companies (LLCs)
Branch or Representative Office
Sole Proprietorship and Civil Company
Stock Company

Scaling Your Business Effectively

A methodical approach, as defined below, will help your business scale effectively.

1. Strategic Planning

As a part of your tactical planning process, develop a clear growth strategy, aligning it with the goals of your target market and business. It’s imperative to identify viable opportunities for expansion and invest in branding and marketing. Try to adapt your services and products to fulfill the evolving interests of customers.

2. Acquiring and Developing Talent

There’s no denying that human resources continue to be the greatest asset for a booming business. Look out for skilled professionals, and recruit and retain them. Make sure that they are well-acquainted with the local market and invest in programs for training and developing employees. With advanced competencies, they can strengthen your business with a competitive edge.

3. Broaden your market reach

The secret to broadening your reach in the market lies in establishing strategic collaborations with local suppliers, companies, and distributors. With partnerships and joint ventures, you can pacify your growth trajectory, leveraging existing networks and their proficiency.

The process of business setup in Dubai involves several strategic decisions. Forward-thinking business leaders seek professional support from our consultants, who recommend effective market entry strategies. The IMC Group continues to be your reliable partner for establishing your business in the UAE. The experience of our specialists can position your business to embrace success in the long term amidst the dynamic business environment in the UAE.

NEWSLETTER,U.A.E

Succession and Estate Planning Unveiled: Key Trends and Challenges in the Middle East

December 12, 2023

Succession and estate planning in the Middle East is a crucial domain that has drawn the attention of various professional fronts. It’s imperative to understand the key trends and challenges of the Sharia-compliant estate structures and gain insights into the financial future of the area. From the challenges of multiple jurisdictions to the impact of technology, this edition of our newsletter offers a complete idea of the evolving dynamics in wealth transition. With these valuable insights into evolving strategies that individuals and families are adopting, you can secure your future in the Middle East.

Challenges in Sharia-Compliant Estate Planning

Sharia-compliant estate planning is not a novel concept in the Middle East, but it presents unique challenges. Some of these include:

It’s challenging to address the evolving dynamics of local GCC assets within Sharia-compliant estate plans. There has been a visible shift toward increased inclusion and significance in comparison to non-GCC assets
Another hurdle is to explore the uncharted territories of domestic estate planning solutions like the UAE federal trust regime and common law private foundations
Managing the web of multiple (non-GCC) jurisdictions remains a challenge, which is influenced by the demographic location of family businesses and different nationalities or tax residencies of family members
The absence of standardization and harmonization in legal frameworks governing Sharia-compliant estate planning across different GCC countries continues to be a challenge. For affluent families, this lack of uniformity poses significant challenges to encompass all their assets within the GCC

Emerging Trends Shaping the Future of Succession and Estate Planning

In this section, we have discussed the emerging trends that will shape the future of succession and estate planning in the Middle East.

1. Domestic Structuring

Over the years, international structuring has been a viable option. However, the rise of local alternatives like the UAE Foundation, is gaining prominence. New trends reveal that clients largely favor locally-based advisors. These domestic structuring options provide a pragmatic response to rising pressure and costs associated with the adherence to global tax norms.

2. Growing Wealth in the GCC

As the GCC cements its position as one of the wealthiest regions globally, the demand for estate planning services keeps rising. High oil prices and booming economies in the Middle East are the key factors spearheading the affluence of the region. This explains why families are looking for comprehensive solutions for the preservation and succession of their wealth.

3. Increased Awareness of Estate Planning

A significant shift has been noted in the awareness for protecting assets and intergenerational planning among families and high-net-worth individuals in the GCC. This trend reveals that the next generation is likely to take a proactive stance in financial planning. They will recognize the impact of the dispute on their family assets.

4. ESG and Impact Investing

The rise of ESG (Environmental, Social, and Governance) considerations and impact investing is yet another important trend to check out. This trend is particularly visible among younger members of the family. Within family offices, the focus has substantially shifted to long-term sustainability and ESG. This has fuelled a growing interest in digital assets and private banks.

5. Family Offices Becoming Professional

Family offices are undergoing a transformation, and they are becoming increasingly sophisticated while dealing with complexities and managing alternative asset classes. They are bracing up to fulfill more stringent regulatory requirements. The asset management process is becoming increasingly complex, which has fuelled this professionalism. This calls for increased transparency and advanced investment strategies.

6. Technology in Estate Planning

Across the GCC, the role of technology in estate planning is going to be vital in the Middle East. From the virtual execution of DIFC wills to the digitization of registration and operations for UAE foundations and family offices, technology goes a long way in enhancing efficiency. Family offices are readily embracing artificial intelligence, machine learning, and advanced data analytics to streamline their decisions.

7. Affordability of UAE Foundation

Establishing a UAE Foundation involves relatively lower costs. This has gone a long way in democratizing access to asset strutting and protection. The cost of registering a will with the Abu Dhabi Judicial Department at approximately USD 260. This implies that now, a broader segment of the population can secure their assets.

8. Multiple Structures for Estate Planning

Considering the uncertainty in the current business environment, the demand for multiple estate planning structures is on the rise. A recent trend reveals that in the GCC, wealthy families are exploring diversified approaches to reduce the risk associated with owning assets in more than one country.

9. Professional Estate Planning Advisors

A notable trend in succession and estate planning in the Middle East reveals that an increasing number of families are seeking professional advice from established companies for estate planning. These families in the GCC have realized the importance of engaging estate planning advisors for tailoring plans, which align with individual needs to secure the interests of their beneficiaries.

At the IMC Group, we understand the challenges and new trends in succession and estate planning in the Middle East. Our dedicated team of professionals operating both in the Abu Dhabi Global Market and DIFC offers a comprehensive range of services to private and corporate clients. We remain committed to our clients with highly customized succession and estate planning advice.

NEWSLETTER,U.A.E

A Guide to Understanding Corporate Taxation in UAE Free Zones

December 12, 2023

The UAE continues to be a preferred hub for entrepreneurs and investors seeking global opportunities to expand. While the country might be synonymous with a tax-free environment, entrepreneurs should be aware of recent changes in its corporate tax regime. With the recent implementation of the Federal Decree-Law No. 47/2022 on the Taxation of Corporations and Businesses, the tax-free environment has witnessed a change in paradigm. Effective from 1st June 2023, this new corporate tax regime in the UAE has been drawing the attention of investors. Forward-thinking organizations can reach out to established professionals for corporate tax advisory in Dubai to ensure compliance and manage their tax obligations.

Considering the gravity of the new corporate tax regime on your organization, it pays to understand the impact of taxation in the Free Zone areas in the UAE. In this comprehensive guide, you will get a clear understanding of the classifications, regulations, and benefits associated with Corporate Tax in the UAE Free Zones.

What Do Free Zones Mean For Your Business In The UAE?

Free zone areas have emerged as strategic business hubs in the UAE. These zones offer a wide array of incentives to businesses such as exemption from import and export duties, 100% foreign ownership, and several tax advantages. Businesses need to understand the clauses of Corporate Tax regulations to ensure compliance and capitalize on the advantages.

Free Zone Persons

For understanding tax obligations in the Free Zones in the UAE, it’s imperative to distinguish between Juridical Persons and Natural Persons. Natural Persons, operating independently, include sole establishments, freelancers, and civil companies. Although these individuals may carry out their business from a Free Zone, the UAE Corporate tax laws don’t recognize them as Free Zone Persons. Juridical Persons, on the other hand, include corporate entities like LLCs. They can attain the status of Free Zone Persons only when they are incorporated into these Free Zones.

What Are The Corporate Tax Rates For Free Zone Companies?

Based on their classification, corporate tax rates may vary for Free Zone companies.

QFZP (Qualifying Free Zone Person): Eligible for a 0% tax rate on qualifying income.
NQFZP (Non-Qualifying Free Zone Person): Not meeting specific conditions, leading to different tax implications.

Avoid a AED 10,000 fine by Meeting UAE's Corporate Tax Deadlines. Contact us for Expert Tax Compliance Guidance and Protect your Business.

Criteria for Qualifying Free Zone Person (QFZP)

Fulfill Adequate Substance in the UAE such as having sufficient assets, being involved in activities to generate income, having mandatory operating expenses and qualified employees
As explained in Cabinet Decision No. 55 of 2023, the entity must get “Qualifying Income”
Avoiding the applicability of the 9% tax rate
Adherence with Arm’s Length & Transfer Pricing Rules
Fulfilling other conditions outlined in the Cabinet Decision No. 139 of 2023
Meeting the ownership criteria established by the free zone is crucial, typically permitting full foreign ownership

Taxation for Three Types of Business Activities in Free Zones

Business activities in Free Zones fall into three categories: qualifying activities, excluded activities, and other activities.

Qualifying activities: Approved activities are defined as per the parameters of Cabinet Decision No. 139 of 2023. Companies actively involved in these operations may be eligible for tax incentives or exemptions.
Excluded activities: Restricted activities include a list of operations that do not align with the criteria for tax benefits or exemptions mentioned under Approved activities. For businesses, it’s crucial to identify whether or not their activities come under this category.
Other activities: These include activities that aren’t mentioned explicitly under the Qualifying or Excluded Activities lists. For these activities, the tax implications are decided after considering their nature and respective tax regulations.

Qualifying Income Categories

The structure of Qualifying Income is decided on the basis of the transactional nature and parties involved. These include:

Transactions with Other Free Zone Persons, including qualifying income that covers all the transactions excluding the ones originating from Excluded Activities
Transactions with Non-Free Zone Persons, where qualifying income includes revenue generated exclusively from Qualifying Activities, where Excluded Activities is considered ineligible
All Other Transactions, where Qualifying Income may include extra revenue, and has to meet de minimis requirements

Tax on Accountable Income

Tax on Accountable Establishment Income: Income attributed to Domestic or Foreign Permanent Establishments of Free Zone Persons is calculated at a 9% tax rate.
Tax on Accountable Income to Establishments and Immovable Property: Tax rates on accountable income may vary on the basis of the nature of transactions and parties involved. It is crucial for businesses to understand these aspects to comply with tax regulations in Free Zones.

Eligibility for Corporate Tax in UAE Free Zones

To be recognized as a Free Zone Person under UAE corporate tax laws, entities need to satisfy the Minimis Requirement, which mandates that non-qualifying Revenue within a Tax Period remains below AED 5,000,000 or 5% of total Revenue, whichever is lesser.

Mandatory Corporate Tax Registration and Filing

Regardless of their qualifying status, all Free Zone entities are required to register for corporate tax and file their returns via the Federal Tax Authority (FTA) online platform.

Taxation for Free Zone Entities with Mainland Operations

For Free Zone entities with operations on the mainland, a 9% corporate tax rate is applicable to taxable income generated from mainland activities. However, income from Free Zone operations can still enjoy a 0% tax rate, provided that separate accounting records are maintained for Free Zone and mainland income.

Impact of Disqualification from the 0% Tax Rate

If an entity no longer meets the criteria for a Qualifying Free Zone Person, it will be disqualified from the 0% tax rate and will instead be subjected to the standard 9% corporate tax rate on income exceeding that generated on the mainland.

Requirement for Audited Financial Statements

To access the benefits of the 0% UAE corporate tax rate on Qualifying Income, entities must submit audited financial statements, ensuring accuracy and compliance in financial reporting.

Steps for Corporate Tax Exemption in Free Zones

Businesses seeking corporate tax exemption in Free Zones must follow a systematic process, including business formation, obtaining a business license, registering for tax, submitting required documentation, and undergoing review, resulting in the issuance of a tax exemption certificate.

Ongoing Compliance and Reporting for Free Zone Entities

Even with corporate tax exemptions, Free Zone entities must fulfil compliance and reporting obligations, including annual audits, timely renewal of tax exemption certificates, and adherence to Free Zone regulations, ensuring continued eligibility and regulatory compliance.

For corporates, it’s natural to wonder how to calculate the payable corporate tax in the UAE? For businesses, understanding Corporate Taxation in UAE Free Zones is crucial for seamless financial planning and adherence to norms. The IMC Group is your trusted partner for corporate tax advisory. With professional support from our expert team, you can embrace the new corporate tax regime with confidence.

NEWSLETTER,U.A.E

What Factors Are Vital for Ensuring ESR Report Compliance upon Submission?

December 8, 2023

This is to inform you that the Economic Substance Regulation (ESR) requires reporting by December 31, 2023, for the Financial Year ending December 31, 2022.

The Economic Substance Regulations (ESR) in the United Arab Emirates (UAE) require certain legal entities in domestic and free zones to conduct one or more of nine relevant activities (RA) (referred to as “licensees”) to comply with annual filing obligations.

Licensees earning income and meeting under the exempted licensee criteria (for instance, if a licensee operates as a branch of a foreign entity and its income is taxed in a foreign jurisdiction) must submit a notification but are exempt from filing a report.

Navigate ESR with Experts

There are other exemptions. The Ministry of Finance has recently released updated instructions in Ministerial Decision No. 100 of 2020, which can help firms determine whether they conduct a relevant activity and are exempted licensees.

Key Factors to Consider

Relevant Activities (RA): As per the UAE Ministry of Finance’s ESR Regulation, the responsibility for submitting an ESR Notification and ESR Report lies with Licensees involved in any pertinent activities and generating specified relevant income outlined in the regulation.

Reminder about the Deadline: The deadline to submit the ESR Report is approaching. We strongly encourage you to act promptly, to guarantee compliance with the regulatory obligations.

An entity must submit a notification within six months from the end of the fiscal year (FY) stating its engagement in RA, regardless of whether the licensee is exempt from the ESR or generates income from RA.

A report outlining specific business details should be filed within 12 months after the conclusion of the Fiscal Year, solely if income was derived during the period from RA and the licensee was not exempt from the ESR.

Consequences of Non-Compliance: Not submitting the ESR report by the specified deadline may lead to an administrative penalty of AED 50,000. It’s essential to adhere to the resolution’s provisions by submitting the report and any pertinent information or documentation to avoid these penalties. Furthermore, failure to comply with the Economic Substance regime for the year ending 31 December 2022 will have severe results, such as suspension or cancellation of your business license.

Suggested Steps for Your Business

ESR Evaluation: We advise all Licensees to undertake a thorough ESR assessment, irrespective of involvement in pertinent activities, and, if applicable, to submit an ESR notification and report via the MoF portal.

Accountability for Pertinent Activities: Licensees involved in relevant activities and generating relevant income are obligated to file the ESR Notification and ESR Report. They will be answerable to their respective regulatory authorities.

Key ESR Factors to Consider before the end of the Financial Year

All legal entities should address the following ESR matters and act, where applicable, before the end of the fiscal year:

The entity needs to evaluate if it engaged in and earned income from any of the nine RAs within the period. This assessment is crucial as it determines the entity's specific ESR compliance needs for the fiscal year
Entities that have generated income from RA during the fiscal year should assess their adherence to the relevant ESR evaluations, namely the directed and managed test, core revenue generating activities (CIGA) test, and adequate examination
After the review, entities should promptly undertake all essential measures before the fiscal year's conclusion to rectify any potential non-compliant areas (i.e., ensuring adherence to all relevant ESR tests)
Regarding the CIGA test, entities must showcase control and supervision over any outsourced arrangements during the fiscal year. This can be illustrated, for instance, through contractual agreements or correspondence
Given the FTA ESR audits, Licensees should gather pertinent supporting documents regarding their ESR compliance obligations and maintain them on file. Should they be chosen for an audit, Licensees have a brief timeframe of 5 working days to furnish the FTA with all requested documentation (i.e., demonstrating compliance with the ESR tests)

The guidance mentioned above (not exhaustive) is to offer entities a chance to initiate any required actions for ESR compliance before it becomes too late.

How Can IMC Be Your Trusted Ally?

Navigating the complexities of compliance with regulatory bodies such as the Federal Tax Authority (FTA) and the Ministry of Finance (MOF) can be challenging. At IMC, we understand the importance of staying in good standing with these authorities. That’s why we’re here to assist you in conducting a thorough ESR assessment and ensuring clear communication of your status to the regulatory authority.

By partnering with us and addressing these requirements promptly, you can avoid the stress of potential conflicts and significant penalties. Remember, we’re just a call or an email away for any additional guidance or questions you might have. Let’s tackle these challenges together, with ease and confidence.

NEWSLETTER,U.A.E

7 Compelling Advantages of Establishing a UAE Foundation

November 13, 2023

In the dynamic business environment in the United Arab Emirates, foundations have emerged as a powerful tool for safeguarding wealth and ensuring seamless succession planning. Foundations were introduced in 2017 in the UAE and have gained prominence quickly. Currently, they find their place in three of the free zones in the UAE, including RAKICC, ADGM, and DIFC.

A foundation in the UAE is an independent legal entity allowing individuals to consolidate their wealth while keeping their personal assets distinct from their business interests. This separation takes place by endowing assets to the foundation, which holds them in its name. During your company formation in Dubai, you may decide to establish a foundation and take advantage of its benefits.

A foundation is free from shareholders and works as an ‘orphan’ entity. These foundations are managed according to their charter and help beneficiaries, who often belong to the same family. This striking feature of foundations makes them suitable for succession planning.

Advantages of Establishing a Foundation in the UAE

Establishing a foundation in the UAE offers several potential benefits to organizations. These include:

1. Protecting Assets

Establishing a foundation enhances the protection of your assets. When the assets are transferred to a foundation, they no longer belong to the founder. This makes them less vulnerable to government claims, creditors, or disputes within the family. So, under specific conditions, these assets wouldn’t be readily accessible to external parties. This ensures the security and preservation of your wealth.

2. Privacy

Since foundation beneficiaries remain confidential, they ensure discreet family wealth management. It reduces the potential for claims or judicial actions from third parties trying to exploit the wealth of the founder. This significantly secures the financial interests of the family.

A confidential foundation structure enhances the bargaining power of the founder in business acquisitions and negotiations. It mitigates the risk of the founder or heirs being targeted by individuals with malicious motives to access their wealth.

3. Flexibility

UAE foundations are flexible, which provides internationally mobile families with a strategic advantage when they have their assets scattered across multiple jurisdictions. When the beneficial and legal ownerships are separated, families can adapt their wealth management strategies to changing goals. Thanks to this adaptability, their inter-generational legacy planning and wealth protection remain effective regardless of the global financial conditions or changing family conditions.

4. Effective Succession Planning

When it comes to succession planning, foundations prove to be highly effective tools. Founders get peace of mind, knowing that the asset distribution or their benefits will comply with what they wished, not considering succession laws. Traditional wills become effective only upon death. However, foundations protect a family’s assets in different scenarios like bankruptcy, incapacitation, divorce, or incapacitation. Foundations can also expedite asset transfers and mitigate complexities associated with probate procedures.

5. Better Family Governance

Foundations offer an effective corporate governance framework to manage a company or single-family office. With this professional structure, the founders with their family members can systematically manage their wealth. This ensures optimal protection of assets and their distribution. The powerful governance framework ensures that family assets are managed professionally, benefitting both the founder and the subsequent generations.

6. Philanthropic Opportunities

Foundations in the UAE also provide philanthropic opportunities. Founders have the scope to align their foundations with humanitarian and ethical values. This enables them to support causes and initiatives holding personal significance.

This is an ongoing support and can involve making regular donations to charitable organizations, education, medical research, etc. Therefore, the legacy of the founder extends beyond preserving wealth and contributes to the society.

7. Legacy in Perpetuity

The goals and vision of the founder continue in perpetuity with a UAE foundation. This is long-term commitment ensures the proper impact of the founder on their community, family, or chosen causes.

The IMC is a trusted and experienced business setup consultant in Dubai, providing expert guidance to entrepreneurs and corporations establishing a new company in the UAE’s thriving economy. Our dedicated team offers customized solutions to ensure that your venture in Dubai is set up with professionalism and a deep understanding of the local market. Let us help you establish your business with precision and expertise.

NEWSLETTER,U.A.E

UAE: Understanding Qualifying Free Zone Person Status

November 10, 2023

The IMC focuses on the criteria for attaining Qualifying Free Zone Person status in various jurisdictions in the context of global business and corporate tax regulations.

Under the global corporate tax guidelines, Qualifying Free Zone Persons can benefit from a preferential 9% corporate tax rate on their Qualifying Income. However, they need to fulfil the following conditions:

Establishing a substantial presence within the designated free zone
Generating Qualifying Income
Adhering to the Transfer Pricing documentation and Arm’s Length Principle
Ensuring that non-qualifying revenues remain below specified de-minimis thresholds
Compiling audited Financial Statements as per local laws
Fulfilling any additional conditions that the relevant authorities need

It is imperative to fulfil all these conditions right from the outset. Non-compliance with one or more of these conditions may deprive you of your tax benefits. The implications apply for the current financial year along with the upcoming four years, even if you meet all the conditions afterwards.

Key Insights

With the calendar year drawing to a close in 2023, businesses operating within free zones, with their initial tax periods commencing on or after January 1, 2024, should prioritize evaluating their operations to be eligible for the preferential corporate tax regime (i.e., a 9% corporate tax rate) as applicable.

It is imperative to carry out strategic planning and an early assessment to ensure that businesses meet all the conditions from the very beginning. It takes time to implement any restructuring, resource allocation, adjust processes, or evaluate potential benefits.

Certain steps may be more urgent or important compared to others to ensure compliance from the first day. Taking timely action after identifying those steps holds the key to enjoying the 9% benefit.

Disclaimer

Our team of corporate tax experts at the IMC Group is dedicated to navigating the complex world of global tax regulations. We provide comprehensive support throughout your compliance journey. You can contact one of our tax specialists by click here or reach out to us via email at [email protected]. We are always here to help you.

NEWSLETTER,U.A.E

Empowering Family Businesses in the UAE: The New Family Business Law

October 10, 2023

Family businesses have long been the driving force behind the thriving economy in the UAE. It significantly contributes to the growth and prosperity of the country. These businesses could operate without a comprehensive legal framework for governing their operations until recently. However, with the introduction of UAE Federal Decree Law No.37 in 2022, circumstances are different for family businesses.

Also known as the New Family Business Law, this is a groundbreaking legislation that marks a crucial moment for family-owned enterprises. It offers a wide range of provisions to strengthen family businesses in the country.

Facilitating Succession Planning

One of the primary objectives of the New Family Business Law is to support succession planning. Although this is a crucial aspect, family-owned companies tend to overlook the priority. Do you know that less than 15% of family businesses manage to survive into a third generation?

To address this issue, the new law facilitates smoother transitions of businesses between two subsequent generations. As a result, you can expect a more seamless ownership transfer for family businesses and control. It ensures that your family business can continue in the years to come. Forward-thinking enterprises are seeking professional assistance for succession planning for Dubai family offices from established companies.

Exception to Statutory Pre-emption Rules

The New Family Business Law introduces an exception to certain statutory pre-emption rules. This empowers family businesses with greater flexibility to manage their ownership structures. Due to this adjustment, they can create different share classes and allocate the same among shareholders.

Family businesses can also adapt to changing circumstances due to this newfound versatility which caters to their evolving needs. In the process, they can cruise on the path to long-term sustainability.

Effective Mechanisms to Resolve Disputes

The introduction of robust dispute resolution mechanisms is one of the benchmarks of the New Family Business Law. In recent times, public disputes have shed light on the challenges that family-owned companies encounter. This often results in adverse consequences for the concerned business.

To address this issue, the law has established “’Family Business Dispute Resolution Committees”. While the effectiveness of these committees is yet to be seen, this marks a significant step toward preventing and resolving disputes. Historically, these disputes have jeopardised the stability of family businesses.

The New Family Business Law applies across all Emirates and free zones within the UAE. Therefore, family businesses across the country would have access to a consistent legal framework. This promotes fairness in their operations.

For professional assistance in personal holding company formation and management and succession planning, reach out to a professional expert at the IMC Group. We continue to be one of the pioneers in assisting family businesses in the UAE.

NEWSLETTER,U.A.E

The Evolution of Family Offices Towards Greater Professionalization

October 10, 2023

The concept of family offices has witnessed a profound transformation in recent years. Traditionally, they have been perceived as entities that affluent families entrusted for wealth management. From its basic structure, the model of a single family office in Dubai has evolved into a sophisticated and strategic institution. This professionalism marks a significant shift from the investment perspective regarding how family offices drive investment decisions, manage assets, and explore financial aspects.

In this newsletter, we will take a look into this shift towards the professionalization of family offices. We have also discussed some crucial considerations that family offices need to weigh to secure the wealth of their clients and grow it.

Factors prompting family offices to shift towards better professional standards

Traditionally, affluent families entrusted their financial assets to investment managers. However, investment managers struggled to achieve their target returns amidst economic uncertainties amidst the Global Financial Crisis of 2008 and then the pandemic. Naturally, affluent families started exploring alternative approaches. Consequently, the notion of professionalizing family offices gained traction since the move would empower executives engaged in such work to manage financial assets directly and report the same to family members.

The uncertainties in global markets and low-income returns have led to a decline in the trend of entrusting investment managers to manage the finances of families. This shift has left family offices in pursuit of greater control and peace of mind while consolidating all data in one central location. Naturally, this transition calls for the recruitment of skilled family office executives.

Key factors driving the professionalism of family offices

Let’s take a look at the key factors that have fuelled a higher level of professionalism in family offices in recent years.

1. Higher Complexity

With the global financial landscape becoming increasingly difficult to navigate, it’s imperative to carefully weigh different investment strategies and risks. Exploring complex regulatory environments continues to be a challenge for family offices. The market conditions are changing rapidly, and there is a plethora of asset classes to invest in. These evolving market conditions call for continuous vigilance, which calls for a higher degree of professionalism.

2. Better Expertise

Recognizing the need for specialized knowledge, family offices have been actively recruiting skilled professionals. These include legal experts, financial planners, investment analysts, and technologists. With fresh and relevant talent, family offices can conduct the necessary due diligence to identify emerging trends. This empowers them to capitalize on potential investment opportunities.

3. Advancements in Technology

The investment world has undergone a significant revolution with the digitization of technologies. For instance, family offices have been strategic in using data analytics, machine learning, and artificial intelligence to streamline their decision-making processes. These technologies empower them to evaluate vast datasets and make tactical investment decisions.

4. Exploring Investment Avenues

With adequate family office regulations in place along with growing professionalism, there has been an increasing tendency to explore alternative investments. For instance, expanding the portfolio with investments in real estate, hedge funds, venture capital, and private equity can be lucrative indeed. The return potential of these investments is much higher, but investing in these asset classes involves greater risk and complexity. Therefore, cultivating a risk-resilient approach in family offices requires higher standards of professionalism.

5. Global Perspective

Forward-thinking family offices are now looking beyond domestic markets to explore investment opportunities. This is a broader outlook that requires a deeper understanding of international currencies, markets, and demographic aspects.

Professionalization of the Family Office: Evaluating Risk vs. Reward

Professionalizing family offices comes with a multitude of perks. These include better access to diverse investment opportunities, better risk management, and the opportunity to use sophisticated technologies to make informed decisions. However, it’s crucial to focus on the challenges involved in the process as well. Some of the persisting concerns are equating the risk and reward ratio to optimize returns, align to the respective values and goals of each family, and maintain proper communication between professional staff and family members.

In the coming years, family offices are likely to undergo further professionalization. With the younger generations assuming leadership roles, they are likely to deploy even more tactical investment strategies to ensure greater transparency. Moreover, family offices need to adapt to changing family dynamics. Embracing evolving technologies and adapting to shifting investment trends, they can deliver value to their clients.

Case Study: IMC Group adds value to investments for clients

One of our family office clients invested in a startup focussing on green energy. We were supporting an existing management team that had created a promising business unit.

The Challenge

The management team possessed industry contacts and credibility to establish a new operation but relied on their previous firm’s finance department for financial planning, tax, and other crucial aspects.

Our Solution

We redesigned the group structure of this client and determined the residence location of this company based on practical factors. Next, we secured specific favorable VAT rulings for them. The professionals also came up with financial control mechanisms which encompassed measures for foreign exchange risk mitigation. In the process, we managed all derivative financial trading to support the financial needs of the business.

Results

It took us just three and a half years to put this client on a growth trajectory. Ultimately, it was sold for 23 times the original investment, delivering outstanding results for both the family office and the management team.

How can IMC Group assist you with family office services?

Being an affluent family, you know how demanding wealth management turns out to be. At IMC Group, we deliver comprehensive family office solutions to our clients. We also collaborate with our clients for succession planning for Dubai family offices. A seamless and holistic approach from our end will see you through unique challenges.

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