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Dubai Expo 2020: A Perfect Venue to Promote India-UAE Trade and Investment Ties
  • Newsletter, U.A.E

Dubai Expo 2020: A Perfect Venue to Promote India-UAE Trade and Investment Ties

Originally scheduled to be hosted from 20th October 2020 to 10 April 2021, the belated Dubai Expo is ultimately going to be held from October 1, 2021 and will continue till March 31, 2022. The postponement of this historic event was due to the outbreak of the Covid 19 pandemic which ravaged the entire world including the UAE.

The Dubai Expo 2020 is spanning between the two leading cities of the Emirates, Dubai and Abu Dhabi and will witness 60 exhibitions daily with pavilions from 191 countries. The 182-day event will attract more than 25 million visitors across the globe besides running more than 200 restaurants at the venue.

The master plan for Dubai Expo 2020 has been designed by HOK, an American firm around a central plaza with three thematic districts dedicated to the Mobility District, Opportunity District, and the Sustainability District

World Expos for many decades have been used as venues to showcase the greatest innovations that have helped transform our present-day world and the same tradition will continue in Dubai Expo 2020 with the latest innovative technologies around the world.

India enjoys long historic ties with the UAE and will be the largest participant in this major event with a new look of its Pavilion. The pavilion has been designed in a four-level structure with technology, culture, space and heritage as the defining themes. Once the biggest event of the world finally resumes in Dubai, the Indian Pavilion stretched over 4800 sqm will showcase the new technology, and its “5 Ts” resonating Talent, Trade, Tradition, Tourism and Technology.

Pavan Kapoor, Indian Ambassador to the UAE remarked, ” It is very clear that by sheer dint of our proportion of the population, by our connections that we have in India, we will be the largest participant at the Dubai Expo.”

The long history of trade and investment between India and the UAE has been further reinforced last year when the top leadership of the two countries convened regular virtual conferences to promote bilateral and trade investment cooperation during the post-pandemic.

Dubai Expo 2020 will showcase the robust India-UAE trade which has seen unprecedented growth over the years which was only valued at 180 million dollars per annum in the 1970s and has currently grown to 59 billion dollars in 2020.  The UAE was the third-largest trading partner of India during 2019-20 after China and the US while India was the second-largest trading partner of UAE with an amount of 41.43 billion dollars of trade in non-oil sectors during 2019.

The UAE is a major exporter of crude oil and the Indian government has sought more investments from the UAE in Indian core economic sectors including infrastructure, logistics, defence, ports, highways, airports, renewable energy and food parks. In September 2020, the Consulate General of India, Dubai, and Tea Board India jointly organized a virtual B2B Meet for promoting Indian tea amongst the UAE consumers.

Besides enhancing trade and investment, the two countries also agreed to expand security cooperation and explore opportunities for mutual collaboration for fighting against the pandemic. Current geopolitical instability in many parts of the world has also forced the two countries to look for increased political and economic engagements. With millions of Indian workers employed in the UAE, India has been keen on protecting the interests of its citizens at the time of great economic turmoil.

While UAE scales up investments from India in healthcare, food security and fintech sectors and Dubai company incorporation by Indian investors, the Indian government announces major policy reforms to promote business and investments and attract foreign investors from the UAE. It is no wonder that Dubai Expo 2020 turns out as the perfect venue for enhanced bilateral trade and investment between the two countries.

Dubai Expo 2020 is the biggest event in the Middle East and North Africa (MENA) and will enhance and accelerate the country’s economy with foreign investments pouring in and new business set up in Dubai UAE.

The revival of the world’s economy is also intimately linked to the growth and economic prosperity of these two countries.

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Singapore is Witnessing Unprecedented Growth in Family Office Space
  • Newsletter, Singapore

Singapore is Witnessing Unprecedented Growth in Family Office Space

Overview

Though Singapore has witnessed a more than fivefold jump in the number of Family offices over the last few years, this wealth and asset management space is still in a phase of infancy with enormous potential for future growth. Most of the family offices in Singapore belong to the first or second generation of Ultra High Net Worth (UHNW) families who are planning for their wealth transfer only for the first time and will keep doing so over many future generations promising a booming market for family office services.

Traditionally, family offices have been popular with well-established structures in Western developed countries viz the US and Europe. However, as the Asian continent has put its strong footprint in the global economy with a high concentration of individual wealth and private capital, there has been a surge of this financial business model in Asia, especially in Southeast Asian Singapore. As per data available with the Monetary Authority of Singapore, there are more than 400 family offices in Singapore, and only 200 of such offices manage an estimated value of assets exceeding 20 billion dollars, a whopping sum.

Family offices are private wealth management entities providing cost-effective financial solutions for UHNW families. Family offices employ financial advisors, investment analysts, legal and tax professionals for wealth and tax planning.

Family offices carry out financial and legal activities which are either carried out in-house or outsourced from external service providers. Activities performed by family offices include management and planning of private assets, wealth protection, succession planning, tax planning, lifestyle management, family governance, education, charities etc. While a Single family office in Singapore caters to one single family, multiple family offices can serve more than one family.

Why is Singapore considered attractive for Family Offices?

Multiple reasons are driving the ultra-rich families to flock to Singapore for establishing family offices post-pandemic. Singapore provides access to both Asian and global opportunities for investments and besides the Asian families, many US and European family offices are being attracted to the country with key family figures opting for residing and taking citizenship of Singapore. The main reasons for exponential growth can be attributed to the below-mentioned reasons.

  • Reduced risks of regulatory changes ensuring the safety of assets
  • A competitive corporate tax environment irrespective of residence status and tax incentives through Singapore Resident Fund Scheme, Enhanced Tier Fund Tax Exemption Scheme and Global Investor Programme
  • Presence of investment and international banks planning to double their operations over next two to three years
  • A Matured and Regulated financial market
  • World-class Technology
  • A recognized international hub for financial services and banking
  • Newly introduced Variable Capital Company structures
  • Easy settlement for super-rich families through Global Investor Programme


How do Global Pandemic and Geopolitical Uncertainty help flourish the Family Office Space in Singapore?

Global pandemic and geopolitical instability can be a big positive rather than negative for family offices in Singapore. The fear of morality of the pandemic has indeed made the super-wealthy families vulnerable but the uncertainties also instilled a sense of urgency amongst them. Singapore has one of the lowest death rates from the covid pandemic and many billionaires all over the world have been residing for longer in this city-state.

The pandemic has become an important wake-up call for wealthy families to mobilize resources and step up to bring in the positive changes needed in family offices for reviewing and updating protocols and practices within the family office space, investing more time and money for upgrading antiquated ineffective systems and assessing all forms of risk. The geopolitical instability has also raised safety issues of their assets and a need for relocation to a safer and more politically stable jurisdiction.

Covid pandemic has also triggered the possibility of higher tax regimes and stricter regulatory norms in the foreseeable future necessitating the need for wealthy families to explore better avenues for reducing the tax burden. Populist policies with several monetary stimuli introduced during early 2020 may not be viable for long due to inflationary pressure as already hinted by the Federal Reserve on Fed tapering.

In 2020, many billionaires across the world donated several billion dollars for vaccine development and many ultra-rich families were prompted to serve their communities in their countries of origin. This shift in social responsibility has spurred the growth of philanthropic trusts. Philanthropy helps in bringing people together and helps members of wealthy families do something meaningful by participating for a novel cause and reduce bureaucracy in organizations.

The pandemic also provided a big push in smart digital technologies and data securities providing wealthy families better comfort and safety in wealth management. As per recent surveys, more than 80% of family office respondents agree that artificial intelligence can be the biggest disruptive force in global business. More asset management and hedge fund professionals are joining family offices in Singapore and the technology stack is also growing more sophisticated.

Takeaway

The city-state has world-class technology, a transparent and non-bureaucratic regulatory system, a high standard of health infrastructure and a politically stable government and is attracting the super-wealthy families to set up a Singapore family office in preference to their home countries.

As there are plenty of alternatives available for family office structures and governance framework for addressing varying needs and circumstances, it is advisable for wealthy families to partner with a reputable and trusted partner with professional expertise and experience in providing advice on wealth management and implementing customized and appropriate family office structures.

IMC is led by a team of asset management and legal professionals and can help you set up your own family office in Singapore to provide independent and trusted advice on suitable structure, control and supervision keeping in view the long term needs for wealth management and administration.

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What are the Ten Cash Flow Management Strategies for MSMEs and Startups
  • Newsletter

What are the Ten Cash Flow Management Strategies for MSMEs and Startups?

OVERVIEW

Cash is oxygen for every organisation and no business can survive without cash in hand. Business expansion and growth are also impossible without a positive free cash flow. Even businesses with very high profitability can close down in absence of liquid cash. MSMEs and Startups suffer the most as they have limited access to finance and in the event of any stoppages in cash flow, the business operations are likely to come to a standstill forcing them to wound up their business either temporarily or permanently.

As any disruption in cash flow can seriously jeopardize the entire chain of business operations ranging from raw materials procurement to salary payment, Cash flow management becomes a matter of tremendous significance for businesses especially the smaller ones.

Cash flow management is a subset of finance and money management and effective implementation could be a serious issue for small businesses with limited professional skills and expertise. Several surveys conducted on MSMEs and Startups revealed that managing cash flow is the biggest of all challenges faced by small businesses during the business life cycle.

WHAT ARE THE REASONS FOR CASH FLOW CHALLENGES IN SMALL BUSINESSES?

Cash flow needs to be managed very prudently by small business owners and strict discipline must be maintained in terms of cash flow forecasting and budgeting. The main reasons for cash flow issues can be attributed to the following

  • Unfavourable Payment Terms with Customers and Suppliers can adversely affect the cash flow, early disbursement of payment than that realized can dry up cash flow
  • High Inventory especially for manufacturing MSMEs and Startups can block a considerable amount of cash
  • High Fixed Costs in the form of debt & interest payment, high rent, high salary etc. can adversely affect the cash flow
  • Unnecessary Expenses on non-value-added activities can cause reduced liquidity e.g., marketing expenses that can’t generate leads and grow customer base
  • Seasonal effects as financial year-end time can be challenging for cash realization

WHAT ARE THE STRATEGIES FOR AN EFFECTIVE CASH FLOW MANAGEMENT OF MSMEs AND STARTUPS?

Following are the Roadmaps of MSMEs and Startups for an effective cash flow management system.

1. Planning and Forecasting Cash Flow

Cash flow planning and forecasting can lead to better management of working capital, reduced debt and high-interest cost and better evaluation of revenue requirements for handling expenses.

2. Financing of Expensive Purchases

Easy financing is available these days that can be used for expensive purchases and help avoid blocking of a large amount of funds. Instead of paying a lump sum, payment can be made instalments. Governments have also launched many credit facilities to finance capital expenditures of MSMEs and Startups.

3. Utilising Idle Assets and Outsourcing Machinery

MSMEs and Startups with assets e.g., land and machinery not being used for business purposes can rent out or sell such assets for mobilizing cash and address short term cash flow issues at hand. Many small businesses prefer to procure machinery on rent rather than spending on Capex for preserving cash and ensuring business sustainability. The cash generated from rent or sale can be put in a short term investment fund that can earn better interest than a fixed deposit and still be liquid.

4. Negotiating Payment Terms

Based on cash flow forecasting, MSMEs and startups can negotiate with their suppliers for temporarily delayed payments to address cash flow challenges. In many cases, vendors realize the situation and agree on deferring the payments. Similar arrangements can be made with the customers to speed up the realization of funds. Relationship management plays a big role and a lot of effort must go into this.

5. Expediting Recovery of Receivables

Sending invoices immediately after delivery of services and products needs to be the guiding policy of all SMEs and Startups. Fast billing and fast collection of receivables are a must for effectively address the cash flow. Tracking of receivables with continuous follow up on past dues is also extremely critical in ensuring liquidity and optimizing Days Sales Outstanding (DSO). DSO of 30 days or less with a Collection Effectiveness Index (CEI) of more than 80% is generally recommended for small businesses for healthy cash flow.

6. Claiming Advance from Customers

For executing big orders, MSMEs and Startups must negotiate on advance deposits and payments on part deliveries with their customers.

7. Reducing Unnecessary Expenses

Identifying and reducing unnecessary expenses should also be on the agenda of small businesses to effectively address cash flow challenges. They should continuously strive to reduce expenses, save cash, and make regular cash deposits to bank accounts for improving cash flow.

The fixed costs associated with your business must be reviewed critically and periodically to identify opportunities for cost reductions e.g., cosharing of office spaces, online marketing avenues for lead generations etc.

8. Negotiating Price

Though risky and non-viable at times, increasing the price of products and services can help small businesses garner more revenue. Similarly, price negotiations with suppliers can be initiated with strategies planned for a win-win situation. Implementing cost management and cost reduction incentives can also work well and can automatically translate into improved margins without entering into risky price increase with the customers.

9. Reducing Inventory

Reduced inventory can drastically improve liquidity within a system by unlocking a great deal of money. Reduced inventory also helps in reducing wastages and operating cost of the business. For manufacturing MSMEs and Startups, Just In Time (JIT) inventory management system has been hugely successful all over the world.

10. Technology

Last but not least, present-day technologies can help MSMEs and Startups to solve their cash flow puzzle to a great extent. Expense report software for expense management automation and credit card reconciliation. Time tracking software for optimizing staff, Inventory monitoring software for optimized inventory, online payment for speeding up receivables processing, automatic expense monitoring, etc., can help manage cash flow better.

Takeaway

More than 60% of small businesses fail to see the day of light due to imprudent working capital handling and poor cash flow management. In simple terms, delaying cash outlays as long as possible and collecting cash from customers as quickly as possible guarantee an efficient cash flow management system.

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UAE New Trust Law and Tax Planning for Wealth Optimization
  • Newsletter, U.A.E

UAE New Trust Law and Tax Planning for Wealth Optimization

Overview

Trusts are most popular for estate and wealth planning and can be used as a planning tool for both tax and non-tax reasons. UAE is a no income tax jurisdiction and with the introduction of recently introduced onshore trust law may become the strongest competitor in establishing trust-based estate and wealth planning structures among the other no-tax jurisdictions. Foreign assets and foreign beneficiaries are allowed under the UAE Trusts Law. Trusts are also used as asset protection and succession tools.

What is UAE New Trust Law?

UAE witnessed a new Trust law during September last year to support the onshore wealth management sector when President Sheikh Khalifa bin Zayed enforced much needed Federal Law No.19 of 2020.

The undersecretary of the Ministry of Finance, Younis Haji Al Khouri announced in a press briefing noting, “The decree-law regarding trusts was an important addition to the UAE’s advanced legislative structure.” He also said, “The onshore Trust law supports the wealth management sector in the country and provides new mechanisms for managing companies and family funds. It also encourages the allocation of charitable trusts.”

It is noteworthy that two financial free zones in the country, the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), already have trust laws based on English common law. Now for the first time, the UAE government recognised the country’s vast onshore private wealth and has allowed this financial model within the onshore wealth management system.

A ministry official remarked that this new trust law will allow both onshore companies and individuals to transfer their wealth to a trustee through a special document which is recorded electronically to reflect the assets if movable or property. The deed will mention the settlor, trustees and beneficiaries and document the responsibility and authority of the trustee and the details of the property.

As per the ministry the new initiative ‘was an important addition to the advanced legislative structure of the UAE’ and will help the financial sector to integrate with global financial industries and be more competitive with new avenues for managing funds.

The necessary tools for administering the new trust law are already being implemented by the UAE government. The trust registry for family businesses has been established and is currently being done for private trusts.

Why did the UAE Government Pass the New Trust Law?

Legal financial products including private family trusts, real estate investment trusts, securities, investments and mutual funds are already familiar to the UAE citizens and there was already a public demand for such a law. Although these products were available in the two financial free zones, the trust arrangements didn’t effectively deal with and establish ownership over UAE onshore assets such as cash, securities, land and moveable assets.

This new law will hugely benefit the family-owned company as this empowers the founders to do succession planning for securing the future of their businesses, assets and descendants in the long run.

Besides dealing with the securities for charitable and private trusts on financial markets, the new law will also include retirement funds to provide financial security to the beneficiaries in exchange for contributions to trust once they cease to work.

The law will help bridge some gaps in the onshore legal system in the country and will accelerate developments in onshore laws and practices. The country’s financial legislation will be stronger and more effective.

Preservation and investment of huge capital within the country will also be assured with the introduction of trust law.

The law has been aligned with the regulatory structure and best practices of the wealth management industries in advanced countries strongly emphasising investor protection and will help increase the confidence of the investing community.

What are Trusts?

A trust structure is established when the settlor, legal owner of assets transfers legal ownership of those assets known as the trust property to an individual or a company called the trustee and for the benefit of some persons as the beneficiaries. Once established, the legal ownership of the trust property will lie with the trustee with beneficial ownership vested upon the beneficiaries.

There are different types of trusts including public trusts, private or family trusts or public cum private trusts based on the types of beneficiaries. However, trusts can also be formed without any beneficiaries for charitable and non-charitable purposes.

What are Foundations?

A foundation is based on civil law and is an independent legal entity with characteristics of both a corporation and a trust. It doesn’t have shareholders and there is a Council that manages the foundation following its charter and regulations.

There are mainly three types of foundations viz Charitable foundations, Private foundations and Corporate foundations.

How are Trusts and Foundations Taxed?

Tax treatment of trusts can be quite complicated because it is a legal relationship and straightforward taxation doesn’t apply as an individual or business entity. Though the trustee is the legal custodian of the trust assets, they essentially belong to the beneficiaries of the trust.

Trusts are treated as individuals in many tax jurisdictions and the trustee needs to file a tax return for the trust besides filing their tax return.

As a no-tax jurisdiction, UAE doesn’t levy any income tax on trusts. However, if a UAE trust has settlers, trustees and beneficiaries who are residents of high tax jurisdictions in other countries, the trust can be considered as ‘ deemed tax resident’ and would be liable for payment of tax and filing tax returns. The settlors of a UAE trust may be liable for gift tax.

As the resident status of trust is primarily determined by the residence status of the trustees, a UAE trust with trustees who are UAE residents can enjoy tax-free status. If a DIFC trust has trustees with a tax residency certificate in Dubai, the trust can earn tax free income even when the beneficiaries of the trust are not UAE residents.

As the foundation is treated as a legal person, taxation is relatively easier.  However, if a non-resident controls the foundation, the country of residence of the controller may be considered as the residence of the foundation.

Takeaway

Tax planning of a trust can be simple when both the trustees and beneficiaries are UAE residents. However, when they are residents of other tax jurisdictions, the trust deed must be documented and phrased very wisely and carefully for ensuring that the tax advantage is preserved. Similar measures must be followed for ADGM foundations as well.

Though UAE has reached DTAA agreements with many countries, most of these tax jurisdictions don’t mention taxation of trusts very clearly and comprehensively. Considering taxation of trusts as hugely complicated affairs, expert consultations are often recommended as a necessity.

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UAE Plays a Decisive Role in the Economic Integration of GCC
  • Newsletter, U.A.E

UAE Plays a Decisive Role in the Economic Integration of GCC

One of the main objectives of the GCC is the gulf economic integration as per provisions of Article IV of the GCC’s set of laws for achieving coordination, integration and interdependence among member countries in all fields through similar economic regulations, joint ventures and strengthening ties with private sectors including technological and scientific progress.

 

Gulf economic integration focuses on the movement of products, removal of trade barriers including coordination and unification of economic policies. Work is also in progress to complete the requirements of the Monetary Union and the issuance of a GCC single currency.

The UAE has always been a forerunner in the area of GCC joint integration and all the country’s achievements are documented in the statistical reports of the Gulf Cooperation Council General Secretariat. UAE is the first member state to permit GCC citizens to own real estate (76%) in 2013 and grant licenses for economic activities and company formation in Dubai. It also allows GCC citizens to work in its government sector, grants admission to GCC students to public education, and achieves a high volume of intra-regional trade of GCC countries.

The Minister of State for Financial Affairs of the UAE, Obaid Humaid Al Tayer met Dr Nayef Falah Mubarak Al-Hajraf, Secretary-General of the Gulf Cooperation Council (GCC) on 2nd August 2021.

The agenda of the meeting was to discuss measures for enhancing economic and financial cooperation between GCC countries, ensuring better economic integration, accelerating trade and promoting outputs delivered by the GCC Customs Union Authority (GCCCUA, established in 2003) and the Gulf Market Committee (GMC, established in 2008).

The Minister of State for Financial Affairs emphasized the crucial role that UAE played in boosting the economic, trade and developmental integration, and widening the scope of cooperation amongst the GCC member countries and solidifying the role of GCC countries in the decision-making process of the world economy.

Al Tayer noted that the Gulf Council plays the desired and necessary role in strengthening economic ties and strategic partnerships between the member countries. He also stressed the intentions of the Ministry of Finance for promoting relations between the UAE and other GCC countries for achieving planned developmental goals.

The Unified Economic Agreement of the GCC countries and its implementation is looked after by the Ministry of Finance of the UAE including joint GCC economic action, associated projects, financial integration, and the implementation of plans of the GCCCUA and GMC.

“Department of the Cooperation Council for the Arab States of the Gulf Affairs”, a specialized wing of the Ministry of Finance has been established and assigned the responsibility to keep a follow up on the effective implementation of projects for economic integration.

Implementation of policy frameworks as a measure towards strengthening and boosting economic and investment ties with the GCC countries has been discussed by Dubai UAE with particular emphasis on the enhancement of trade exchange. The framework was also designed to support the sustainability of the gains accomplished by the GCCCU and the Gulf Common Market.

Discussions were held between Obaid Humaid Al Tayer and Dr Nayef Falah Al- Hajraf on potential frameworks and ways for strengthening and accelerating economic and investment cooperation with the GCC member states.  The meeting convened on 2nd August 2021 was a result of efforts put by the Ministry of Finance for strengthening and extending support to joint GCC economic action and deciding on a common direction towards confronting international as well as regional changes in the economy.

Expanding on areas of co-operation and joint coordination among the GCC countries particularly in terms of the volume of trade exchanges that could confer the GCC region a distinguished position on the global economic decision-making map were also discussed during this meeting.

Al Tayer highlighted saying, “The Gulf Cooperation Council (GCC) plays a key role in consolidating the strong relations and strategic partnership between the member countries to enhance the Council’s march. The Ministry of Finance is keen to bolster the ties between the UAE and the GCC countries, to support the GCC joint action and meet its aspirations for development and prosperity.”

To strengthen and promote ways of economic and investment cooperation with various countries of the world, the UAE, represented by the Ministry of Finance (MoF) previously signed agreements with other countries as a GCC member state to strengthen its position across the world. As per the latest data and statistics, the total volume of the economy of all GCC countries is one of the biggest across the globe.

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Why is Well Designed Governance Structure Critical for Successful Family Offices in UAE
  • Newsletter, U.A.E

Why is Well Designed Governance Structure Critical for Successful Family Offices in UAE?

Overview

Universally recognised as overly complicated, Family Offices are run for many generations and greatly influenced by family dynamics and numerous business ventures, local and global investments, International business structures, trusts, foundations, real estate and other assets giving rise to a great number of complexities.

With time, family offices expand due to increasing numbers of beneficiaries through inheritances and the new and younger entrants bring in a plethora of conflicts of interests. Unless effective corporate governance is put in place, future decision making processes and maintaining harmony within the family becomes extremely difficult for a long and successful family business.

Corporate structures for family offices are often tailor-made as there is no single fit for the purpose that can control and manage these entities, ensure family unity in diversity and comply with all Family office regulations in UAE.

What is Corporate Governance?

Corporate governance is defined as a set of rules, regulations, policies and procedures that controls, directs and guides a business entity for balancing the interests of all the stakeholders including the community and the government as a whole. In the context of family offices, it governs every aspect of managing family affairs be it an investment, charity, business diversification, personal maintenance etc.

Though informal governance is sometimes practised for smaller family offices such as board meetings convened out of board rooms, well documented governing arrangements must be implemented for bigger family offices to effectively address the complex decision-making processes. As a family business grows, well-documented policies and procedures become inevitable to ward off family conflicts and navigate through unprecedented emergencies.

Why is good governance indispensable for UAE family offices?

Lack of transparent, ethical and well-accepted decisions can have serious consequences on a family business with growing conflicts and distrusts amongst family members and many lost business opportunities. A robust governing mechanism headed by a professionally credible board of directors can only make such decisions and steer clear of all family conflicts during major and bold moves in acquisitions, investments and other strategic issues.

A well established 4 P governing system encompassing people, process, performance and purpose can aid in achieving the following

Effective Conflict Resolution

Conflicts and disputes in family office environments emerge due to many reasons including differences in values, poor communications and interactions, poor performance, opposing interests, scarcity of resources, and personality differences and requires the management to timely and rapidly intervene before the conflicts can jeopardize the mission and objectives of UAE company incorporation.

A consensus-oriented responsive corporate governance with dispute resolution mechanisms and procedures can help the management eliminate conflicts to a great extent through improved communication, interaction and exchange of ideas and perspectives. The success of family offices is most often determined by the effectiveness of corporate governance and conflict management systems establishing a balance of interests of various stakeholders.

Smooth Succession Planning

For the preservation of family wealth, smooth and effective succession planning is crucial. However, it poses several challenges to family offices and is time-consuming considering the long time taken to strategize and formulate handing over the decision-making responsibility from a founder to the next generation. Most of the founders believe in short term fixes and prefer to keep the decision making process with themselves and are reluctant to transfer the power.

Good governance can instill business culture and promote values amongst the family members that help them understand the long term business goals and the necessity for the participation of the younger generation as early as possible facilitating smooth succession planning.

Reduced Risks of Fraudulent and Unethical Practices

As good governance creates an environment of values and cultures, employees develop the right behaviour and attitude to discriminate the right from the wrong. It helps the family offices to ensure that business is carried out openly and transparently and as documented in the ethics manuals and procedures with appropriate controls against fraudulent and unethical practices.

Improved Financial Performance

Good governance promotes the financial performance of family offices as it encourages systematic and strategic investment plans depending on the need and preferences and avoids adhocism. Fundraising also becomes easier for a business set up in Dubai when well-governed and in compliance with every law and regulation of the Emirates.

Business Continuity

With governance policies solidly implemented, family businesses can ensure continued operation even when business responsibilities are not directly assigned to any family members. It also helps to attract employees and retain them for long.
What are the attributes of well-governed family offices in the UAE?

Following are some attributes of well-governed family offices

  • A shared vision, mission and goal are most important for family offices for implementing major decisions eliminating conflicts and randomly taken decisions by the founder.
  • A tailor-made governing framework must be designed, developed and implemented as every family office is unique with varying objectives and scope.
  • An environment of open and transparent communications comes first even when the best governance system is implemented as disputes and conflicts can not be ruled out completely. An accommodative and participative policy fosters easy and effective communication and helps avoid pent up ill feelings and personality clashes.
  • A review mechanism must be in place to evaluate continuing suitability of the governance system for meeting the shared vision, mission and goal of family offices.
  • A resilient and flexible governance structure can help family offices in times of unforeseen circumstances without any serious adverse effects on business performance and sustainability.
  • A technology-driven governance structure can facilitate risk management, easy and interrupted communication amongst family members and fast decision making backed by information and data.
Takeaway
The success of family offices is determined by the quality of decision making backed by authentic data that can satisfy all family members and help protect the private family wealth for future generations. However, all family offices must understand and assess their core purposes before implementing a governance system and documenting the policies and practices.

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The UAE Cabinet Approves Registration of Marks under the Madrid Protocol
  • Newsletter, U.A.E

The UAE Cabinet Approves Registration of Marks under the Madrid Protocol

The long-anticipated approval of the UAE cabinet for joining the Madrid Protocol for trademark registration systems has been accorded recently and is likely to come in force by this year-end or early 2022.

To strengthen and promote Intellectual Property Rights, the authorities planned for using the International Madrid Protocol Administrative System that allows filing, registering and maintaining Trademarks in over 120 different member countries. Amongst the GCC nations, only Bahrain and Oman are presently a part of the Madrid Protocol.

The UAE Trademark Office (TMO) will only certify international applications and forward those to the World Intellectual Property Organisation (WIPO) electronically once the Madrid Protocol is enforced in the country.

The WIPO will then carry out the subsequent processes involved including conducting examination, goods or services classification, trademark registration, publishing the trademark in the International Gazette and notification to the designated countries.  There is usually a strict deadline given by WIPO within which the member countries of the Madrid Protocol must decide if the international trademark in their territories can be granted.

The International Trademark Registration normally takes around 18 months from the date of notification of the registration subject to no objection from individual designated members. The trademark will then be registered within the territory of that member in the same way as it gets registered directly with the local IP office.

Once the UAE joins the Madrid Protocol, UAE applicants will be allowed to obtain and protect their trademarks around the world through cost-effective and user-friendly procedures for trademark applications and registrations in many countries in a centralized manner.

What is the Madrid Protocol? 

The Madrid Protocol is a system of international registration of trademarks that permits the brand owners to apply and maintain protection in 124 countries through one single procedure. The levels of protection, however, can differ in different territories.

The Madrid System for the international registration of trademark rights in multiple jurisdictions is administered by the WIPO headquartered in Geneva.

The registration of Marks under the Madrid Protocol is cost-effective and the application can be done in one language. A cost savings of 30% to 40% may be realized compared to national filings.

What are the Benefits of Madrid Protocols? 

The use of the Madrid System for companies with a global presence provides several benefits including

  • Cost Savings potential
  • The simple and easy filing process
  • Streamlined management with centralized filing, registration and maintenance
  • Use of one language as per applicant’s choice
  • No need for local representatives in individual designated countries
  • Easy and less cumbersome documentation with minimum formalities e.g no requirement of POA
  • Provision for extension of geographical protection of an international mark as and when necessary for commercial interests, any new jurisdiction can be easily added
  • The examination period is fixed and finite either 12 months or 18 months
  • The application receives automatic protection whenever there is no objection raised
  • Country specific local representatives are not warranted if no objection is raised by national trademark authority or by third parties
  • Easy renewal of Trademark
  • Easy incorporation of Mark holder’s details

What are the Disadvantages of using the Madrid Protocol?

Though the Madrid Registration system offers multiple benefits, it also comes with its share of anomalies, complications and vulnerabilities, both in terms of the process and the protection offered.

  • Can only be extended to the member countries
  • As the registration is based on home filing for the initial five years, any cancellation or abandonment of the home filing renders the international registration automatically stands cancelled
  • Even if a mark is accepted in the home jurisdiction, it doesn’t necessarily mean that it would be accepted in every designated country in the Madrid registration application due to the non-circumvention of WIPO in local trademark laws
  • Response deadlines can be very short posing difficulties in timely action and appointment of local representatives for responding to actions
  • The wide variance in application processing time
  • Enforcement problems in countries where national trademark laws have not been revised to recognise the international registration system e.g. African continent
  • Also, some anomalies exist in certain key territories

What is the Process of Registration of Trademarks under the Madrid Protocol?

The following three important steps are involved in registering a trademark through the Madrid System.

Step 1: Application through Office of origin

An international application needs to be filed,  Form MM2 through the “home” IP or Trademark office  known as Office of origin, certifying your international application and forward it to WIPO online

Step 2: Examination by WIPO

WIPO carries out a formal examination of the international application and does not refuse or grant trademark protection. WIPO only checks the information provided in international applications. Once the application complies with the requirements of WIPO, the Mark is recorded in the International Register and subsequently published in the WIPO Gazette of International Marks making the applicant the holder of an International Registration.

WIPO then sends a certificate of registration with a notification to the IP Offices in all the territories where the applicant wishes to have the trademark protected and as given in the international application.

Step 3: Substantive examination by national/regional IP offices

Once notification is received from WIPO, the IP offices of the territories where protection is sought conduct a substantive examination of the trademark as per the prevailing trademark laws in those territories. Every individual territory through its IP office decides if the trademark can be protected in that territory or not. It usually takes around 12 to 18 months.

WIPO then sends an intimation informing the decision of the individual territories. In case trademark protection is refused by any territory either totally or partially, this will not affect the decisions of other IP offices.

If trademark protection is accepted by an IP office, it states a grant of protection. The international registration of trademarks bears a validity of 10 years in each designated territory making the registration renewal through the Madrid System compulsory every 10 years.

Specialized online tools and resources are made available by the Madrid system to facilitate the filing and management processes of an international trademark registration providing complete control to the trademark holder at every stage of the lifecycle of the trademark.

How does a company decide on the Madrid System?

All companies with global operations usually eye for access to foreign markets with huge business potential such as India, China, the US and Japan and the Madrid Protocol can play a pivotal role in realizing this ambition by enabling these companies to cost-effectively register trademark rights in these member countries. 

The following considerations however must be made before the start of the application process for determining the cost benefits and effectiveness of brand protection.

  • If a company is aiming for registration in only one or two countries, national filings may be cheaper compared to this all-inclusive international protocol.
  • The requirements of this protocol are stricter in some countries and may cost the companies more.
  • In some countries, the IP rights obtained through this protocol may be more vulnerable compared to national registration.
The Fine print

Despite some challenges, anomalies and inconsistencies present in the registration process, the Madrid Protocol is a mature, effective and widely accepted system for getting IP rights in many international jurisdictions simultaneously. It follows a year-long developed solid trademark registration strategy enabling brand owners protection of rights in many territories affordably.

The UAE trademark owners will certainly derive lots of opportunities to build and expand their brands in the international market. It is believed that the recent approval of the Madrid Protocol will stand Dubai and the UAE in good stead in IP protection and international recognition.

At IMC, we are closely monitoring all the developments in the UAE IP system and will be more than happy in providing our professional and expert services to our clients in this regard.

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UAE FTA Announces Amendments in Administrative Penalties on Violations of Tax Laws
  • Newsletter, U.A.E

UAE FTA Announces Amendments in Administrative Penalties on Violations of Tax Laws

VAT was introduced in the UAE with effect from 1st October 2017 and 1st January 2018, respectively. The common tax procedures documenting the rights and obligations of the Federal Tax Authority (FTA) and the taxpayers have then been developed and specified in Federal tax procedures legislation, the Federal Law No. 7 of 2017 on Tax Procedures called “FTP Law” and applicable to all Federal taxes under the jurisdiction of the tax authority.

The number of violations subject to administrative penalties has been specified in Article 25 recommending that each of such penalties must be more than 500 AED but not exceeding three times the amount of tax on which the penalty is imposed.

The UAE Cabinet has announced Decision No. 49 of 2021 on 28th April 2021, making amendments in some of the administrative penalties applicable on the violations for assisting businesses in the country. The amendments included reduced tax and increased clarity on the redetermination of penalty levied as per the old penalty regime of 2017.

A summary of Amendments made on Violations and Administrative Penalties related to the Implementation of Federal Law No. 7 of 2017 on Tax Procedures made the following two areas.

  1. Reduction in Tax
  2. New Mechanism for Tax determination

Reduction in Tax

Reduction in Tax has been made on Violations and Administrative Penalties in relation to the

  1. Implementation of Federal Law No. 7 of 2017 on Tax Procedures
  2. Implementation of Federal Decree-Law No. 7 of 2017 on Excise Tax, and
  3. Implementation of Federal Decree-Law No. 8 of 2017 on Value Added Tax

The amendments made in reducing taxes are summarized below

1. The failure of the person conducting business to keep the required records and other information mandated in the tax procedures Law and the tax law. 10,000 AED for the first time and 20,000 AED if repeated

2. The failure of the taxable person to issue a tax Invoice or the alternative document when making any supply 2,500 AED for each detected case.

3. The failure of the taxable person to issue a Tax Credit Note or alternative document 2500 AED for every case detected

4. The failure of the taxable person in meeting the conditions and procedures in relation to the issuance of a tax invoice and a tax credit note electronically 2500 AED for each case detected

5. The failure of the taxable person in displaying prices inclusive of tax 5000 AED

6. The failure of the Taxable Person to provide the Authority with the price lists of the Excise Good that it produces, imports or sells 5,000 AED for the first time and then AED 10,000 in case of repetition.

7. The failure of the Legal Representative of the Taxable Person to inform the Authority of its appointment as Legal Representative within the specified time frame (the Penalties will be due from the Legal Representative’s funds) 10000 AED

8. The failure of the Registrant to inform the Authority of any circumstance that requires the amendment of the information about its Tax record kept by Authority 5,000 AED for the first time and then 10,000 AED for every repetition

9. The failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law 10,000 AED

New Mechanisms

New Mechanisms have been announced on Violations and Administrative Penalties related to the Implementation of Federal Law No. 7 of 2017 on Tax Procedures and are as under

1. The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law.  

1,000 AED in case of delay, and on the same date afterwards every month, up to a maximum of 10,000.

2. The failure of the Taxable Person to settle the Payable Tax stated in the submitted Tax Return or Voluntary Disclosure or the Tax Assessment he was notified of by the Authority, within the specified timeframe

The Taxable Person shall be obliged to pay the penalty applicable to late payment of Payable Tax up to a maximum of 300% as mentioned below 2% of the unpaid tax shall be due on the next day of the due date 

A 4% monthly penalty is due after one month from the due date of payment on the Tax amount unsettled at that point in time

The due date of penalty payment for Voluntary Disclosure and Tax Assessment shall be

For voluntary disclosure, 20 business days from the date of submission

For Tax assessment, 20 business days from the date of receipt

3. The submittal of an incorrect Tax Return by the Registrant

Fixed penalty as mentioned below shall be applied:

1,000 for the first time

2,000 if repeated

If the incorrect Tax Return amounts to Tax difference less than the fixed penalty, a penalty equal to the Tax difference of at least 500 AED shall be levied

Anyone correcting their Tax Return before the due date of payment shall be excluded from the penalty imposed

4. The submittal of a Voluntary Disclosure by the Person/Taxpayer on errors in the Tax Return, Tax Assessment or refund application will attract penalty as below

a percentage-based penalty on the difference between the inaccurately calculated Tax and the correct tax which should have been and as per the following

5% on the difference if submitted within one year from the due date of submission

10% on the difference if submitted in the second year

20% on the difference if submitted beyond the third year

30% on the difference if submitted in the fourth year

40% of the difference if submitted beyond the fourth year

5. The failure of the Taxable person to voluntarily disclose an error in the Tax Return, Tax Assessment, or refund application will attract penalty as below

A penalty of 50% on the amount of error

A penalty of 4% for every month or part of the month, of the following:

The unpaid Tax to the Authority, from the date the payment is due for the relevant Tax Period until the date of receipt of the Tax Assessment.

The Tax that was not returned to the Authority due to ineligible refund, from the date of Tax refund until the date of receipt of the Tax Assessment.

6. The Registrant if fails to calculate Tax on behalf of another person where the Registrant Taxable Person is obliged to do so under the Tax Law is imposed with penalty as under

The Registrant is responsible for paying the penalty applicable to the late settlement of Payable Tax up to a maximum of 300%, according to the following:

2% of the unpaid tax is due on the day following the due date of payment, where the settlement of Payable Tax is late.

A monthly penalty of 4% is due after one month from the due date of payment on the unsettled Tax amount as on that date.

The due date of payment for this penalty in the case of Voluntary Disclosure and Tax Assessment shall be as under

20 business days from the date of submission, in the case of a Voluntary Disclosure.

20 business days from the date of receipt, in case of a Tax Assessment.

We, at IMC can assist you with our expertise in UAE Tax Laws and provide professional advice on the impact of the public clarification on your business and suggest ways that are best in ensuring compliance with the requirements of FTA.

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Both the EU and the Indian Government are Enthusiastic to Resume FTA Talks
  • India, Newsletter

Both the EU and the Indian Government are Enthusiastic to Resume FTA Talks

Both India and the EU are seen as enthusiastic to resume long-awaited talks on a bilateral free trade agreement that was on hold for almost eight years. Fresh negotiations are expected to focus on key issues including access to each other’s markets for goods and services, investment protection and geographical indications. The commerce minister announced the Indian government’s plan to revive talks in September 2020 and was further confirmed during the India-EU leaders’ Meet in May 2021.

The introductory talks on broad-based trade and investment agreement (BTIA) are likely to begin in September after being suspended in 2013 due to non-agreement between the two parties over issues including reduction of import duties on automobiles and alcohol; greater access to the financial services market by Indian companies and; higher mobility for Indian professionals in the European countries by liberalizing the visa regime.

The BTIA will be based on initial recommendations from industry groups. As per the Trade Policy Council of India, the trade deal will be beneficial for the country.

For the EU, this will be the first such FTA with an emerging economy.

The Indian government has been eager to restart the trade negotiations as it wants to establish trade pacts with countries that are not under Chinese influence. The ” Make in India” and “Atma Nirbhar” campaigns to put India as a regional leader and global manufacturing hub are also one of the reasons for initiating talks on trade agreements. Economically, a well-negotiated FTA will promote trade and investment flows and would attract European businesses for company formation in India.

On the other hand, the EU is willing to re-establish strong economic and trade ties with India through the BTIA especially after Brexit and wants to strengthen its role in governing global trade. For Europe, the FTA would provide access for EU businesses to the huge Indian market of more than 1.3 billion people including vast skilled resources and cost-competitive professional services e.g. accounting and payroll services in India.

According to the European Commission, the EU is the third-largest trading partner of India, accounting for 62.8 billion euro worth of trade in goods in 2020 which comes as 11.1% of total Indian trade, after China, 12 % and the US, 11.7 %. The UK was the largest trading partner among all the European nations and accounted for bilateral trade worth 12.29 billion dollars with India in 2020-21. Trade-in services between the EU and India touched 39.78 billion dollars in 2020.

Export promotion councils in India have been advised by the Commerce Ministry to identify sensitive areas and product & service types requiring protection including those needing greater access to the EU market. Besides the Export Promotion Councils, several industry bodies including CII, Ficci and the FIEO have also been asked to offer recommendations.

Arpita Mukherjee, a trade economist of the Indian Council for Research on International Economic Relations (ICRIER) spoke favourably for a mutually beneficial trade agreement however commenting “I do not think that the negotiations are less complex now and we need to be prepared for the negotiations. There are new areas of negotiations like e-commerce or public sector enterprises or carbon tax. India needs to have industry consultations and conduct research to develop a position that is beneficial for the country.”

“There are some sectors where both India and the EU had reached a consensus when they decided to put the negotiations on hold in 2014. These include reduction in tariffs in many products, for example, zero for zero in case of apparels,” she remarked.

Mukherjee also highlighted saying “It may be easier to move forward if such sectors are not opened up again for tariff discussions. Some issues that India had raised earlier like intra-EU labour mobility-related issues have been addressed by an EU Directive.  This can be resolved easily.”

“India has discontinued its bilateral investment treaties with the EU member states and hence the focus of the EU is to have a clear and transparent investment agreement. The EU may look at EU-China as a model investment agreement to be replicated with India and the Indian side needs to see whether we are ready to discuss issues like public sector enterprises, and subsidies,” she added.

More than 15 rounds of talks had happened on the BTIA over 6 years from 2007 and 2013 however couldn’t be concluded as India chose to discontinue the then-existing bilateral investment treaties (BITs) in 2016 with 23 EU nations. The EU though asked India to let individual agreements remain enforced until a new deal is struck.

The Indian government has made it clear that all future negotiations on trade and investment need to be negotiated under the model BIT framework issued in 2015 that would refer to individual deal agreements with other countries.

The FTA should be a win-win for both India and the EU and help promote the benefits of globalization which have been adversely impacted due to geopolitics over the last two decades.

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BRICS Roundtable Meeting for MSMEs to Boost Trade and Economy
  • Newsletter

BRICS Roundtable Meeting for MSMEs to Boost Trade and Economy

Brazil, Russia, India, China, and South Africa together represent BRICS, the acronym associated with the top five emerging economic blocs in the world. Economists believe that due to the low operating and labour cost prevailing in these countries, they will become the major suppliers of raw materials, goods and services by 2050 primarily led by the micro, small and medium enterprises (MSMEs).

A virtual BRICS MSME Roundtable meeting was held on 22nd July 2021 by the Ministry of MSME, Government of India. Shri BB Swain, the Secretary of MSME chaired the meeting.

The vision of BRICS nations on the Post-Covid Roadmap for the growth accelerating sector was the main focus of the meeting.

The Government and private sector of all BRICS nations participated in the roundtable conference which was also attended by more than 200 people from industry associations, and MSME tool rooms.

Secretary MSME while addressing the roundtable highlighted the need for an immediate future roadmap to sustain and accelerate the growth of the MSME sector post-Covid pandemic. He also emphasized the preparation of a guide for creating a conducive business climate for benefitting the MSMEs.

The SME Joint-Secretary stressed upon assessing the degree of damage caused by covid 19 on MSMEs as well as the covid response policies and programs of the government for protecting MSMEs.

Co-Chair CII, National MSME Council made presentations on ‘way forward in mitigating losses from COVID-19’ and ‘post covid strategies for MSMEs development’.

Deputy Managing Director of Export-Import Bank of India, and President of India SME Forum discussed ‘Integration of MSMEs in Global and local value chains’ and ‘Role of digitalization for MSMEs in post covid 19 scenario’. They also threw light on appropriate government measures for digital transformation and ways to leverage the BRICS forum for enhancing the development and growth of MSMEs.

Series of presentations were made by both the Government and private sector of BRICS Nations during sessions scheduled separately by the concerned senior officials from the Government and private sector.

Brazilian delegates spoke on policy implementation for mitigating the adverse economic impact of the pandemic. They also talked about various programs launched for productivity improvement and increased competitiveness of Brazilian MSMEs.

Senior functionaries from Russia were also present during the virtual conference and highlighted the intermediate results of the National SME support measures of the nation. They also discussed support measures specifically meant for the digitalization of MSMEs and their integration into the global value chains.

Chinese delegates highlighted the country’s supportive policy measures implemented by the government to alleviate the disastrous economic effects of pandemic on the MSMEs.

South African representatives made a comprehensive presentation encompassing all the important aspects of this Roundtable conference along with the actionable strategies for promoting the MSME sector during post-Covid-19. The promotion of global value chains and digital transformation of MSMEs was also talked about by the delegates.

India’s planned strategies and timely actions were seen as most relevant in the existing situation and were appreciated by other BRICS nations who also deliberated their support for working together towards the economic upliftment of the MSMEs.

The BRICS nations also agreed for a trade fair to be held from 16th to 18th and decided on the remaining workshop on August 13 2021. “To deepen and strengthen the trade and economy, the events proposed by India were agreed by the BRICS Members,” added the Commerce Ministry spokesperson.

The Contact Group on Economic and Trade Issues (CGETI), of different groups of BRICS, was given the responsibility for economic and trade matters. India made certain proposals on the MSME sector and these were deliberated by the members during the meeting of CGETI held between 12th to 14th July.

The proposals made by India included BRICS cooperation on the multilateral trading system, BRICS framework for ensuring consumer protection in e-commerce, non-tariff measures resolution mechanism, cooperation framework for the protection of genetic resources, traditional knowledge, and traditional cultural expressions.

“BRICS members agreed to take forward India’s proposals to finalise them before the BRICS Trade Ministers meeting to be held on 3 September 2021, to be chaired by Piyush Goyal, the Commerce and Industry Minister,” the Ministry spokesperson highlighted. India is charing BRICS in 2021.

The Indian MSME sector typically contributes about 30% to the country’s GDP and 48% to exports. It also generates the largest employer in the country only being second to the agriculture sector. However, the two pandemic years, 2020 and 2021 have been exceptional and faced many economic challenges.

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