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India, Newsletter

India’s FM Assigns Rs. 900 Cr Debt-Funding for MSMEs

February 13, 2020

India’s Finance Minister Nirmala Sitharaman presented the Union Budget 2020 and announced an array of schemes and steps for micro, small, and medium enterprises (MSMEs) and for small businesses. Budget 2020 proposes to give a push to the manufacturing of electronic equipment, mobile phones, and semiconductor packaging. The FM also said that this could also be utilized for uplifting the manufacturing of medical devices.

In Jan this year, the Union MSME minister Nitin Gadkari had mentioned that his department had a plan to establish five parks for manufacturing low-cost medical devices in India. A National Technical Textiles Mission has also been announced in the Budget 2020, which would have a four-year execution period with an outlay of Rs 1,480 crore. The FM said that a National Logistics Policy would also be soon released to form a single window e-logistics market and ensure that the MSMEs become competent. In addition, for achieving a higher export credit, soon a new scheme would be launched to offer higher insurance cover and lessen the premium particularly for small exporters. It would also ease the process of claim settlements.

The FM also stressed on the goal to make every district as an export hub. For this, she announced the launch of the Nirvik scheme to enable export tax disbursement, which has an objective of making loans simpler to access for exporters and also ease the lending procedure. The Commerce Minister Piyush Goyal announced Nirvik in September 2019, which is a New Export Credit Insurance Scheme (ECIS) by Export Credit Guarantee Corporation of India (ECGC). The ECGC offers credit guarantee of almost up to 60 percent loss, however, under Nirvik scheme, the insurance cover which is guaranteed would cover almost up to 90 percent of the principal, including the interest of loans, and would also include pre and post-shipment credit. Another announcement was that a unified procurement system will be created on public procurement portal Government e-Marketplace.

This declaration is not completely new as the Commerce Ministry earlier launched GeM in August 2016 with the aim of developing an open and transparent platform of procurement for the government. In September 2019, it was said that GeM is working towards a series of steps like creating a mechanism to ensure timely payment to all the registered small businesses and MSMEs, and a process for rating buyers and sellers for promoting its growth. Now in the Budget 2020, the FM said that a digital platform would be established for seamless process of application and capturing of Intellectual Property Rights (IPR). But, it was not clear if she was talking about the website and mobile application Learn to Protect, Secure and Maximise Your Innovation on Intellectual Property Rights (IPRs) that was launched in October 2019.

The website and app was developed by Cell for IPR Promotion and Management (CIPAM)-DPIIT in partnership with Qualcomm and National Law University (NLU), Delhi.

GST and Debt Funding

The FM also announced a scheme for subordinating the debt to MSMEs. She advised the banks to extend restructuring MSME NPAs for an additional year, which earlier had a timeline of March 2020.

She also said that an app-based product which will invoice financing loans would be launched to improve the challenge of delayed payments and also cash flow disparities for MSMEs. She assured that some amendments would be made to facilitate the NBFCs to offer invoice financing to MSMEs. In January 2019, the RBI had permitted the recasting of loans to MSMEs only under the pre-requisite that the total fund and the non-fund based exposure to the MSME borrowers is not exceeding the limit of Rs. 25 crore.

The FM also mentioned that the implementation of GST had helped MSMEs in a big way. However, leading up to Budget 2020, various MSMEs weren’t too happy with GST and voiced their expectations regarding GST. The streamlining of GST was one of the top challenges for the MSME sector, a section that is the backbone of the Indian economy as it contributes almost 29 percent of the nation’s GDP. MSMEs had anticipated the Union Budget 2020 to tackle the rationalising of GST slabs, enhancing the GST refunds system, and dealing with export issues caused due to GST. In Budget 2020, the FM allocated Rs 2.83 lakh crores particularly for agro and allied sectors comprising rural development, irrigation, and Panchayati Raj. The Agri credit target was proposed at Rs. 15 lakh crore.

The budget also recommended comprehensive action-plan and steps for water-stressed districts. Approximately 35 lakh farmers would be helped to set up their stand-alone solar pumps so that they can make a living even in their barren lands. The budget also concentrated on offering 152 million metric tonnes of warehousing facilities.

Newsletter, Singapore

Technology Transformation Brings About an Ocean of Opportunities in South East Asia

February 13, 2020

As more and more organizations are turning to technology to enhance their operational efficiency and serve their customers better, South-east Asia comes up with new opportunities for Singapore companies who are looking at expanding in the region or doing company formation in Singapore.

According to a recent survey, 76 percent of organizations who wanted to expand were wishing to enter in the Asean region. The top three destinations for doing business as per the survey were Vietnam, Malaysia and Indonesia. Meanwhile, another report showed that Singapore companies opted for Indonesia as the second most significant growth market globally (16 percent), after China, in the coming three to five years, whereas Malaysia (15 percent) ranked third.

Growing interest in the region can be seen amid fast technological advancement which is rapidly changing the way consumers behave.

In the last four years, the number of people using Internet in South-east Asia has gone up by 100 million — out of which most are aged 15 to 19. “As more of these young, digital-savvy and mobile-first South-east Asians come of age over the next 15 years, they will further fuel the growth of the region’s Internet economy,” stated a survey report in 2019.

The report also projected that the region’s Internet economy is going to triple by 2025, reaching almost US$300 billion, with Indonesia and Vietnam as top players.

Fostering digital transformation

Riding this trend, regional companies are driving digital transformation to further enhance their operational efficiency and serve digital-first customers in a better way.

“Companies in retail, e-commerce, logistics and transportation have really felt the push to provide the best online experience for customers in comparison to other alternative services, and that has been a great impetus for them to change,” said Evan Tan, chief of staff, Holistics Software.

Holistics offers a data analytics platform for firms to prepare and manage their databases, said that more than 50 percent of its existing customers are from South-east Asia. It has assisted an Indonesian Artificial Intelligence (AI) chatbot company to get access to internal big data sources without needing a technical team, and thus, improving the organization’s operational efficiency.

This keenness to try new technologies by regional firms was not common few years ago.

Indonesia in particular is quite open to try new technologies and also has improved digital infrastructure and huge e-commerce potential. Being the biggest in the region, Indonesia’s Internet economy was projected at US$40 billion at its gross merchandise value in 2019. It is likely to further go up to US$133 billion in the year 2025.

“Singapore is a good place for us to do initial research and development, and prototyping,” ViSenze’s Mr Tan said. “But when you need to scale very quickly, you need big consumer markets.”

ViSenze announced a partnership with Samsung Electronics in February 2019 in South-east Asia and Oceania, which would enable Samsung consumers to find products online along with real-life images or current pictures via Bixby Vision Shopping.

Shobhit Shukla, who is the chief revenue officer and co-founder of Near, was quite surprised by the huge technological transformation in the region.

“South-east Asia actually completely skipped an entire generational development,” said Mr Shukla. “Connectivity by 4G and 5G and smartphones help them bypass the broadband (stage) into the smartphone (stage). Who would have thought that companies like Gojek would emerge in a developing economy?”

Near is a Singapore-based AI platform which is tasked with analyzing data to comprehend the real world behavior of consumers. Fascinatingly, though more brick and mortar firms in South-east Asia are beginning to start their journey into e-commerce, all established e-commerce players are also now building their offline capabilities.

These firms are eager to better gauge their consumers, and thus there is a growing requirement for data to join the dots between the consumers’ online and offline behaviour and to offer a 360 degree outlook of the consumers.

Available opportunities for logistics players

The logistics sector is also vigorously planning to utilize technology in its operations. Demand for new technology solutions have risen as Southeast Asia strives to enhance its connectivity to foster the mobility of manpower, other resources and technology, even as it is weighed down by an infrastructure gap.

Regional governments have also announced projects to enhance infrastructure and trade, for example, Thailand’s Eastern Economic Corridor (EEC) and the China-led Southern Transport Corridor that connects China to Asean.

These initiatives offer golden opportunities for various Singapore’s investment and logistics firms to back new establishments and manufacturing activities in this region and go for Singapore company incorporation.

The Vietnamese government is also encouraging investors to offer their technical expertise and experience in project management particularly in infrastructure projects for helping to speed up their development.

Indeed, YCH, a Singapore-based logistics giant, mentioned that after a memorandum of understanding was signed in 2018, it is collaborating with T&T Group, a Vietnamese multi-industry conglomerate, for building Superports in Hanoi, Ho Chi Minh City, and may be also in the Philippines this year.

These Superports, which would be connected to all major rail, road, and freight networks, are likely to use new technology for coordinating cargo movements and to build an effective network for distribution inside the cities and beyond.

The Superport project by YCH and T&T would enable promoting infrastructure development and in addressing the requirement for a chain of distribution centers located in the Southern Transport Corridor.

Newsletter, U.A.E

Foreign Civil Decrees Passed by U.A.E. Courts Are Now Enforceable in India

January 22, 2020

Foreign Civil Decrees Passed by U.A.E. Courts Are Now Enforceable in India The Indian Government has advised in a recent notification that foreign civil decrees which are passed by the courts in the UAE are allowed to now be executed in India.

For this purpose, the Central Government has given a notification that it accepts UAE as a reciprocating territory for enforcing any foreign civil decrees in India, in tandem with Section 44A of the Code of Civil Procedure (CPC).

“In exercise of the powers conferred by Explanation 1 to section 44A of the Code of Civil Procedure, 1908 (5 of 1908), the Central Government hereby declares, United Arab Emirates to be a reciprocating territory for the purposes of the said section.”

Government Notification released on January 17, 2020

This implies that decrees which are passed by any courts in the UAE will now allowed to be executed in India, similarly in case if they were passed by any Indian civil courts.

The manner for bestowing such a status to any foreign civil decrees has been described in the Section 44A of the CPC, and it states,

“Execution of decrees passed by Courts in reciprocating territory. (1) Where a certified copy of decree of any of the superior Courts of any reciprocating territory has been filed in a District Court, the decree may be executed in India as if it had been passed by the District Court….”

The specification further stipulates the mode in which the foreign decree must be filed. In any cases where such a special recognition of foreign decrees is conferred only on the decrees which are passed by courts located in reciprocating territories, which had to be so announced by the Government Notification. Regarding this, the initial explanation to Section 44A, CPC, mentions,

“Reciprocating territory’ means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of this section; and “superior Courts”, with reference to any such territory, means such Courts as may be specified in the said notification.”

Therefore, the Central Government has advised that the civil decrees passed by any of the following UAE courts may be now executed in India, that is,

Federal Court

Federal Supreme Court;

Abu Dhabi Judicial Department;

All Dubai Courts;

Ras Al Khaimah Judicial Department;

Courts of Abu Dhabi Global Markets;

Courts of Dubai International Financial Center.

Federal, First Instance and Appeals Courts located in the Ajman, Emirates of Abu Dhabi, Sharjah, Umm Al Quwain and Fujairah;

For more information, please contact us at [email protected] and one of our consultants shall get in touch with you. You can also visit our website at www.intuitconsultancy.com

India, Newsletter

Cabinet Approved a Plan for Review of Foreign Direct Investment (FDI) Policy on Single Brand Retail Trading, Digital Media, Contract Manufacturing, and Coal Mining

January 13, 2020

In 2019-20 Union Budget, the Finance Minister has recommended to further consolidate all the gains under FDI so as to make India a more appealing FDI destination. Going steady with its reform policy, the Union Cabinet has recently approved the plan for review of FDI Policy on various sectors on 28 August 2019.

The major highlights of the FDI Policy reform are as follows:

Single Brand Retail Trading (SBRT)

For offering enhanced flexibility and ease of operations in the SBRT sector, the below listed norms have been eased:

In case of SBRT firms with over 51% FDI, all procurements done from India by such SBRT firms for that single brand are going to be counted in the local sourcing of 30% bracket, regardless of whether the products obtained are sold in India or are exported outside. In addition, to give an push to exports, current limit of considering exports for five years only has been eliminated;
‘Sourcing of goods from India for global operations’ could be done directly now by the firm conducting SBRT or its resident/non-resident group companies, or can be done indirectly by them via a third party with a legally-tenable agreement;
Additionally, complete sourcing from India for all the global operations would be considered for local sourcing requirement (with no incremental value);
Retail trading done through online trade could be undertaken before opening of brick and mortar stores, but this has a condition that the entity should open brick and mortar stores within two years beginning from the date of starting their online retail.

Contract Manufacturing

As of now, 100% FDI is allowed under automatic route in the manufacturing sector. There is no particular provision for contract manufacturing mentioned in the FDI Policy. To give more clarity on contract manufacturing, a decision has been taken to allow 100% FDI under automatic route in contract manufacturing. Now, manufacturing activities could be performed either by the investee firm or via contract manufacturing in India with a legally-tenable contract, whether on Principal to Principal basis or Principal to Agent basis.

Digital Media

Extant FDI policy offers for 49% FDI under the approval route in Up-linking of various ‘News &Current Affairs’ TV Channels. Currently, up to 26% FDI under government route is allowed for uploading and streaming of various News and Current Affairs using Digital Media, on similar lines of print media.

Coal Mining

Currently, 100% FDI under automatic route is permitted for coal mining, especially for captive consumption by several power projects, cement, and iron and steel units and also for coal processing plants with the pre-requisite that the processing units would not do coal mining or selling in open markets. It has now been decided to allow 100% FDI under automatic route especially for selling coal, performing coal mining activities, which might also include associated processing infrastructure. Associated Processing Infrastructure includes activities like coal washery, coal handling, crushing, and separation (magnetic and non-magnetic).

Newsletter

Five Tips to Remember when Fundraising

January 13, 2020

Fund raising is on the wish list of every entrepreneur. With a maturing ecosystem, the capital supply is increasing; which in turn means that there are more opportunities for new entrepreneurs to get funds to set up or expand their start-up. So here the top points to remember while taking the plunge and for staying ahead in the game. If you are setting up a start-up in the region, then it will be at least an average of 5 to 10 years before you would think of exiting or closing your venture. And be it your first time or not, there are some factors that remain the same.

1. Concentrate on sustainable growth and prove the numbers

Which business set up doesn’t want to undergo exponential growth? However, there are hitches and pitfalls too, as we are noticing with Uber, WeWork, and many others – and due to this, the investors these days are vary of this. It is recommended to prepare a growth roadmap for at least 5-10 years, and have clear and well-defined goals and objectives for gauging your enterprise’s success.

Having said that, your business model should reflect accurate and convincing growth prospects, and your pitch should accurately display what steps you are planning to undertake for meeting your business goals. Ensure that they’re SMART goals, so that you can show growth year-on-year in terms of your anticipations and objectives.

2. Have clarity in your expecting from your investors and communicate that clearly

As an entrepreneur, you should first have an idea that you believe in, or have in-depth knowledge about. But there are many entrepreneurs who are open to taking ideas that investors want to give them. It is always better to have a clear idea but at the same time, be open to the advice of investors. If they think that a particular client would not be good, then ask why and handle the situation in a delicate manner, instead of pushing it further.

3. Confine your research to existing partners and their earlier deals

You could have a list of your priority investors as a starting point. As a next step, you should know about the earlier deals or investments made by them, and where their interest lies, where they were before, and if any of them is on their way out. This kind of information would help you in focusing your energies to target the right people at the right time.

Though, all the information is not easily available, you can collect some data from your network in the system.Therefore, it is very important to expand your network and remain in good terms with people around you.

4. The primary focus should be your relationship with the investor and not on his investment in your venture

Always remember that all the investors won’t say yes to you. Gracefully accept refusals, if any, so that while listening to their opinion, you can put your connection with them above the investment they are offering. This will help you earn respect from them and also keep your doors open for future prospects.

5. Respect the timelines and don’t lose your focus

Investors can be intimidating at times. But you should remember to design a strong business plan and have a strong mind. Maintain your confidence and don’t go under just because you want their investments. So first, you should get your business model perfect. This way, you’ll grow even without new investments, may be not that quickly though. While negotiating, stay in a position of power, but not in arrogance. And ensure to stick to your deadlines and communicate openly and professionally.

Africa, Newsletter

Top Five Investment Prospects in Ghana

January 13, 2020

The booming economy in Ghana can surely make you want to consider settling there and calling the place home. Ghana’s flourishing oil industry has also proven to be a huge additive to one of Africa’s most vigorous small and medium enterprise (SME) economies. It is also the continent’s most steady democracies, which is an added bonus. These are the reasons why Ghana has gradually become appealing to foreign investors.

Let’s take a look at some of the top opportunities this West African country has to offer for company formation in Ghana:

Telecommunications: Earlier in 2019, the mobile penetration rate in this country exceeded 100 percent. This does not essentially mean that every citizen has a mobile phone. While accounting for several sim cards or possession of multiple mobile phones, the country’s telecom insiders assess that the mobile phone ownership is reaching the 16 million mark. There is a huge opportunity for expanding the voice market, but tower managers along with telecom investors would notice the highest growth in data services.

Financial Services: The Banking Act in 2007 began the steps towards change in the financial services industry. Since then, the financial services in Ghana have upgraded tremendously. A flourishing economy and increasing incomes usually emphasize the potential of the financial sector. But this country has proven to have more potential than other nations in the region. Let’s take Cameroon for example. Though it has a parallel level of income, but Ghana still has more than twice the number of ATMs per head of its adult population. Benin, which also has a similar level of income, has only one-third of the banks per head of its adult population when compared to Ghana. Though the services have improved in this country, the new integration of banking ATMs in the nine banks in this country, (example in Zenith Bank, Standard Chartered Bank, and Ecobank) enables customers to utilize their bank cards at ATMs which are serviced by banks other than the card provider.
Real Estate: The real estate prices are blossoming in this country as the returns are good. However, the office or commercial sectors are inundated by poor management and also lack of capacity. Places like Downtown Accra and surrounding suburbs are realising an increase in construction as various developers perceive a rising influx of cash coming from foreign investors. Improvements in the areas like consumer financing and mortgages in the banking sector would also enhance the opportunity for commercial and residential real estate.
Industrial: Ghana is an industrial hub of the continent as it is way more advanced as compared to many other African nations. However, it is still far from its full potential. Pipeline manufacturing particularly for the oil and gas sector is not able to meet the demand on time and with required quality. At times, you just need the basic things to be manufactured without any hassle, says one industry insider, “but it is the small things that can slow up many projects.” Nevertheless, such kind of lamenting should not dissuade the foreign investors. Similar type of grievances have been also thrown around about some other industries. Every time such a complaint comes up, some anxious entrepreneurs are ready to resolve it, which is one of the biggest positive points of Ghana’s entrepreneurial makeup. Imports in agro-chemicals sector and related agriculture goods would slow over time as new businesses work to produce agricultural inputs locally. But Ghana has huge potential in car manufacturing, perhaps even electric cars. The development potential of gas liquefaction is also the talk of the town as the gas stations have ever-increasing queues. The potential of the industrial sector as a whole in Ghana is incredible, but it can only be grasped with more availability of capital.
Services: Ghana is in need of various services across the board, which is why this is also a good area for company formation in Africa. It requires several management-level education facilities such as nursing, finance, etc to be able to meet the rising demand in the nation’s private sector. The country’s medical services do not always provide high-quality care and that is why some foreigners and locals need to travel to other countries if they need specialized medical care. Information and communications technology (ICT) services are also not adequate to meet the intensifying demand and needs of private sector businesses, be it SME or big one like oil and gas. There has also been less investment in the above-mentioned sectors. However, great returns are possible, particularly if the investors can hook up investments to Ghana’s energy and mining boom.

Newsletter, U.A.E

UAE Plans to Ready Itself for the Next 50 Years in 2020

January 13, 2020

UAE Plans to Ready Itself for the Next 50 Years in 2020. UAE has announced 2020 as the year of preparing for the next 50 years. The Kingdom’s 50th anniversary also falls in the year 2021, marking 50 years from the historic union of the emirates.

In his tweets, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai announced and said: “Brothers and sisters. The UAE is approaching its fiftieth anniversary in 2021 and we want it to be the year of fresh-starts and new-beginnings. We will celebrate our country’s 50th anniversary and launch into another fifty. We will get ready for that in 2020. Next year will be the year of preparation for great strides”.

In yet another tweet, Sheikh Mohammed said, “Today, we announce 2020 to be the Year of Getting Ready for UAE’s 50th Anniversary. We will develop our plans, projects and thinking. 50 years ago, our founding fathers designed our lives today. So, we want next year to design the future of generations to come in the next fifty years”.

He mentioned that 2020 will be the year of getting ready and gaining momentum in the economic sector, infrastructure, education, health, and in the media sector. “In 2020, we will work together, Emiratis and residents, in all sectors… We are united and we can change the equations. We can raise expectations… We want 2020’s atmosphere to be similar to that of in 1970 when our founding fathers and their teams were preparing to embark on a new stage and new life” the Vice President said.

He further said, “I was there in 1970, the year of creating the union and will also be there in 2020, overseeing the team shaping the next fifty. There will be two committees. The first one will be chaired by Sheikh Mansour Bin Zayed and will be tasked with mapping out the development plan of the next 50 years. The other committee will include Sheikh Abdullah Bin Zayed and Sheikha Mariam Bint Mohamed Bin Zayed to oversee the celebratory activities of the country’s Golden Jubilee”.

“We are one team working in one spirit. We are fully optimistic that we have a promising future ahead,” he concluded.

In the meantime, His Highness Sheikh Mohamed Bin Zayed Al Nahyan, the Abu Dhabi Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, also announced that 2020 will be the year of preparing and making great strides towards the country’s 50th anniversary and also prepare for the next 50 years.

Sheikh Mohamed tweeted: “Today, I launched with my brother Sheikh Mohammed Bin Rashid the biggest national strategy for next year 2020. It will be the year of getting ready for the UAE’s 50th anniversary. It will be a red-letter year, during which we will make great strides economically, socially and developmentally aiming to be the best in the world in fifty years”.

He further added: “In the next fifty years, we will prepare all sectors for the post-oil phase, build a real knowledge economy based on innovation, creativity and modern science, and leave our imprint on the human civilization march. We will lay solid foundations to sustain development for future generations”.

The 50-year development plan committee

Sheikh Mohammed also announced the formation of a committee for creating a development plan for the coming 50 years. The committee, which would be chaired by Sheikh Mansour Bin Zayed Al Nahyan and Mohammed Abdullah Al Gergawi as his deputy, would have main agenda of preparing a complete development plan across the UAE and advancing the government administrative system with an objective to make the UAE the quickest and most adaptable and flexible government to future amendments.

The committee is also responsible for involving various segments of the society in shaping their life in the UAE for the coming 50 years. It would create a new economic map for the UAE and designing exceptional projects, guidelines and policies to make massive leaps in the country’s economy. It would also work to cement the soft power of the Kingdom and establish latest media systems for sharing the country’s new story with the world, thus bringing economic and social yields that safeguard its profits and increase opportunities in the new economy.

The committee is also responsible for developing key sectors such as health, housing, education, transport, and food security in the country to enhance future readiness. The committee would also create a broad vision of the UAE society in the coming 50 years that adapts family life, cultural identity and demographics to a rapidly-changing world.

It is also responsible to foster the ethics of productivity and passion for growth to prepare the new generation for any challenges and goals of the country in the coming 50 years.

Golden Jubilee celebrations committee

Sheikh Mohammed bin Rashid also announced directives to form a committee which would oversee the Golden Jubilee preparations.

The committee, which would be chaired by Sheikh Abdullah bin Zayed Al Nahyan and deputy Sheikha Mariam bint Mohamed bin Zayed Al Nahyan, would organize and manage remarkable celebrations to mark the momentous milestone in UAE’s history.

The committee would have a goal to govern the Emirates’ Golden Jubilee celebrations, develop a broad preparation plan and also form teams to organize various events and activities to celebrate the country’s 50th anniversary next year in 2021. It is also supposed to involve all the segments of the society for preparing for the Golden Jubilee celebrations.

The committee would also involve the private sector in preparing and executing the exceptional celebrations towards the Golden Jubilee and develop new plans to reinforce the global outreach and effect of the Golden Jubilee celebrations.

The committee would also compile a report of the Kingdom’s achievements since the federation and preserve the same for future generations. It is also going to involve embassies across UAE in the preparations and implementation of the Golden Jubilee celebrations for promoting the UAE’s global image.

The committee’s key duties also involve setting broad mechanisms for coordinating events and activities during the Golden Jubilee celebrations on both the federal and local level, creating local and international-level media plans for sharing the country’s journey of 50 years and also invite regional and international media to participate in the Golden Jubilee celebrations.

With all these dynamic changes, if you plan Dubai company incorporation or new business setup in UAE, this is the right time. We, at IMC, can assist you in your entrepreneurial journey and help you register your business.

Newsletter, Saudi Arabia

Why is Saudi Arabia the Most Appealing MENA Market for Retail Investments?

January 13, 2020

Why is Saudi Arabia the Most Appealing MENA Market for Retail Investments?, Saudi Arabia is the top-most and very appealing developing market for retail investment in the Middle East and North Africa (MENA) and also ranks among the top ten in the world, as per the 2019 Global Retail Development Index (GRDI).

The Kingdom has consumers spending about $125.5 billion annually on their shopping,out of which a large proportion of the residents spend on luxury labels. This is the reason that Saudi has risen up on the index and got the seventh rank globally, just after China, India, Ghana, Malaysia, Indonesia and Senegal.However, Saudi Arabia was ahead of Jordan, which got the 8th position, the UAE being on 9^th, and Colombia on 10th.

The latest ranking has been a huge leap from the 11th rank of Saudi Arabia in 2017,largely because of the continuing efforts by the government to launch new economic and social reforms, as part of the plan to give the country a makeover and attract more foreign investments.

From the time of launch of its Vision 2030 agenda in 2016, Saudi Arabia has executed various social reforms like easing travel restrictions for women, permitting women to drive, and making abayas optional. Many such reforms have also assisted the retail industry.

In 2017 end, a proposal to open hundreds of cinema theatres by 2030 was announced, which ended a 35-year-long ban on movies and cinemas. The GRDI is a bi-annual research or study of the retail industry in about 30 developing markets. It provides ranking to countries depending on “country risk”, their population and per capita gross domestic product (GDP), enabling retailers, consumer goods producers and global service providers comprehend which destinations are growing, and which are stagnant or declining, and the reasons for the same.

Among the numerous reasons that make this Kingdom an alluring destination for international investors is their huge population, and also their young demography that offers itself to the volume game.

In addition, Saudi Arabia has high per capita income which also makes it very lucrative. The concentration of high-net-worth (HNI) individuals adds up to make it an appealing destination for the retail luxury segment and Saudi company incorporation.

Saudi Arabia has a population of 32.9 million and is therefore considered the largest market in the Gulf Cooperation Council (GCC) region for consumer brands and over 58.7 percent of the people here are quite brand-conscious. Its female consumer base and ultra-high net worth individuals are expanding, while the religious tourism is also on the rise. Between the years 2012 and 2016, the retail sales recorded in Saudi Arabia grew from $85.3 billion to $114 billion.

With a focus on the large Saudi retail market, the consumer tech giant Apple has recently collaborated with Fawaz Al Hokair Co to establish their business in the kingdom. SPAR International, a Dutch food retailer that entered into the market in the year 2018 by affiliating with Saudi conglomerate Al Sadhan Group is working towards having their 40 stores operational by the end of 2020.

It’s not just global brands who are setting up their outlets in Saudi Arabia, but many are thinking of capturing a share of the huge online spending. As per some reports, online retail is expected to reach almost $10.2 billion by the year 2023, which is up from $6.3 billion in 2019. Big brands such as Ikea and Landmark Arabia have launched their click-and-collect service to reinforce their omnichannel presence, whereas the e-commerce retailers such as noon.com are working hard to expand their online presence.

So if you are looking for business setup consultants in Saudi Arabia, please get in touch with us and we would be glad to assist you.

Newsletter, U.A.E

Key Points of FAQ Regarding Economic Substance Regulations in the U.A.E.

January 13, 2020

In April 2019, the U.A.E. Ministry of Finance announced Cabinet Resolution No 31 of 2019 (Resolution) on Economic Substance Regulations (ESR). The regulation is an element of Kingdom’s commitment to the OECD inclusive framework.

As per the regulations, the U.A.E. onshore and free zone companies along with other U.A.E. businesses (collectively known as Licensee) that conduct any of the listed ‘Relevant Activities’ to maintain an acceptable economic presence in the country related to the activities.

In continuance to the above, the Finance Ministry of U.A.E. recently published a list of 41 Frequently Asked Questions (FAQs) for addressing the apprehensions of impacted companies in relation to ESR. Along with listing down the FAQs, the Ministry has also offered valuable guidance on what steps a Licensee should take before the end of a specific financial year to be able to meet the compliance requirements related to the regulations. As per the stated guidance, a Licensee should –

Evaluate what Relevant Activities were being or are likely to be conducted during the financial period while applying a ’substance over form’ approach;
Evaluate the amount and type of income that is earned from the Relevant Activity in that financial period;
Organise board meetings with a particular required number of directors’ present in the U.A.E. document the important minutes of these meetings;
Investigate all the expenses incurred;
Study and document main U.A.E.-based assets like premises, which is related to the Relevant Activity;
Maintain relevant documents like agreements or financial records which support the assets and expenses;
Examine roles and responsibilities of the staff towards the Relevant Activity;
Analyse applicable outsourcing agreements;
Any other facets that may help Licensee to prove adequate Economic Substance in the U.A.E. for a relevant financial period.

Questions	Answers
Which is the first reportable financial year?	Regulations apply to financial year that starts on or after 1 January 2019. For a U.A.E. company that follows January to December as their financial year, the first assessable period would become 1 January 2019 to 31 December 2019. But for a U.A.E. company that follows April-March financial year, the first assessable period would become 1 April 2019 to 31 March 2020.
Will these regulations only apply to entities in U.A.E. that are part of a global multinational group?	No. The regulations enforce Economic Substance obligations on any U.A.E. business which conducts a Relevant Activity, irrespective of whether the U.A.E. business belongs to a global multinational group. But in case of a U.A.E.-based Distribution Business, Headquarter Business, Service Centre Business, or High-Risk IP Business would remain within the scope of the regulations only if the U.A.E. company or firm is doing transactions with any foreign group companies.
Will a company that is registered under an ‘offshore’ free zone company regime be subjected to these regulations?	Yes. Regulation would apply to ‘offshore’ company in case it conducts a Relevant Activity.
Do the listed activities on the commercial license regulate whether a Licensee undertakes a Relevant Activity or not?	No. Though the commercial license might define the Relevant Activity, a ‘substance over form’ method should be used to decide whether a Licensee conducts a Relevant Activity and is within the scope of these regulations.
What happens if a Licensee does not conduct any Relevant Activity during a specific financial period?	The Licensee would not need to inform its Regulatory Authority nor is it required to submit an Economic Substance return for the applicable financial period.
What if a Licensee conducts a Relevant Activity, but is not able to earn any income from the same during a financial period?	Then the Licensee would only be required to submit a notification with the Regulatory Authority. Nevertheless, they would not be needed to file an Economic Substance return for the applicable financial period.
If the entire income from the Relevant Activity has been earned from outside U.A.E., then does the Licensee get an exemption from the Regulations?	No, this Licensee will not be exempted from the regulations. Any income from a Relevant Activity for which the Licensee needs to show Economic Substance return in the U.A.E. includes all income, inclusive of income generated by the Licensee outside of the U.A.E.
How is ‘adequate’ or ’appropriate’ economic substance defined?	The regulations and directive do not give a minimum standard for what is defined as adequate or appropriate. The Regulatory Authorities are supposed to take a realistic approach while assessing if a Licensee complies with the Economic Substance test, understanding that the type and level of activity of any Licensee might vary during the financial period and also from year to year.
Is the Economic Substance evaluated on a Licensee by Licensee basis, or can Licensees who are part of the same group chose to be evaluated on a ‘consolidated’ basis?	No. The regulations do not permit the Licensees who are a part of the same group to be combined for Economic Substance purposes. All the Licensees would have to comply with the regulations, and validate Economic Substance on an individual basis.
Are conditions for directed and managed applicable to Holding company business?	A Holding Company Business is not needed to be directed and managed in the U.A.E.; only exception is when this is a condition for the relevant licensing authority.
Is it necessary for the employees who conduct Core Income Generating Activities (CIGAs) to be the residents in the U.A.E.?	Yes, the employees who conduct the CIGAs of a Licensee would, be needed to be residents in the U.A.E. Any non-resident employees or other individuals would be counted towards the Economic Substance of a Licensee in the U.A.E. only if: the Relevant Activities are conducted while the individual is present in the U.A.E. physically, and under the supervision of the Licensee; and the Licensee is bearing the related costs of the non-resident individual.
Is it necessary the directors of the Licensee need to be resident in the U.A.E.?	No. Directors only need to be physically present in the U.A.E. to attend pertinent board meetings of the Licensee.
Can CIGAs or any other related activities be outsourced by the Licensee?	A Licensee is allowed to outsource any or all of its CIGAs as long as the outsourced activities are conducted in the U.A.E. However, a Licensee is not permitted to outsource activity of being supervised and managed, as the Licensee itself is needed to show oversight and control of the Relevant Activity in the U.A.E.. Activities that are not defined as CIGAs (like back office functions) could be outsourced to people located outside U.A.E. without negatively affecting the Economic Substance of the Licensee in the U.A.E..
Are investment funds dependant on the Regulations as a Holding Company Business?	No. An investment fund is not deemed as a Holding Company Business.
Is lending to any other group entity deemed a Lease-Finance Business?	Yes, a U.A.E. company that offers a loan or provides some other form of credit to a U.A.E. or any other international group company for deliberation, for example, interest would be deemed as engaged in a Lease-Finance Business.
Is doing investment and trading in debt securities deemed as undertaking a Lease-Finance Business?	No, all the U.A.E. company that invest and hold bonds or other debt securities which are traded on a regulated exchange are not deemed as engaged in a Lease-Finance Business.
What happens if there is no consideration payable for the credit given?	The Regulations are not applicable to credit and other financing and leasing provisions where there is no anticipation of consideration in the form of fees, interest, rental payments, capital gains or any other such form of payment. The grant of security which is in favour of the lender does not constitute consideration.

Newsletter, Qatar

Qatar Announces New Executive Regulations Regarding the Income Tax Law

December 18, 2019

Key highlights and next steps

Qatar has made an announcement about the Ministerial Decision No. 39 of 2019 issuing the Executive Regulations to the Income Tax Law (Law No. 24 of 2018). These Regulations were issued in the Official Gazette on December 11, 2019 and will be applicable with immediate effect and the earlier Executive Regulations are now annulled. The Regulations aim on revolutionizing the local tax administration regime to be in alignment with Qatar’s global taxation commitments to bring greater transparency and also to encourage growth of foreign direct investment (FDI) in tandem with Qatar Vision 2030.

Main highlights and key changes:

Corporate Income Tax

Supplementary guidelines on Permanent Establishments (PEs) comprising clear reference to a six-month (183 days) limit for service PEs and also project PEs.
Taxability of various subsidiaries of companies that are listed on the Qatar stock market to the size of non-Qatari shareholding in the listed parent company. Companies conducting “Petroleum Operations” and working in the Petrochemical industry would stay fully taxable, if the company is fully or partially owned by the State of Qatar, be it directly or indirectly.
Tax losses, if any, could be carried over for up to five years, in contrast to three years in the previous regulations.
New Tax depreciation rates have been announced recommending a Straight Line method in place of the Written Down Value method which was mentioned in the earlier regulations.
Amendments to the timeline for tax registration – 60 days now instead of 30 days. There is also a recommendation to use the new digital Tax Administration System.
The scope of field inspections has been defined and also the approach that the General Tax Authority would adopt while assessing tax returns.

Capital Gains Tax

Precise guidance on how to apply Capital Gains Tax on the sale of shares especially in Qatari resident companies by a non-resident corporate body.

Withholding Tax

Amendments to the “wholly or partly” rule when testing performance to evaluate the applicability of Withholding Tax (WHT). The services that are used in Qatar or conducted for
the advantage of Qatar are considered as locally-sourced, irrespective of the place of performance and as a rule, will be subject to WHT.
Amendments to the rule on when a WHT payment would be due and who would be subject to registration obligation as WHT agent.Theamounts that are subject to WHT would now be considered as paid within a period of 12 months from the payment due date (only exception will be for Ministries and other Government agencies or public foundations).
Addition of other detailed guidelines about WHT refund claim depending on application of double tax treaty.

Transfer Pricing

The requirements for Transfer Pricing applicable for taxpayers have been announced along with new and updated reporting requirements that will be applicable from the tax year ending on December 31, 2019.
The requirements for Transfer Pricing comprise four tiers of compliance: (i) Transfer Pricing Form or Questionnaire which is be submitted with the Tax Return, (ii) Masterfile, (iii) Local file
and (iv) Country by Country requirements or reporting (this has been already introduced in 2018-2019).
The Regulation takes a reference from International Accounting Standards and the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines (for instance, it takes a reference on the definition of an Associated Enterprise).
Additional guidance are expected to be issued in due course to explain some key areas and this would include an Advance Pricing Agreement program that would be available to the taxpayers who are involved in some complex or material transactions.

The above-mentioned are among the many amendments that are going to reshape the current tax landscape of the State of Qatar.

Points which are still unclear

Some areas of the Regulations that are still not clear are:

Exemptions in some specific scenarios that are applicable to legal entities which are partly owned by Qatari nationals.
Some practical challenges that are related to the method of calculation of share of profits which are attributable to non-Qatari shareholders in the specific subsidiaries of the listed entities.

The way forward

The announcement of the four tier documentation approach in Qatar is expected to increase the compliance burden on all the taxpayers who are operating in this region. Global Multinational Entities might feel some comfort because the OECD Transfer Pricing Guidelines are referred to in the Regulations. The initiation of Advanced Pricing Agreements would also aid big Multinational Entities to gain certainty in times to come.

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1. Concentrate on sustainable growth and prove the numbers

2. Have clarity in your expecting from your investors and communicate that clearly

3. Confine your research to existing partners and their earlier deals

4. The primary focus should be your relationship with the investor and not on his investment in your venture

5. Respect the timelines and don’t lose your focus

Key highlights and next steps

Main highlights and key changes:

Corporate Income Tax

Capital Gains Tax

Withholding Tax

Transfer Pricing

Points which are still unclear

The way forward

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