Newsletter Archives

Newsletter, U.A.E

Why is the Post Covid Economy of Dubai-UAE on a Strong Growth Trajectory?

December 12, 2021

The UAE/ Dubai economy has started displaying signs of growth in key economic indicators after recovery from economic fallout and GDP contraction due to covid 19. International financial institutions e.g. the World Bank and IMF also sounded upbeat on the prospects of the country’s economy being on strong footing. “Over the medium term, the recovery will be bolstered by trade and tourism as health concerns wane and the authorities continue to work towards UAE’s long-run priority — diversification,” reported the World Bank in a recent update.

The country’s GDP will average 3.4 per cent between 2021 and 2023 with 2.7 per cent GDP for 2021, 4.6 per cent for 2022 and 2.9 per cent for 2023, the World Bank’s projection suggests.

During the covid pandemic, the government approved 33 initiatives during August 2020 to support various sectors over three planned phases. The first phase of the recovery and economic advancement plan for providing immediate support to businesses has already been completed.

In August last year, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, in a Cabinet meeting approved the launch of the 33 initiatives to support various economic sectors. It also approved the formation of an interim committee was also formed to oversee measures for successful implementation of the 33 initiatives, creating stimulus for business and enhancing economic growth rates. Emerging business sectors will be provided with new opportunities for a resilient and sustainable future through the latest technologies and increased investments.

The committee is engaged in providing new opportunities by developing emerging sectors, harnessing technology, boosting investment in new sectors and enhancing the sustainability and resilience of the national economy. To this effect, the UAE Central Bank already announced a USD 27.2 billion package towards financing businesses.

Since the time of the deadly virus spread, Dubai- UAE authorities have introduced several post covid recovery plans and initiatives for speedy economic recovery and growth.

The government has been restructured with some federal entities merged into one and new ministers and CEOs appointed for specialized areas. The Ministry of Industry and Advanced Technology has been formed to specifically look after the industrial sector and a new Minister of State for Digital Economy and AI has been included in the cabinet. The UAE Government strategized and planned for all government services to be accessible from anywhere, any time by the year 2023 and appointed a Head of the UAE Digital Government for a digital transformation of the country.

A National COVID-19 Crisis Recovery Committee was also formed with several ministerial representations to steer the economic recovery post the pandemic.

A 10-year plan, ” Operation 300bn” has been launched to promote the industrial sector and provide all necessary support to 13,500 SMEs and generate 25,000 job opportunities. Easy and affordable financing to the priority sectors, SMEs and Startups including new business setup in Dubai has been kept on the top of the country’s economic growth strategy.

A new ‘Export Development Policy’ has been introduced to boost exports and explore new international markets for increasing the contribution of non-oil sectors in the GDP.

A Creative Economy Strategy has been planned to increase the contribution of creative industries to its GDP by two-fold, from 2.6 per cent in 2020 to 5 per cent by 2025. The country also implemented a strategy to attract and retain talents to lure foreign investments and company formation in Dubai.

As economic recovery and growth of a country is always intertwined with several other factors, six main areas have always been in the country’s focus including health, education, economy, food security, society and government restructuring.

While Europe and many other nations have witnessed a covid resurgence, the Dubai-UAE is relatively free of covid infection with 90 per cent population double vaccinated and high-risk categories provided with booster dose.

Lastly, the Dubai Expo, the booming realty sector and stable and higher oil prices have also helped Dubai- UAE to take its economy on a high growth trajectory.

Bahrain, Newsletter

What Could be the Potential Business Impacts of the VAT Rate Hike in Bahrain from 2022?

November 24, 2021

Bahrain, the smallest amongst the six GCC countries including Saudi Arabia, UAE, Oman, Qatar and Kuwait has announced during the last week of September 2021 to increase the VAT rate to 10% from the prevailing rate of 5% effective from 1st January 2022.

Sheikh Salman bin Khalifa Al Khalifa, the Finance and Economy Minister said in an official briefing “The Kingdom is emerging from the pandemic with reasons to be highly optimistic and the plan announced today aims to turbocharge the recovery.”

The Council of Ministers in Bahrain has approved the VAT rate hike to re-stabilise the Fiscal Balance Programme initiated during the end of 2018 however severely impacted by Covid 19.

VAT is a consumption tax and ultimately, the consumers bear the cost increase due to VAT rate hike. It is largely believed that the zero-rate would continue on essential supplies including basic food, healthcare, education, the oil and gas sector, the construction of new buildings, local and international transport. Metals and reality sectors are also expected to be out of this new tax structure and certain financial services might also enjoy an exemption.

What needs to be addressed by the Businesses in Bahrain?

Like every tax rate increase, the VAT rate hike shall also have implications on businesses who should first assess the impacts of the tax raise from their operational perspective considering both internal processes & systems and then critically review the legal requirements about charging of VAT and reporting the right amount of tax due to the National Bureau of Revenue (NBR), Bahrain.

As the recent pandemic has posed serious cash flow challenges to all businesses the world over making it difficult to get going, the businesses in Bahrain need to have sound and strategic plans in place to optimize the working capital cycles. Due to the difference in timing between the payment and recovery of VAT, the rate hike will have an impact on cash flow.

Concrete planning must also be in place for the smooth transition to the higher tax regime approximately in a month. Simply changing the VAT rate from 5% to 10% in their ERP systems would not suffice and all transitional provisions must be assessed with utmost care for every individual contract. It needs to be ascertained if contracts with customers and suppliers extend beyond 1st January 2022 and if any special VAT rules and regulations apply to them.

What needs to be the focus areas for Bahrain businesses?

Businesses need to focus upon a number of crucial areas including

Getting ready for Increased Audit frequency from NBR as the rate hike becomes the most crucial source of revenue for the government
Being aware of Increased compliance requirements as two-time penalties may be imposed on the tax due amount because of the higher tax rate
Correct understanding of transitional rules, especially for businesses involved in continuous and periodic supplies of goods and services and upgrading of IT Systems with automation
Strategic planning Cash flow in terms of VAT being due before payment is received from creditors. The cash flow impact may be higher for businesses in a constant refund position such as certain exporters.
Identifying needs to modify terms and conditions of existing contracts with suppliers and customers.

How can IMC help?

IMC is a cross border corporate service provider with a local presence in Bahrain and comes with extensive experience in VAT implementation and compliance systems. We successfully handled a smooth transition to a higher VAT regime in different businesses sectors in the UAE and Saudi Arabia.

We have a team of experts with proven experience in VAT-related challenges and how to mitigate them.

We are keenly monitoring all developments in this regard and looking for additional information on the rate increase and transitional rules.

As the time is limited, we strongly suggest that taxpayers must immediately start a 360-degree analysis on the potential impacts of the increased VAT rate on their operations, supply chain, invoices and contracts, cash flow, internal audit schedule and IT infrastructure.

Newsletter, U.A.E

Dubai Gets Back to Business with Renewed Vigour and Confidence

November 9, 2021

Dubai Expo 2020 being in full throttle and pandemic restrictions tapering off, Dubai gets back to business with renewed vigour, and enthusiasm. The overall sentiment and outlook markedly improved and business confidence hit a multi-year high as companies in the emirate witnessed a significantly improved business ambience before the start of the nation’s biggest event, Dubai Expo 2020.

While the entire world was grappling with the coronavirus pandemic, Dubai and UAE government authorities remained firm in their resolve and never took their eyes off the immediate needs of economic stimulus packages and wide-scale vaccination. Dubai recovered at a spectacular pace just before the inaugural ceremony of the country’s greatest event and started inviting the world for a new business setup in Dubai with its zeal and dynamism like before.

Dubai Chamber of Commerce and Industry in its July 2021 survey reported a high level of optimism amongst firms about future business activities in more than a year. ‘Business confidence in Dubai reached its third-highest level in 10 years as companies in the emirate begin to feel the positive impact of Expo 2020 Dubai’ the survey reported.

While 76% of respondents surveyed expected improved business confidence in the fourth quarter of 2021, 66% believed it to be in the third quarter and 48% in the second quarter of 2021, the quarterly Business Leaders’ Outlook Survey revealed.

All contributing factors towards improved expectations of business conditions showed positive bias in Q3 compared to Q2 2021 and mainly due to exceptional rise was seen in financial transactions.

Major factors for high levels of confidence and positive attitudes amongst business leaders were cited as proactive approaches of the government, growing domestic demand, economic stimulus and vaccination drives. As per the survey findings, the SMEs were more optimistic about the economic recovery of Dubai compared to big business houses.

Increase in input buying and inventories helped raise the purchasing activity at the fastest rate. “Expansions were also recorded in purchasing activity and inventories during August. Delivery times, meanwhile, lengthened for the seventh consecutive month, although the downturn was only marginal,” IHS Markit reported.

Most companies in Dubai also started hiring more employees and employment levels started growing at the fastest pace since November 2019. Many firms expanded their staff capacity expecting higher spending and growth that led to the highest rise in job creation.

In his comments on the survey findings, Hamad Buamim, President and CEO of Dubai Chamber remarked said, “The findings demonstrate Dubai’s success in minimising the impact of the COVID-19 pandemic through a series of policies, initiatives and measures that have ensured a favourable business environment and addressed new challenges created by the pandemic.”

He also emphasised, “Dubai Expo 2020 is expected to fast track Dubai’s economic recovery and boost the emirate’s appeal among foreign companies and investors.” As per him, various sectors including trade, tourism, hospitality and logistics are likely to see the most business activity during Expo.

The non-oil private sector registered the highest level of growth in business after being subdued for nearly two years. Businesses soared to record highs for the construction companies and travel and tourism sectors as the economy bounces back due to the recent boom in reality due to huge capital infusion and relaxation in travel. The seasonally adjusted PMI data of IHS Markit, covering services and manufacturing activities rose to more than 50 levels, 53.3 in September and 55.7 in October signifying reasonable economic expansion.

David Owen, an economist at IHS Markit remarked, “The Expo 2020 finally began in the UAE at the start of October and brought a highly welcome upsurge in growth across the non-oil private sector.”

A remarkable surge in business activities was also noticed in the aviation and hospitality sectors primarily driven by fewer travel restrictions and Dubai Expo. The hotels in Dubai recorded the highest level of occupancy in recent times.

The World Bank’s latest forecast on the UAE suggests that the country would grow 4.6% next year as many tourists visit the country for the Expo. The traditionally strong sectors of UAE including Trade tourism, hospitality and logistics are expected to see the most activity during the next six months.

Dubai is on the go with a positive sentiment and rising confidence. The economy looks bright and shining. Over the coming years, it promises to be more attractive to the global entrepreneurs and investors offering greater opportunities for Dubai company incorporation

Newsletter, Saudi Arabia

Saudi Arabia Eyes for Increased Investments from European Companies

November 9, 2021

Despite the cultural, political and economic dissimilarities, the largest Arab economy and biggest oil exporter Saudi Arabia has long enjoyed a close relationship with certain European countries including the UK, France and Germany. Even for Europe, the Gulf region has always remained crucial both for economic and political reasons. Saudi Arabia, among the seven Gulf countries, occupies a special place in the Gulf–EU relationship.

Saudi Arabia announced its Saudi Arabian Vision 2030 in April 2016 outlining a comprehensive economic reform plan for diversifying the country’s oil-based economy. Private sector participation (PSP) was initiated as a cornerstone of Vision 2030 with a strong focus on strengthening the private sectors, attracting foreign investments and facilitating foreign company registration in Saudi Arabia.

The global economic downturn caused by the pandemic and lower oil prices, however, have necessitated an immediate need to rapidly embark upon social and economic policy reforms to restructure the economy and spearhead a campaign to convince and woo foreign multinationals from Europe and other parts of the world to materialize the targeted plan of vision 2030 and take the private sector contribution to the country’s GDP from 40% to 65%.

Though there has been some important privatisation over the last few years including Saudi Telecom and Saudi Electricity companies, the real privatisation drive started post covid and as of now, 16 government-run organisations are undergoing privatisation process including agriculture, water, tourism, health, housing, labour, education, energy, information technology, social development, energy, environment, communication, municipalities, social development and transportation.

Saudi Arabia has long implemented Public-Private Partnerships (PPPs) and privatisation projects, however, there was no formal laws to govern PPPs. The long-awaited Private Sector Participation Law (PSP Law) was passed by the government on 17th March 2021 providing financial and regulatory support for privatisation schemes, including financial guarantees, tariff subsidies, land ownership rights, tax benefits, custom duty preferences, foreign exchange and interest rate protections and easily obtainable permits and approvals.

The country offers several business and financial incentives to lure foreign investors for doing business in Saudi Arabia which include Saudi Industrial Development Fund (SIDF) loan up to USD 320 million for green and brownfield manufacturing projects, Kafalah loan guarantee scheme to SMEs, Interest-free loan up to 0.8 million USD for small enterprise development, Loans and grants by Human Resources Development Fund (HDRF), 100% Foreign ownership of company, land and properties, Full repatriation of capital and profits, Indefinite carry forward of loss, No Value-added Tax and sales tax, Nil personal income tax, No property tax, import duty exemption on raw materials and spares, tax incentives on investments made in underdeveloped provinces for 10 years etc.

The work sponsorship regulation has also been relaxed and engaging and retaining foreign employees have become much easier now.

Seeking to attract foreign investment above USD 100 billion annually, a National Investment Strategy (NIS) was recently announced by Crown Prince Mohammed bin Salman on 11th October to further diversify the economy.

NIS rolled out comprehensive investment plans for several key sectors such as manufacturing, transport and logistics, tourism, digital infrastructure, health care and renewable energy and is expected to raise foreign direct investment of USD 103 billion annually. The strategy would also increase annual domestic investment to 1.7 trillion riyals by 2030, the Saudi Press Agency (SPA) reported.

The agency also quoted Prince Mohammed as saying, “Today, the kingdom embarks on a new investment era to empower Saudi and international private-sector investors with more and better opportunities.”

Prince Mohammed added “the NIS will draw up comprehensive investment plans for sectors, including manufacturing, renewable energy, transport and logistics, tourism, digital infrastructure, and health care,” SPA reported.

The fundamental strategy among the various measures lies in the formation of special economic zones with the competitive regulatory framework and attractive incentives; rebuilding strategic supply chains and providing innovative financing solutions to accelerate capital creation.

Saudi Arabia has planned for more than SAR 12 trillion capital injection into the country’s economy by 2030 through investment. While the Shareek programme initiatives are set to inject SAR 5 trillion; the Public Investment Fund, will contribute SAR3 trillion and an additional SAR 4 trillion will be mopped up through investments facilitated by the NIS, of which some SAR2 trillion is expected to be foreign investment.

Economic recovery is in sight with improved oil prices and remission of covid 19 infections and with aggressive policy reforms, there can be good business and investment prospects for European companies in Saudi Arabia. The GDP growth is expected to be 2.4% in 2021 and touch 3% in the medium term, as per the Gulf Economic Update of the World Bank.

The Kingdom focuses on increasing annual trade with Europe which is currently pegged at approximately 61 billion euros. It also aims to increase the number of Saudi students in European schools and universities for further enhancing the Saudi potential and capabilities, accelerating reforms & transformations and forging stronger & long-lasting ties with Europe.

Newsletter, U.A.E

The Newly Created Dubai Integrated Economic Zone (DIEZ) Now Offers 50 Years of Tax Exemption

November 9, 2021

A new law, Law No. (16) of 2021 was introduced by Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to create an independent legal entity called Dubai Integrated Economic Zones (DIEZ) Authority and bring the three separate free zones namely the Dubai Airport Free Zone, Dubai Silicon Oasis and Dubai Commerce City under one roof. The newly formed DIEZ will now collectively supervise and administer all these three zones and enjoy absolute administrative and financial autonomy.

Sheikh Ahmed bin Saeed Al Maktoum will act as the chairman of the DIEZ and Dr Mohammed Ahmed Al Zarouni, the Secretary-General of Dubai Free Zone Council (DFZC) will be the executive chairman, effective January 1, 2022.

On passing the new law, His Highness remarked, “The establishment of the Dubai Integrated Economic Zones Authority is a vital move to enhance Dubai’s global competitiveness and raise its investment attractiveness. The private sector is a major partner in our development journey over the next 50 years and the government continues to explore innovative initiatives to support their growth and success. Our objective is to make Dubai the destination of choice for global investors and a major focal point for global commerce.”

“The creation of the new Authority is one of our many strategic initiatives to raise the speed and efficiency of services for businesses and investors and enhance the ease of doing business. Our focus is on integrating government processes and facilitating greater access to global markets through an accelerated transition to a digital environment. We remain committed to strengthening our partnership with the private sector and making our business environment more attractive, both of which are key to sustained growth in our new phase of development.”

The enactment of the new law aims to promote Dubai as the leading business and investment hub in the world and provide an integrated & state of the art multimedia system in line with the highest global standards. DIEZ will have a wide global network and will offer comprehensive and innovative packages of business solutions satisfying the needs and expectations of customers across various industries.

Seamless cross-border business activities will be ensured by the DIEZ authority and a happy and conducive living and working environment will be created through various unique offerings for its existing and new customers.

The newly created authority will primarily focus on attracting both local and global companies for new business setup in Dubai free zone and establish their business headquarters in the DIEZ. It shall also enhance the business and economic competitiveness of Dubai and mainly in retail, technology, Islamic economy, e-commerce, industrial, logistics and shipping sectors. Moreover, it shall also provide all the required and necessary support to the SMEs to promote business growth and diversification through innovation and entrepreneurship across various sectors and improve ease of doing business.

DIEZ will act as the sole authority to create, develop and manage the infrastructure and administrative services and shall regulate all business activities and services including the import and storage of merchandise.

DIEZ will be home to more than 5,000 global firms hailing from 20 core economic sectors and 30,000 employees. Almost 5 per cent of Dubai’s GDP will now be generated by this authority.

50 years of tax exemption has been announced for all companies and individuals licensed under DIEZ and will be effective from the date of the enforcement of the new law. The tax exemption shall include all taxes including income tax and the exemption period can be extended for a similar period by a decision issued by the Dubai Ruler.

Once licensed under DIEZ jurisdiction, all companies, subsidiaries and individuals will be exempted from all restrictions related to the repatriation of capital, profits and salaries. The exemption will apply to all currencies and all destinations outside the DIEZ and will have a validity of 50 years renewable for a similar period. Besides, no nationalization or restriction of ownership will be applied to the funds of licensed companies, subsidiaries and their employees.

The activities of DIEZ and companies licensed under it will not be subjected to the regulations of Dubai Municipality or Dubai Economy unless the regulations relating to safety, security and food control, or any other regulations specifically applicable within free zones.

The creation of the DIEZ Authority complements the continuous effort of the government to introduce new frameworks for further improving services provided to businesses and investors to boost up business setup in Dubai and enhance the economic growth of the nation.

Newsletter, Saudi Arabia

Saudi Arabia Gears Up To Lead the Post-Covid Construction Sector Recovery in the GCC

November 9, 2021

The COVID pandemic has had a devastating impact on businesses, and economies all over the world and Saudi Arabia is no exception. In the construction sector, it has led to project cost escalation, supply chain disruption, and labour shortage. All the gulf nations witnessed a decline in their GDP growth.

However, as the gulf countries put their best foot forward towards sustainable long term development by diversifying economies into the non-oil sectors and bringing in social reforms, the construction sector in the gulf will begin to recover steadily and in all expectations, the post-covid construction sector growth will be led by the KSA with several foreign company formation in Saudi Arabia in real estate and construction space.

Amongst the GCC nations, Saudi Arabia currently holds the greatest potential for the construction sector with more than 5,000 capital projects worth well over USD 1.6 trillion in the pre-execution stage.

The construction sector is expected to expand by 2.9% in 2021 and as per forecast, would grow at an annual average growth rate of 4% during 2022-2025 on the back of the government’s housing development projects and infrastructure spending.

The country has a grand plan to rejuvenate the rail, airport, port and other logistics infrastructure including healthcare and tourism facilities.

On 29th October 2021, Saudi Arabia announced the capital city of Riyadh’s intention to bid for hosting the World Expo 2030 to the Bureau International des Expositions (BIE), World Expo organising body. A new airport for Riyadh for a cost of USD 147 billion has already been planned by the government.

Eight new cities have been planned along the Red Sea coast on the western side of the country and USD 575 billion has been budgeted for this project to build 100,000 hotel rooms, 1.3 million new homes and three million square meters of world-class office space.

A promising development plan has been laid out for Riyadh to solidify its status as the commercial centre of the Kingdom and USD 63 billion has been earmarked for creating more than 100,000 new homes expected to be completed by the end of 2023. There is also a plan to add 12,000 hotel rooms and around three million square meters of new office spaces.

Large-scale construction schemes called ‘giga-projects’ have been planned for promoting the country’s overall economy as part of Vision 2030. The most notable giga projects include NEOM Smart City, Six Flags Qiddiya Theme Park, Red Sea Resort Project and Amaala Red Sea Riviera.

Saudi Arabia’s Property Technology, PropTech market is expected to boost up with the roll-out of ‘giga projects’ like NEOM. Almost USD 2 million initial funding has been set aside for home maintenance services startups including FalconViz, Ajeer, Muqawiloon, B8ak.

The traditional ecosystem in the reality sector is all set to get disrupted and improved in property transactions, tendering and procurement due to smart technology adoption. The country plans to extensively use AI, robotics and 3D printing in the construction sector to improve productivity.

The Saudi government is actively working towards investing in green buildings and standardising the building rating system towards meeting sustainable development goals. A new standard called Mostadam Standard has been developed by the Ministry of Housing for rating buildings and launched in 2019 to validate the sustainability of constructions and avoid re-construction and CO2 emissions in future.

With giga-projects incorporating a mix of technology and sustainable development elements, the government is trying to build a better future for the younger generations and empower the country to build a new era driven by digital transformation and innovative technology. The real estate company called “Roshn” launched by Public Investment Fund specializes in integrated urban neighbourhood development incorporating the latest technologies in construction. The Sakani housing program also reaffirms the country’s commitment to development using smart tech.

Adopting Construction delivery Technology is instrumental in transforming the construction sector in the Kingdom. The government is already on a move towards the widespread introduction of prefabricated building techniques including those developed by the Ministry of Housing with 3D printing to reduce the construction time, standardise designs and operations, improve quality and productivity.

Exponential growth is on the cards in the transport and logistics sectors as the country recovers from the pandemic and restrictions ease. In July 2021, His Royal Highness Prince Mohammad bin Salman bin Abdulaziz Al-Saud proposed USD 147 billion capital infusion into the transport and logistics sectors over the next ten years. Once implemented, these sectors would contribute 10% of the country’s GDP by 2030, an increase over 4% from the current level.

An agreement has been signed between Maersk, a global integrator of container logistics and Saudi Ports Authority (Mawani) for an investment of USD 136 million over 25 years for an integrated logistics park set up at the Jeddah Islamic Port.

The huge infrastructure spending planned for reshaping the economy and future of the Kingdom will attract many foreign talents and institutions for doing business in Saudi Arabia.

Newsletter, U.A.E

Demand Surge from the World’s Wealthiest Sets Dubai’s Luxury Real Estate Price on Fire

November 9, 2021

[vc_row][vc_column][vc_column_text]”Rare Jumeirah Bay plot sells for almost double the price at AED 61 million” the August 2001 report from Luxhabitat Sotheby’s suggests that the high paced luxury property market in Dubai is on an exponentially upward trajectory. The city is witnessing an unprecedented rise in sales of high-end luxury real estate properties as the ultra-rich across the world set on a journey to find new homes in Dubai. Increasing demand is driving the prices higher for centrally located properties especially in the high-end luxury villas and apartment segments.

On the manmade marvel Palm, a Super-Penthouse, an epitome of luxury recently sold for AED 86 Million making it one the costliest penthouses ever sold in the metropolis. According to Alexander von Sayn-Wittgenstein, Managing Director of Luxhabitat Sotheby’s International Realty the penthouse prices would normally remain stable over time.

“The luxury segment is more stable than the mass market since supply here is limited and owners are wealthy and wouldn’t just sell for any given price,” he said.

[/vc_column_text][/vc_column][/vc_row][vc_row css=”.vc_custom_1636460379636{background-color: #f7f7f7 !important;}”][vc_column][vc_column_text]Dubai’s real estate market is witnessing continuous growth and increased investment, reports Dubai Land Department (DLD). As per the 18th edition of Mo’asher, Dubai’s official sales price index, launched by DLD, August 2021 scored the second-highest rank since December 2013 and best August in the last twelve months in terms of the number of monthly sales transactions with 5,780 sales amounting to a staggering AED 14.97 billion.

The August 21 sales took the yearly volume to 37,537 sales transactions worth AED 88.12 billion. The value of real estate sales transactions also rose by 22.61% in just eight months compared to 2020 which had 35,401 sales worth AED 71.87 billion. While secondary ready market sales contributed to 55% of total transactions, primary market sales stood at 45% registering a growth of 5% on a month on month basis and witnessing the highest amount of money infusion in the last 11 years.

The Arabian Ranches 3, Dubai Land, Dubai South, Tilal al Ghaf and Damac Hills 2 were the areas where villa sales took place in August while Business Bay, Jumeirah Village Circle, Dubai Harbour, Mohammed bin Rashid City and Downtown Dubai were the main areas of attractions for apartments.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]In 2021, Dubai real estate sector witnessed the best Q3 in its history in sales transaction value and the best Q3 ‬in sales volume since 2009.‬ In comparison to Q32020, Q32021 ‬showed an 85.36 % increase in sales transaction volume and an increase of 135.42 % in transaction value. Both the volume and value of sales transactions also rose considerably from that of precovid level and by 64.5 % and 138.8 % respectively.

Luxhabitat Sotheby’s, one of the famous global reality sector players, reported more than 8 million USD sales transactions by ultra-high net worth individuals since 2020. “The average value of the transaction has gone up in comparison to the last couple of years due to many UHNWIs moving to Dubai with a net worth of above $30 million,” Rohal Kohyar, Marketing Director at Luxhabitat Sotheby’s International Realty. Some big deals struck with clients who belong to Forbes’ billionaire list. As per Kohyar, a huge surge in demand helped them achieve an almost 300% jump in annual sales revenue.[/vc_column_text][/vc_column][/vc_row][vc_row css=”.vc_custom_1636460415460{background-color: #f7f7f7 !important;}”][vc_column][vc_column_text]Alluring sunshine, mesmerising skylines, attractive beaches, sprawling shopping malls, high-end dining facilities and a world-class healthcare system are some of Dubai’s tempting appeal to the growing number of millionaires moving to the emirate over the past several months. The ultra-rich retiring to Dubai are inspired and encouraged by the new visas, the handling of the pandemic and the quality of life.

The covid impact on traditional office work environments has also accelerated the trend in remote working from home further encouraging many international business persons to relocate their businesses to Dubai and take advantage of a relatively normal lifestyle. Dubai has scenic and mind-blowing beaches promising a sunny romantic waterfront lifestyle that attracts HNWIs from across Europe, Russia, and other cold countries to Dubai as their second home during cold winters.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Dubai has always remained friendly to foreign workers from across the world and only 10% of its population are UAE Nationals. This puts a global tag on Dubai and helps attract foreign nationals as tourists, businesses, and investment destinations.

Dubai is the gateway between the east and the west and due to its geographically central location, has made Dubai International Airport one of the busiest airports in the world. More than 15 million people visit this airport every year.

Around 2,000 high-net-worth individuals (HNWIs) relocated to Dubai from January to June 2021 and their population rose by 3.8% from 52,000 in December 2020, as reported by New World Wealth, a global wealth intelligence firm based in RSA and tracks the movements and spending habits of the world’s wealthiest people.[/vc_column_text][/vc_column][/vc_row][vc_row css=”.vc_custom_1636460426689{background-color: #f7f7f7 !important;}”][vc_column][vc_column_text]There has been an unprecedented rise in sales transactions in the luxury upscale residential space in Dubai surging 230% during Q12021, compared to Q12000. Prices have also increased in some top-end sought after locations and as much as 40%, highlighted Property Finder, the country’s largest real-estate website.

“Tons of people are coming in and buying multimillion-dollar properties on the spot, with no due diligence time whatsoever,” noted Matthew Cooke, a partner at consultancy Knight Frank, penthouse sales manager on man-made Palm Jumeirah artificial archipelago in Dubai.

Only a few prime locations are presently available in Dubai and high-end real estate developers are competing heavily for their future projects in the primary market. The secondary market doesn’t offer many options either as they are mostly owned by end-users. Presently a limited number of ultra-high-end real estate projects are on offer in the city and consequently carrying a hugely inflated price tag, 100% higher in some cases, on them. Effectively, the demand-supply gap is driving the luxury home prices higher in Dubai.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]As the ultra-high-end properties have seen the highest price surge during this year, it follows suit with the growing trend of UHNWI clients relocating to Dubai as their second home destination.

The residential prices in Dubai remained moderate over the last few years and have made the Dubai luxury real estate market amongst the most attractive and affordable in the region. The high-end residential property prices are still much lower compared to those in London, New York and Hong Kong. Being one of the safest cities in the world today, the luxury ultra-high-end real estate market in Dubai is expected to move further upwards in the coming days.[/vc_column_text][/vc_column][/vc_row]

India, Newsletter, U.A.E

India-UAE-Israel Trilateral Summit Symbolizes Synergy and Economic Strength and Resilience

November 9, 2021

Driven by common goals and philosophy for regional peace, economic growth & sustainability, India and Israel joined hands for a trilateral economic summit in Dubai on Tuesday, 19th October 2021. Business leaders from India, UAE and Israel could well visualize the potential of trilateral cooperation in many fields and projects and long cherished a collaborative approach to address the same. The economic summit was attended by more than 250 delegates, industry experts and Government Officials from the three countries.

The agenda of the summit was to discuss measures for assessing and optimising trilateral opportunities in trade and investment. The Economic Summit was a one-day forum and a joint effort of the Consulates of Israel and India in Dubai, the Israel Export Institute, the Indian Business and Professional Council (IBPC), Bank Hapoalim, Bank of Baroda and media partner Khaleej Times. Bank of Baroda and IBPC Dubai also sponsored the summit.

The summit witnessed several panellists and experts highlight prospects of joint projects in various fields. After the general discussion session, the sectoral panel discussions were held in the fields of technology, agritech, infrastructure, clean energy, food technology, water technology, tourism & smart cities, technology collaboration including harnessing the potential of the medical and health care sector.

The brainstorming and discussion sessions centred around the possible joint projects and assessing mutual benefits. India was represented by the three young unicorn panellists Nikhil Kamath of Zerodha, Nishant Pitti and Prashant Pitti of Ease My Trip and Sujeet Kumar of Udaan.

Abraham Peace Accords and recent government policy reforms in UAE and India made the delegates strongly believe in the trilateral synergy and an economic force to reckon with. All of them actively participated in the economic summit and Indian companies were invited to visit Israel for exploring collaborative opportunities in various sectors.

The Consul-General of India to Dubai, Dr Aman Puri termed this event as a ‘force multiplier’ and said, “The Indian business community in the UAE could significantly leverage the strengths of this trilateral to boost the economic growth of all nations.” He also mentioned this event as an ideal platform for the three countries to explore areas of collaboration and partnership in both private and public enterprises.

“This trilateral economic summit is taking place at an opportune time with the first anniversary of the signing of the Abraham Accords having been commemorated recently. I would like to congratulate both the UAE and Israel on their outstanding efforts in fostering regional peace and trust. The Abraham Accords was a landmark event that has not only had a significant impact on trade interest between the UAE and Israel but also helped to promote regional peace and prosperity. I commend the vision and commitment of the UAE and Israel leaders as well as the people of the two countries in forging such a historic, multilateral alliance that will have a significant positive impact on all nations,” Dr Puri remarked.

Dr Puri emphasized that India being the third-largest start-up ecosystem could bring tremendous growth opportunities from a company formation in India. He identified Israel as a powerhouse of research & development including startups and appreciated UAE for its relentless support for SMEs and startups and numerous incentives for new company formation in Dubai.

Ilan Sztulman, Consul General of Israel to Dubai also highlighted the opportunities of this trilateral summit for mutual collaboration and doing business together. He noted saying, “This forum is symbolic as it comes immediately after the signing of the important economic cooperation agreement between Israel, the United States, the United Arab Emirates and India on shared issues of concern in the region and globally.”

All the three countries, Israel, India and the UAE are tech-centric and have a deep interest in technology and once together can be an innovative force, the Chairman of IBPC commented.

The President, Manufacturers Association of Israel and CEO, Unipharm Ltd. Dr Ron Tomer noted that these three nations are complementary to each other and can make a win-win situation for everyone. He also informed that Israel’s FTA with India was in progress and the same with UAE was under discussion.

Chairman, KEF Holdings Faizal Kottikollon shared his thoughts on the major healthcare and education projects currently undergoing in India where a collaborative approach can benefit all three countries.

Many eminent personalities from the business and industrial arena took part in the event such as Adiv Baruch, Chairman of the Israel Export Institute; Ahmad Sultan Al Haddad, COO, JAFZA; Professor Leonardo Leiderman, Chief Economic Advisor, Bank Hapoalim and Professor of Economics and Business, Tel Aviv University; and many more.

The combined strengths of India, Israel and the UAE can propel the trilateral trade between the countries to a high of USD 110 billion by 2030, many top diplomats and industry experts have commented.

The comments came up during an event organised by the International Federation of Indo-Israel Chambers of Commerce (IFIICC) to discuss the ongoing business collaborations being facilitated by IFIICC across various sectors.

“The international business potential backed by Israeli innovation, UAE’s visionary leadership and strategic partnership of both nations with India could be USD 110 billion by 2030,” Head of the Israeli mission in Dubai, Consul General Ilan Sztulman said in a press release issued by IFIICC.

As India has a very constructive partnership with the UAE and also enjoys an equally wonderful relationship with Israel, post-Abraham Peace Accord between Israel and UAE can be the most opportune period to bring everything together for the economic good of the citizens of the three counties and open floodgates of opportunities for new business setup in the region.

Newsletter

GCC – OECD Releases Statement Agreeing on the Design Components of BEPS 2.0 Project

November 2, 2021

On 8 October 2021, the Organization for Economic Cooperation and Development (OECD) / G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) released a statement on the two-pillar solution which states the agreement of 136 out of 140 Inclusive Framework members on core design features developed in the BEPS 2.0 project. The decision has received support from major economies including the United Arab Emirates, the Kingdom of Saudi Arabia, Qatar, Bahrain and Oman.

The announcement reflects the progress made by the OECD on the two pillar solution to overcome the tax challenges arising from the digitalization of the economy.

IMC Group has deeply analysed the statement and has summarised the new components agreed by the IF members for Pillar One and Pillar Two. Our alert also summarises the implementation plan for the same.

Agreed Components of Pillar One

The October statement is a build on the July statement that focuses on the conceptual agreement on fundamental reforms to international tax rules. Furthermore, it provides clarity on certain key parameters. IF further provided clarification in regard to Amount A and confirmed completion of technical work for the application of Amount B by the end of 2022. The new agreed components are as follows:

Amount A

Scope: The scope of Amount A is restated without any change. It states that Multinational Enterprises (MNEs) with global turnover above EUR 20 billion and profitability above 10% are within the scope of Pillar One rules. The calculation of turnover and profitability shall be done using an averaging mechanism.
Allocation: October statement amended the previously defined residual profit allocation from 20% and 30% range to 25%. This means MNEs will now reallocate 25% of their residual profit (profit in excess of 10% of revenue) to market jurisdictions.
Tax certainty: A mandatory and binding dispute resolution mechanism will be in place for all issues pertaining to Amount A. For a few developing countries, an electivebinding dispute resolution mechanism will be in place. The eligibility conditions to access this mechanism will be reviewed on a regular basis.
Unilateral measures: The multilateral convention (MLC) through which Amount A is to be implemented requires the removal of all Digital Services Taxes and other relevant similar measures to all companies. Furthermore, no new measures are to be imposed on any company from 8 October 2021 until 31 December 2023 or the coming into force of the MLC.

Amount B

The statement clarifies that the application of the arm’s length principle to in-country baseline marketing and distribution activities will be simplified and streamlined. There will be a specific focus on the needs of low-capacity countries. The said work shall be completed by the end of 2022.

Agreed Components of Pillar Two

Pillar Two consists of two interlocking domestic rules, an income inclusion rule and an undertaxed payment rule as well as a treaty-based rule for the benefit of developing countries. The new components in pillar Two are as follows:

Rate: The Inclusive Framework has agreed that a global minimum tax rate shall be 15% calculated on a country by country basis. The phrase “at least” has been removed from the statement.
Scope: The rules will apply to MNEs that meet the EUR 750 million thresholds.
Undertaxed Payment Rule (UTPR) exclusion: MNEs that have a maximum of EUR 50 million tangible assets abroad and operate in less than 5 other jurisdictions are excluded for a period of 5 years from the application of the UTPR.
Effective Tax Rate (ETR) calculation: The earlier provided timeframe of 3 to 4 years has now been revised to 4 years for existing distribution tax systems earnings. The ETR calculation however remains unchanged.

Substantial activity exclusion: Certain incomes earned by MNEs are excluded from the computation of the ETR. The same is calculated at 5% based on a percentage of its tangible assets and payroll expenses. The term “at least” has been removed. The conditions for exclusion are as follows:

– The transitional period has been increased to 10 years.

– Exclusion amount is 8% of the carrying value of tangible assets and 10% of payroll. The same will be reduced annually.

De minimis exclusion: Furthermore, if MNE has revenue less than EUR 10 million and has profits less than EUR 1 million, a de minimis exclusion will also be applicable.

Subject to tax rule (STTR): The STTR has been fixed at 9% from the previously mentioned range between 7.5% and 9%.

Implementation Plan for Pillar Two

The statement also highlighted the implementation plan for pillar two which is as follows:

Pillar Two is anticipated to be brought into law in 2022 and will be made effective in 2023, with the UTPR coming into effect in 2024.
Model rules to give effect to the GloBE rules will be developed by the end of November 2021. It will define the scope and set out the mechanics of the GloBE rules.
Model tax treaty provision for the STTR and commentaries will be made effective by the end of November 2021. A multilateral instrument will be developed by the IF by mid-2022 to facilitate the smooth implementation of the STTR in relevant bilateral treaties.
A detailed implementation framework will be developed by OECD by the end of 2022 to facilitate coordinated implementation of the GloBE rules.

End Note

With the new statement coming into effect, the tax and finance teams need to stay abreast with the changes in the existing tax landscape. They need to access the potential challenges the businesses are likely to face.

How Can IMC Group Help?

IMC Group is keeping a tap of all the changes that are happening from time to time. We can help you prepare an effective roadmap to sail through these changes.

Our international tax team can also assist you in determining the applicability and potential impact of Pillar One and Pillar Two on your business and how to go about its implementation.

For further information, get in touch with us now!

Newsletter, U.A.E

UAE Economic Substance Regulation – Compliance and Filing Obligations

October 26, 2021

Economic Substance Regulation has been issued in the UAE since April 2019. Since its introduction, there have been various updates and amendments to the rule.

IMC Group has deeply studied and analysed the upcoming Economic Substance Regulation in order to guide businesses through the ESR filing obligations and help them prepare for the same.

Applicability of Economic Substance Regulation

The Economic Substance Regulations broadly apply to all United Arab Emirates onshore as well as free zone legal entities that carry out one or more of the 9 ESR “Relevant Activities” referred to as “licensees”.

The “Relevant Activities” are as follows:

Banking
Distribution and service centre
Fund management
Headquarters
Holding company
Insurance
Intellectual property
Finance and leasing
Shipping

ESR Filing Requirements

The entities that fall within the scope of the regulations are required to submit a notification form and an Economic Substance Report to the respective regulatory authority.

The annual filing obligations for such entities are as follows:

Notification

A notification must be filed within 6 months from the end of the financial year declaring that the entity undertakes Relevant Activity, even if no income was earned from such activity during the financial year; and

Report

In case of income earned from Relevant Activity, a report must be filed within 12 months from the end of the financial year declaring certain business information demonstrating economic substance. The information includes income figures, expenses, assets, number of employees, etc.

Note:

An entity is not required to file the report for any financial period in which it has not earned income from a relevant activity or if it meets the conditions for being exempt. However, a notification must be filled regardless.

Exemption from the Regulation

The following entities are specifically exempted from the regulations:

Investment funds
UAE branches of a foreign entity provided the branch’s income is taxed in a foreign jurisdiction
Tax resident entities in a foreign jurisdiction
Wholly-owned entities by UAE residents or nationals that are not part of a multinational group, if they carry on business in the UAE.

Reporting Deadlines

Below are the reporting deadlines for a selection of financial year ends:

Fiscal Year End	Notification Filing Deadline	Report Filing Deadline
31 Dec 2020	30 Jun 2021	31 Dec 2021
31 Mar 2021	30 Sept 2021	31 Mar 2022
30 Jun 2021	31 Dec 2021	30 Jun 2022
30 Sept 2021	31 Mar 2022	30 Sept 2022
31 Dec 2021	30 Jun 2022	31 Dec 2022

Key Actions

On the completion of a given financial year, entities are required to determine their upcoming ESR filing obligations and take the necessary steps to ensure timely filing along with submitting the supporting documentation.

Penalty for Non-Compliance

In case of non-compliance, entities will have to bear wide-ranging and significant penalties which are as follows:

AED 20,000 – For failure to submit a notification
AED 50,000 – For failure to submit an Economic Substance report
AED 50,000 – For failure to provide accurate or complete information
AED 50,000 (first failure) and AED 400,000 (second failure) – For failure to demonstrate sufficient economic substance in the UAE

Key ESR Considerations

Before the end of the financial year, all UAE entities must consider the following ESR matters and ensure timely action, where relevant.

Assess whether the entity has conducted any Relevant Activity during the period and has generated income from the same. This is a crucial assessment as it determines its specific UAE ESR compliance requirements for that financial year.
Entities that are earning income from any Relevant Activity during the period need to review their compliance with the applicable ESR tests (Directed and Managed, Core Income Generating and Adequate).
Post review, entities should address the potential areas of non-compliance, if any.
In case where the entity’s ability to comply with the regulations got impacted due to COVID-19, it should look for temporary measures such as appointing alternate directors in the UAE to attend local meetings.
Entities should ensure control and supervision over any outsourcing arrangements. This can be done by way of entering into contractual agreements or correspondence.

The above-mentioned guideline provides an opportunity for the entities to take the necessary actions to comply with the ESR within the stipulated timelines.

How can IMC Group help?

IMC Group can help you navigate through the Economic Substance Regulation and guidelines based on your jurisdiction. You may book a consultation with our expert to know how the new update will affect you and the way forward.

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What needs to be addressed by the Businesses in Bahrain?

What needs to be the focus areas for Bahrain businesses?

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Agreed Components of Pillar One

Amount A

Amount B

Agreed Components of Pillar Two

Implementation Plan for Pillar Two

End Note

How Can IMC Group Help?

Applicability of Economic Substance Regulation

ESR Filing Requirements

Exemption from the Regulation

Reporting Deadlines

Key Actions

Penalty for Non-Compliance

Key ESR Considerations

How can IMC Group help?

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