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The Role of DIFC in Empowering Family Offices in Dubai
Family businesses and family offices have emerged as a fundamental element in the progressive economy of Dubai. Internationally, they constitute 70% to 90% of gross domestic products, besides creating millions of jobs. In this edition, we present you the role of DIFC in empowering single family office in Dubai. DIFC is extensively recognized as a leader in private wealth advisory and asset management. It caters to families in Dubai with practicality and flexibility. With its robust regulatory framework and tailored support services, this globally recognized body is empowering family offices extensively.

Assisting Single Family Offices in Dubai

Globally, family businesses are thriving, growing faster than advanced and emerging economies. These businesses in the Middle East significantly contribute to the regional economy. The UAE hosts the vast majority of family offices, employing around 80% of the country’s workforce.

Opportunities for Family Offices in the Middle East

The DIFC has come up with its Family Arrangements Regulations, which have been effective since January 2023. It offers specialized provisions for family businesses. These regulations allow for a Family Business Register and a revamped Family Office and Multi-Family Office Regime, ensuring flexibility without stringent registration requirements. These initiatives are aligned with the federal UAE Family Business Law and facilitate long-term wealth planning across generations. Thus, the DIFC has opened up fresh opportunities for family offices in the Middle East.

To ensure the sustainability of family businesses, governance and succession are among the most crucial elements. DIFC supports these efforts through robust legal frameworks such as trust and will arrangements, foundations, and prescribed company structures. The body operates under English common law principles and ensures legal stability and transparency. It also ensures that dispute resolution mechanisms in the country remain efficient.

Empowering the Family Wealth Ecosystem with DFWC

The DIFC has established the Family Wealth Centre (DFWC) to strengthen its family wealth ecosystem with practical tools and additional initiatives. The core objective of this entity is to successfully preserve the wealth of affluent families. With nearly 6,000 registered firms and over 42,000 professionals benefiting from these offerings, DIFC continues to be a preferred hub for family offices looking for growth opportunities in the Middle East, South Asia, and Africa.

The IMC Group provides comprehensive assistance and counselling services during the formation of a single family office in Dubai. With professional insights, single family offices can confidently stride ahead to success and make the most of the opportunities that the DIFC presents them with.

Mastering Employer of Record in Dubai: A Comprehensive UAE Handbook

An Employer of Record in the UAE offers comprehensive recruitment, HR, and payroll services, allowing businesses to focus on expansion and improvement in other areas while relying on experts for these functions.

An Employer of Record in the UAE is a legally recognized entity that hires employees on behalf of your company and assumes all associated legal and administrative responsibilities. This includes managing payroll, taxes, and benefits and ensuring that your company complies with all relevant employment laws and regulations.

This article aims to provide a complete guide about the Employer of Record (EOR) in the United Arab Emirates (UAE). It will cover the definition of EOR, Professional Employer Organization (PEO) services, the differences between PEO and EOR, PEO services in Dubai, Emiratization in the private sector, solutions for mass hiring, and other relevant topics.

In this article, you will discover why these organizations are an excellent choice.

We will discuss:

What is an Employer of Record in the UAE?

An EOR is a third-party organization in Dubai, United Arab Emirates that, specializes in hiring employees on behalf of other companies for various purposes, including immigration and taxation, even though the employees hired perform work for different organizations. Employer of Record services ensures compliance with regular employment tasks and administrative roles.

Employer of Record in the UAE simplifies the processes of employee recruitment and management by acting as the legal employer for your business. This setup offers numerous benefits and conveniences to your company.

The following sections detail everything concerning Employer of Record services in the UAE.

Additionally, this service enables rapid international hiring without the need for legal entities. Moreover, while the Employer of Record assumes legal responsibility for the employees, your company oversees their day-to-day activities. This arrangement enhances efficiency and organization, with the Employer of Record managing payroll, benefits, risk mitigation, and worker support.

Understanding the Function of an EOR

An Employer of Record (EOR) in the UAE is a third-party organization that acts as the formal employer within the local jurisdiction, facilitating international employment for your company.

By utilizing an EOR in the UAE, you transfer all legal and compliance duties to them while still managing your team’s operational activities directly. The role of an Employer of Record involves various responsibilities and functions, including:

Global EOR services are advantageous domestically, in addition to their primary use for international staffing, because of differing tax and employment laws in different regions.

Employers of Record in the UAE generally handle numerous HR administrative tasks, such as managing payroll, ensuring compliant benefits, and fulfilling tax obligations. Partnering with an EOR negates the need to establish a legal entity in the location of your hires.

Partnering with an EOR saves the time, costs, and effort needed to learn international employment laws. EORs provide expertise with local compliance and regulations.

Collaborating with a trusted EOR partner allows you to hire and pay employees globally, bypassing the complexities and risks of navigating unfamiliar legal systems and compliance issues on your own effectively and safely.

Delving into Employer of Record Services in Detail

An Employer of Record (EOR) in the UAE empowers companies to expand their workforce and enter new markets without the hassle of managing complex employment laws and regulations on their own.

By utilizing an EOR in the UAE, businesses can concentrate on their primary activities and growth strategies, entrusting the intricacies of employment management to skilled professionals.

This setup provides numerous benefits and conveniences for your company:

Effective HR Management

EOR services include a range of HR responsibilities like payroll, tax filings, benefits administration, and the onboarding and offboarding of employees. This full spectrum of services reduces the administrative load on your internal HR team.

Enhanced Focus on Growth

By delegating employment-related duties to an EOR, your business can reallocate resources and focus on initiatives that promote growth and operational efficiency.

Broad Legal Support

The EOR takes charge of all legal employment aspects, from drafting contracts to ensuring compliance with labor laws and regulations.

Retained Control and Flexibility

While the EOR in the UAE manages the backend employment tasks, your company maintains complete control over daily operations and the decision-making processes for your team.

Comprehensive Legal Support

Ensures your business remains within legal boundaries, minimizing the risk of employment-related legal issues.

Retained Control and Flexibility

It provides the ability to adjust your workforce size as needed while keeping control over your company’s strategic direction.

Enhanced Focus on Growth

Manages the complexities of direct employment through a professional service, enabling your company to pursue expansion confidently and with agility.

Efficient HR Management

It frees up your team to focus on strategic initiatives and employee development instead of routine paperwork.

Responsibilities of an Employer of Record

While specific duties can vary, a typical EOR in the UAE generally offers these essential services: Key Payroll, Benefits, and HR Compliance Management

Onboarding

EORs manage the seamless integration of new hires by handling crucial tasks such as contract preparation, background checks, and payroll setup.

Benefits Administration

EORs design and manage compliant benefits packages that meet the diverse needs of employees while adhering to local regulations.

Tax Withholding and Filing

EORs take responsibility for tax obligations, including tax withholdings and submissions, in compliance with local tax laws.

Government Program Contributions

EORs manage contributions to government programs like social security and unemployment insurance, ensuring accurate and compliant record-keeping.

Payroll in Local Currency

EORs simplify payroll management across different currencies, reducing exchange rate risks and administrative challenges for globally dispersed teams.

Compliance with Labor Laws

EORs monitor and adhere to evolving labor laws and regulations across various jurisdictions.

Additional insights include:

  • The onboarding process not only ensures compliance but also enhances the employee experience from the start, bolstering the employer’s reputation.
  • Employees worldwide can receive timely and accurate compensation through local currency payments, improving employee satisfaction and operational efficiency.
  • From healthcare to retirement plans, EORs offer comprehensive benefits solutions that enhance talent attraction, retention, and overall employee well-being.
  • By ensuring accurate and timely tax compliance, EORs help companies minimize financial risks, avoid penalties, and stay compliant with regulations.
  • Efficient management of government program contributions helps mitigate legal risks and ensures compliance with statutory requirements.
  • Staying updated on legislative changes and implementing proactive compliance measures, EORs help businesses confidently navigate complex regulatory environments, reducing legal risks and promoting ethical business practices.

Employment Contracts in the UAE

In the UAE, employment contracts specify the conditions of employment, including pay, benefits, duties, and procedures for ending employment. Here are essential considerations for UAE employment contracts:

  • Fixed-term Contracts: These agreements are valid for up to three years and may be renewed multiple times. They are governed by specific rules concerning probation periods, notice periods for termination, and severance benefits.
  • Probationary Period: This period usually spans three months unless stated otherwise. It allows employers to assess an employee’s fit for the position.
  • Termination Notice Period: Generally, the longest notice period for ending an employment contract is six months. Employers must either give advance notice or compensate with payment in lieu of notice.
  • Severance Pay: Employees qualify for a service gratuity based on their length of employment. For instance, those with a year of service get 21 days’ salary for each year, while those with five years get 30 days’ salary.
In instances of early termination, severance compensation might differ, with employees possibly receiving up to 1.5 months’ salary in total.

Regarding Indefinite Contracts

These are no longer allowed in the UAE. Such contracts do not include probationary periods, termination notice periods, or severance provisions. It is crucial for businesses in the UAE to ensure their employment contracts comply with these rules to maintain legal adherence and safeguard the rights of both parties.

Working with a PEO service in Dubai can be extremely helpful in aligning contracts with UAE labor laws. Partnering with a reputable PEO can offer significant assistance in managing the complexities of UAE employment contracts, ensuring adherence to local regulations, and supporting Emiratisation in the private sector.

What are the Advantages of Engaging an Employer of Record in the UAE?

An employer of record in Dubai (UAE) assists companies in effectively handling the challenges of international recruitment, ensuring adherence to legal standards, safeguarding intellectual property, and enhancing the employee experience. Below are the primary employee benefits solutions associated with using an employer of record (EOR).

Employee Benefits and Paid Leave in the UAE

Employer Contributions

Employers are required to contribute to social security for their employees, with rates varying by emirate, typically between 12.5% and 15% of an employee’s gross monthly income.

Leave Entitlements

  • Employees earn nearly a month of paid vacation annually after completing three months of continuous service
  • Additionally, employees enjoy 14 recognized public holidays

Sick Leave

Employees qualify for sick leave after three continuous months of employment, with an annual entitlement of 90 days, though payment percentages vary with the leave duration.

Maternity Leave

Maternity leave entitlement ranges from 45 days at full pay to 45 days at half pay, based on service duration, with the possibility of an extra 100 days of unpaid leave for medical complications.

Parental Leave

Employees in the private sector can take five days of parental leave within the first six months following a child’s birth.

Pension Plans and Retirement Contributions

  • UAE nationals are eligible for the federal employment pension scheme
  • Expatriates receive a gratuity, an “end of service” payment, rather than monthly pension contributions

Minimum Wage

  • UAE nationals have a three-tiered minimum wage system based on educational attainment
  • There is no mandated minimum wage for expatriates

Overtime

Normal working hours are limited to 8 hours per day and 48 hours per week, with overtime compensation ranging from 125% to 150% of the regular wage.

Health Insurance

In Abu Dhabi and Dubai, health insurance for employees and their dependents is mandatory, with penalties for employers who fail to comply.

Severance Pay

Severance pay, based on service length, is mandatory, ranging from 21 to 30 days’ salary per year of service, with a cap of two years’ salary.

Legal and Compliance Challenges for Employers in the UAE

Role of the Employer of Record (EOR)
  • Collaborating with a reliable EOR can alleviate risks of misclassification by ensuring proper classification of workers according to UAE laws.
  • EORs employ experts in local employment laws to help employers comply and reduce legal risks.
The Value of Expert Advice
  • Employers benefit from consulting with experts familiar with Emirati employment laws to effectively manage legal and compliance challenges.
  • Professional advice can prevent expensive legal issues and ensure adherence to changing laws.
Ongoing Monitoring
  • Employers should consistently monitor updates in Emirati labor laws and regulations to adjust their worker classification practices.
  • Regularly updating classification policies helps manage legal and compliance risks linked to misclassification.
Misclassification of Employees
  • Misclassifying employees to evade benefits obligations can result in penalties, fines, and legal repercussions.
  • While specific penalties for misclassification aren’t outlined in Emirati employment law, legal issues can still occur, and laws are subject to change.
  • It is essential to accurately classify workers to prevent legal repercussions.
Potential Legal Implications
  • Employers in the UAE could be legally liable for inaccurately classifying workers.
  • Modifications in laws or enforcement can affect the legal risks tied to misclassification.
Compliance Necessities
  • Employers need to adhere to Emirati labor laws concerning worker classification to reduce legal and compliance risks.
  • Following these regulations helps ensure fair employee treatment and shields employers from legal problems.
Employer of Record vs. Staffing Agency
An Employer of Record in Dubai or elsewhere in the UAE is distinct from a staffing agency, though they perform similar functions. Here we explore their differences in more detail.
Key Differences and Considerations
Legal and Administrative Duties
  • EOR: Takes on complete legal and administrative duties, ensuring adherence to local labor laws, tax, and social security requirements.
  • Staffing Agency: Focuses on recruitment and placement, with limited involvement in legal and administrative issues.
Long-term vs Temporary Employment
  • EOR: Ideal for long-term, permanent employment in foreign markets, perfect for establishing a legal presence and managing a stable workforce.
  • Staffing Agency: Best suited for short-term or temporary employment needs, such as project-specific roles or seasonal requirements.
Flexibility and Scalability
  • EOR: Provides the ability to scale and adapt the workforce in new markets quickly.
  • Staffing Agency: Offers flexibility, primarily aimed at meeting immediate, short-term staffing needs rather than ongoing workforce management.
Establishing Relationships
  • EOR: Forms a legal employment bond between the employer of record services and the employee, managing all employment-related responsibilities.
  • Staffing Agency: Forms an employment bond between the client company and the employee, serving as an intermediary.

Additionally, it’s important to ask what the difference is between a PEO and an EOR.

  • Similarity: Employer of Record (EOR) and Professional Employer Organization (PEO) assist firms in managing global teams.
  • Difference: While a PEO acts as a co-employer, an EOR becomes the legal employer for a company’s dispersed workforce.
Permanent Recruitment vs. Temporary Staffing: Serving Distinct Organizational Purposes
Permanent Recruitment
Permanent recruitment prioritizes long-term investment in talent to support organizational growth and success over time. This involves hiring experienced professionals with the requisite skills and expertise for permanent roles. The primary aim is to establish a committed team that will advance the organization’s long-term objectives. Employers focus on employee retention, development, and fostering loyalty and commitment. Permanent recruitment also promotes the cultivation of a unified company culture through shared values and goals.
Temporary Staffing
Conversely, temporary staffing caters to immediate, short-term needs and adjusts to workforce fluctuations. It involves hiring employees on a contractual basis to meet specific needs, fill temporary gaps, or handle seasonal demand variations. This approach offers businesses the flexibility to adapt their workforce size swiftly without the obligations of permanent hiring. Temporary employees are engaged primarily for short-term projects or during peak periods, contributing to the organization while their assignment lasts.
Cost Considerations for Employer of Record in the UAE
Understanding the Costs of Employer of Record Services in the UAE
Employer of Record (EOR) services in the UAE can follow a flat fee or variable pricing structure, each affecting the overall cost and flexibility differently.
Flat Fee EOR Pricing
In a flat fee arrangement, businesses pay a consistent fee per employee, which could be billed monthly or annually, with annual payments generally being more economical. This model ensures cost predictability and is preferred for its simplicity, allowing companies to budget effectively without concerns about fluctuating costs based on employee salaries or benefits.
Variable EOR Pricing
Variable pricing, however, is based on a percentage of each employee’s salary, making costs variable and dependent on employee earnings. While potentially more affordable for lower-salaried employees, it can become more expensive as salaries rise and may discourage wage increases.
Evaluating Costs and Benefits
When selecting an EOR provider, businesses must consider various factors, including the scope of services needed, the number of workers to be hired, and their geographic location. The choice between traditional EOR providers and more flexible solutions should be based on a cost-benefit analysis, considering service requirements, hiring scale, and regulatory environments. EOR companies offer an affordable and comprehensive solution, especially suitable for businesses aiming for global expansion and needing robust security and compliance measures.
Service Requirements
The cost of EOR services depends on the required services including payroll processing, benefits administration, compliance with local labor laws, data security, and intellectual property protection.
Number of Workers
The scale of hiring influences costs; large-scale hiring might offer volume discounts, whereas smaller operations often face standard rates.
Geographic Location
The cost of EOR services is affected by the geographic location of workers due to variations in regulations, tax systems, and living expenses. Hiring in areas with complex legal structures or high living costs can increase EOR expenses.
Traditional EOR Providers
Established providers typically charge premium enterprise fees, potentially reaching up to $2,000 per employee monthly. While they provide extensive services, these costs can be prohibitive for smaller businesses and may lack flexibility and promptness.
EOR Solution
Our Global EOR solutions offer an economical alternative by integrating services such as payroll, benefits, data security, and IP protection. This makes it a viable option for businesses aiming for global expansion due to its affordable rates, transparent pricing, and robust security and compliance measures.
Mass Hiring Solution
For companies needing mass hiring solutions, like rapidly scaling operations or entering new markets, the affordability of EOR services is paramount. Traditional providers with high per-employee costs can place substantial financial strains on businesses planning to hire extensively.
Characteristics of the Top Employer of Record in Dubai

Typically, the Employer of Record in the UAE meets the following characteristics:

  • An Employer of Record allows you to outsource employees globally and effectively manage HR operations.
  • This service enables you to enter the market more efficiently and hire employees 90% faster, with workers being able to start in just 48 hours.
  • It ensures compliance with labor laws, keeps them updated, and helps you maintain better company control.
  • It offers flexibility in penetrating new markets, providing multiple options without long-term obligations.
Employer of Record Dubai Payroll Services
In the UAE, payroll and tax management depend on whether employees are foreign or local. Companies in the region often prefer EOR services for handling payroll. These services adhere to immigration and tax laws.
Furthermore, using an EOR can optimize and simplify an employee’s role, enhancing profitability while ensuring security and confidentiality. EOR services include:
  • Drafting offer letters
  • Issuing no objection certificates (NOC)
  • Planning and managing paid employee leave, vacations, and sick days
  • Assisting with medical or health insurance selections
  • Implementing the salary protection system
  • Calculating legal end-of-service gratuities as per UAE labor laws
  • Prepared and distributed salary certificates, payslips, and bank transfer letters
  • Handling settlement calculations and trial period completions in line with UAE law
  • Other Critical Aspects Managed by Employer of Record Services
Other Aspects of Employer of Record in Dubai, UAE

When employing in the UAE, it’s essential to understand the regulations to create compliant employment contracts. An Employer of Record in Dubai addresses vital HR requirements such as:

  • Working hours: Employees should not work more than 8 hours per day or 48 hours per six-day week.
  • Overtime compensation: Overtime is compensated at 125% of the wage, and work between 9 PM and 4 AM at 150%. Additionally, overtime hours are capped at 2 hours daily.
  • Trial periods: Employers may hire an employee on a trial basis for up to six months, during which termination can occur without notice or severance pay.
  • Termination and severance: Employers may terminate a permanent employee with 30 days’ notice or immediately without notice or severance for justified reasons, depending on the termination cause and contract type.
Employee Benefits Managed by an Employer of Record in Dubai

An Employer of Record in Dubai negotiates employment terms, ensuring legal benefits and paid leave are included, as outlined below:

  • Maternity leave: Eligible employees receive 45 days of maternity leave, with full pay after a year of service and half pay otherwise.
  • Annual leave: Employees earn two days of vacation per month after six months of service but less than a year; those with more than a year of service receive 30 days per year.
  • Public holidays: Employees are entitled to 10 paid public holidays each year.
  • Sick leave: After three months of employment, excluding the probationary period, employees are eligible for up to 90 days of sick leave—fully paid for the first 15 days, half paid for the next 30 days, and unpaid if the leave extends beyond 45 days.
IMC Group: Your Premier Employer of Record in Dubai
At IMC Group, we provide top-tier Employer of Record services, offering comprehensive recruitment and payroll solutions tailored to your business needs.
UAE Corporate Tax

The Cabinet Decision No.10 of 2024, which came into effect on March 1, 2024, has been announced. The Federal Tax Authority (FTA) has outlined important dates for corporate tax registration, and it’s crucial to act swiftly. If you miss the deadline, you could be facing an AED 10,000 ($2700.00) fine.

The first deadline for juridical persons is May 31, 2024. This is part of the new tax rules from the FTA, reflecting the Corporate Taxation Law that kicked in last June, affecting all financial periods starting from then.

For any businesses commenced before March 1, 2024, you need to register for corporate tax by the dates mentioned below. And if you’re a new business by March 1, 2024, you have three months to register.

Staying on top of these rules is key.
Month of Licence issuance irrespective of year of issuance Deadline to apply for Corporate Tax Registration
1 January – 31 January 31 May 2024
1 February – 28/29 February 31 May 2024
1 March – 31 March 30 June 2024
1 April – 30 April 30 June 2024
1 May – 31 May 31 July 2024
1 June – 30 June 31 August 2024
1 July – 31 July 30 September 2024
1 August – 31 August 31 October 2024
1 September – 30 September 31 October 2024
1 October – 31 October 30 November 2024
1 November – 30 November 30 November 2024
1 December – 31 December 31 December 2024
Companies often struggle to keep up with changing tax regulations. At IMC, our experienced team is committed to helping in-house tax departments smoothly navigate the new corporate tax (CT) landscape with our Corporate Tax Advisory in UAE. Our tax experts conduct tax impact assessments, examine transfer pricing, review cross-border transactions, and develop operational strategies for businesses throughout the UAE.
Ready for Tax Success?

IMC is your go-to expert for Corporate Tax in the U.A.E. We’re dedicated to assisting you in keeping up with tax regulations so you can focus on growing your business. IMC Group believes in empowering businesses with the knowledge and tools they need for complete tax compliance.

Trust us to guide you through these changes with ease and confidence.

Remember, it’s not just about avoiding fines – it’s about ensuring your business thrives under the new tax laws. Let IMC help you get there.

A Complete Guide to Obtaining an ICV Certificate in the UAE

In a bid to streamline the industrial bidding process and boost the country’s economy, the government of UAE has introduced the ICV (In-Country Value) certification programme. Obtaining your ICV certificate can provide your business with a competitive advantage during tender assessments. This explains why forward-thinking businesses are applying for the ICV certificate to gain an edge over other bidders. As a business entity operating in the Emirates, you would be keen to obtain your ICV.

Most business entities can easily obtain the ICV certificate by adhering to the guidelines. Only an ICV-approved audit firm or advisory company reserves the authority to give this certificate.

Guidelines to obtain your ICV Certificate in the UAE

1. Furnish the documents

The process of applying for your ICV certificate begins with obtaining relevant financial statements. Established audit firms can assist in preparing these documents. This would ensure your compliance with the International Financial Reporting Standards (IFRS). If your company is newly established, management accounts can be used for the application.

2. Use the latest statements

Established audit firms would recommend using ICV certification templates during the application. The auditors would use the latest financial statements (preferably the last 2 years’ statements) that have been audited and are IFRS compliant. For companies established within the last 10 months without audited statements, the figures from management accounts (not older than 9 months) can be used.

3. Get the application evaluated and approved

The Ministry of Industry and Advanced Technology (MOIAT) has established guidelines and procedures for evaluating ICV applications. Businesses need to get the ICV template verified along with the supporting documents. After evaluating your application, the ICV committee will approve it. You need to review the unsigned ICV certificate and approve it before sending it to the certifying body.

4. Issuance of the ICV Certificate

Upon receiving the approved document from you, the certifying body would finally get your ICV certificate issued. With the ICV certificate in hand, your business can participate in bidding processes with relevant entities.

FAQ

How many certificates do I have to apply for?

Being a supplier in the industrial sector, you need separate certificates for all the business licenses in your possession. The authorities consider each business license as a separate legal entity. If your business operates at multiple branches under a single license, you need a single, comprehensive certificate.

How long does the ICV certificate remain valid?

The ICV certificate remains valid for 14 months after the audited financial statements get issued. Businesses may use the same financial statements to reapply for the certification before this period elapses. If you receive an updated ICV certificate, the previous one would remain valid.

Can I switch to a different certifying body?

When your business entrusts an Empaneled Certifying Body for validating the certification, you are not entitled to switch to a new body throughout the ICV certification process unless you have a valid reason.

IMC Group continues to be one of the trusted auditing and advisory firms in Dubai. Industrial suppliers can fast-track their process of obtaining ICV certificates with professional support.

Why Hiring a VAT Consultant in Dubai is Essential for Small Businesses

Dubai continues to be a global commercial hotspot, offering a plethora of privileges to small businesses. With its ease of doing business, robust transit network, and business-friendly policies, it appeals to entrepreneurs across the globe.

The tax-free regime in Dubai before 1st January 2018 further transformed the city into a global investment hotspot.

Being a small business, it pays to adhere to the tax norms in the country. Working with seasoned tax advisory professionals, businesses can comply with legalities. Right from registering for VAT to tax auditing, hiring experts for VAT advisory would streamline your growth trajectory.

What services do VAT consultants in Dubai provide?

Getting entangled in legal hurdles would be the last thing small businesses expect. In the UAE, failure to comply with the existing VAT norms invites hefty penalties. Companies specializing in VAT advisory can guide your business and help you deal with your VAT liabilities accurately. With professional minds backing your business, you can focus on your priorities.

Reputable VAT consultants offer a plethora of services, including:

  • VAT Registration and deregistration
  • VAT advisory
  • Explaining VAT regulations
  • VAT return filing
  • Assistance in processing payment to FTA
  • Purchase invoice reviewing
  • Internal VAT audit
  • Mitigating VAT liabilities

5 Reasons Small Businesses Should Hire VAT Consultants

Here’s why forward-thinking businesses in Dubai closely collaborate with experts for accurate VAT advice.

1. They are experts

Being informed professionals, tax advisory companies in Dubai educate their clients about their liabilities. So, you don’t bear the risk of miscalculating payments or levying the wrong rate from customers. Established VAT consultants bring their comprehensive knowledge to the table, helping your business navigate through the complex regime.

2. Accuracy matters

While filing VAT, accuracy happens to be the magic word. Reputed VAT consults never hesitate to walk the extra mile to cross-check details. Working with experienced tax advisors, you remain secure from committing generic mistakes during return filing or the initial tax registration.

3. Risk analysis and mitigation

One of the best perks of seeking VAT advisory from consultants is their ability to manage risk. Experienced tax professionals are capable of identifying compliance risks. Accordingly, they advise their clients to stay on the right track, keeping them out of the woods. This way, you wouldn’t be at the risk of being pulled up for unintentional non-compliance with VAT norms.

4. Flawless VAT audit preparation

Remember, FTA would allow your business just 5 days to respond to a VAT audit query. Top VAT consultants prepare their clients for stringent tax audits. Just after filing your VAT, they help businesses understand the supporting documents. Besides, the consultants capture relevant field data and keep their clients well-poised for VAT audits.

5. Capitalize on opportunities

In case your business turnover lies in the Dh187, 500 to Dh375, 000 bracket, registering for VAT isn’t mandatory. However, getting your firm registered brings several benefits that are easy to overlook. Reputed VAT consultants help their clients make the most of these opportunities.

Conclusion

Fulfilling complex tax obligations in Dubai and remaining compliant involves the experienced handling of your accounts. Why not hire the best VAT consultants in your city to spearhead your business? IMC Group, one of the most esteemed companies specializing in VAT advisory in Dubai, can handle your tax matters with expertise.

2023 Middle East M&A Outlook: Brace for Surprising Developments

Gulf SWFs and PE firms have substantial financial resources to support significant M&A activity.

The Middle East’s M&A sector experienced a deceleration in 2022, with both corporate and financial investors adopting a cautious stance due to surging interest rates and growing economic unease. Although M&A transactions sustained their robustness during the initial months of 2022, they lost momentum as the macroeconomic situation progressively worsened throughout the year.

The year 2022 has presented several economic and financial challenges that have made dealmaking a complex task on a global scale. Among the main obstacles has been the constricting credit environment, with banks limiting their funding for leveraged buyouts due to increasing interest rates and an overall aversion to risk. As a result, the issuance of leveraged loans to support private equity (PE) acquisitions have mostly come to a halt in Europe and the Middle East.

Despite the global challenges, the Middle East has experienced a modest decrease in the number of deals, from 366 in the first nine months of 2021 to 343 in the same period in 2022. The UAE, Saudi Arabia, and Israel were the most sought-after countries by buyers, with companies headquartered in these locations representing 20.7%, 9%, and 54.2% of the total deals in the region, respectively.

Amid the increasingly challenging economic climate, most M&A transactions in the Middle East were focused on recession-proof sectors, such as non-discretionary consumer goods and healthcare, while technology, media, and entertainment remained popular. Additionally, infrastructure deals proved to be a highlight in the region’s M&A activity.

Looking ahead to 2023, we anticipate a new dealmaking environment characterized by the same challenges that affected the market in the latter part of 2022. As a result, we expect the M&A sector to remain sluggish, particularly in the first half of the year. Despite this, the performance outlook, potential public-to-private opportunities, distressed situations, and lower valuations could present new avenues for dealmaking and unlock previously pent-up deals.

Nevertheless, in this increasingly complex environment, the timelines for completing deals are likely to be longer, and the risk of executing transactions successfully is higher.

Here are some potential trends that could shape the M&A market in the coming months:

Undeployed Reserves:

In the short-term, powerful corporate buyers may hold an edge, but the M&A market will still depend on sovereign wealth funds (SWFs) and financial sponsors, who have ample dry powder available for investment. As economic conditions shift, these funds will likely become more selective and focus on opportunities that enhance their existing portfolios or offer cash-generating potential. Despite a slowing fundraising pace, we anticipate that SWFs and financial sponsors will remain key players in the M&A market.

Small-scale acquisitions:

While financing options remain limited and large-scale opportunities are scarce, private equity firms and sovereign wealth funds may shift their focus towards smaller-scale bolt-on acquisitions. These types of acquisitions can add value to portfolios of SWFs and PEs, particularly when traditional growth channels are no longer viable, and exit routes become limited. During times of uncertainty, investing in familiar businesses and platforms may also prove to be a more sensible strategy for SWFs and PEs.

Mergers and acquisitions in distressed companies:

It is worth noting that, contrary to expectations, we did not observe a substantial increase in mergers and acquisitions involving financially troubled companies thus far in 2022. However, we anticipate this may change in 2023 as worsening economic conditions begin to pressure company balance sheets. This could lead to asset sales and operational restructuring, ultimately creating potential opportunities for mergers and acquisitions in distressed companies.

Divestitures:

We anticipate increased divestiture opportunities as economic conditions become more uncertain, causing larger companies and conglomerates to re-evaluate their strategies and shed non-essential assets. Moreover, activism investment remains a potent catalyst, with many investors able to establish positions at reduced prices during a downturn in the stock market. For SWFs and PEs, divesting non-core business units from their portfolio companies, while more intricate, may yield superior returns.

Environmental, Social, and Governance:

ESG factors are becoming an increasingly important consideration for both corporate and financial buyers in their M&A activities. This trend is expected to continue and gain momentum in 2023. Investors closely scrutinise targets’ ESG practices, including their impact on the environment, diversity and inclusion policies, and supply chain management. These factors are now essential components of investment decision-making and can have a significant impact on deal outcomes. They can also influence the availability and cost of financing, giving sponsors an advantage in securing debt funding.

In 2023, M&A buyers are expected to shift towards more resilient sectors in the face of economic headwinds, including non-discretionary consumer, healthcare, infrastructure, and specific sub-sectors within technology, media, and entertainment. These sectors are better positioned to withstand economic uncertainties due to strong demand, recurring revenue models, and the ability to mitigate rising operating costs arising from inflation. Moreover, the ongoing trend of digitalization across businesses will provide impetus to technology-related sectors. Infrastructure assets will also be a key focus, given their asset-heavy nature and ability to generate stable cash flows, thus providing downside protection.

VAT Alert in UAE: What Every Entrepreneur Needs to Know

Taxpayers in the UAE should prepare for new VAT changes effective January 1, 2023. It is advisable to consult tax consultants in Dubai promptly due to the significant impact of the recent amendment on your business.

Key dates

  1. The revised, amended provisions became effective from January 1, 2023
  2. As per new rules, qualifying registrants must submit reports from July 1, 2023
  3. The FTA kindly requests Qualifying Registrants to inform them by March 15, 2023

FTA updates the UAE VAT’s Tax Policy and Executive Regulation. The Federal Tax Department has modified the essential regulations surrounding UAE VAT:

Federal Decree-Law No. 28 of 2022 Modifications, Part I (Tax Procedures)
II. Act No. 8 of 2017’s executive rule amendments (Executive Regulations)
Based on the interpretation of the precise wording of the pertinent legislation, we have offered a comprehensive understanding following table:

1. The Federal Decree-Law No. 28 of 2022 updates Federal Decree-Law No. 7 in 2017 of a UAE on VAT, which will take effect on March 1, 2023.

Article Title Modification IMC Remarks
1 Meaning The terms “Tax Residency Certificates” and “Tax Residency” now have new terminology. A few small changes were also applied to the tax and business concept. For the Corporate Income taxes of June 1, 2023, the changes above were done to the legislation to ensure compatibility.
5 Linguistic In addition to Arabic, the Council can consider materials in other languages. In particular, if the Government demands it, an Arabic version could be necessary. Corporate and personal coordination with the Tax Authority will be improved.
7 Legal Advocates Members, too, can comply with any new obligations and present tax records to the Board. If the taxpayer is a juvenile or incompetent, there are no restrictions on filing the tax return.
10 Voluntary Disclosure (VD) When there is no increment of taxable income, individuals must file the VD. The segments and penalty provisions will be outlined in the Executive Order. Taxpayers may not be able to rectify errors in the subsequent report.
16 Power to do an internal audit
  • An extension from 5 to 10 business days for tax audit
  • Authorities can inspect the premises without a warrant
  • Five additional days
  • Cooperation between the taxpayer and the Official is essential
23 Tax Evaluation
  • Within 10 days, the FTA should provide taxation and inform the payer. When the taxpayer is failed in
  • Registered application and VAT payment
  • Due taxes
  • Error in return
Help taxpayers determine the appropriate income tax.
24 Penalty for Regulatory Evaluation Administrative fines ranging from a set AED 500 penalty to a high equal to double the taxes Reduced the burden on taxpayers
25 Tax Offenses and Sanctions
  • Tax fraud, unauthorized withholding of taxes, and tax settling may result in a prison term or a financial penalty
  • Prison if the appropriate penalty is not paid unless it is cancelled
  • Financial fines or prison terms for falsifying information, data breaches, or obstruction of justice
It lessened the strain of covering the initial sum—someone who fully adheres to the legal system and supports the Authorities.
32 Submission of a complaint and any other non-acceptance instances Within 40 business days, an appeal to the Council’s judgment must be filed. Taxpayers are given more time to submit their complaints.
36 Jury’s appeal system processes The panel’s judgment could be challenged within forty days. Chance to challenge in courts within the given timeframe
46 Limited Time Period Whenever five years have passed, the authority can impose tax assessments or perform tax audits in case:

  • FTA issues an auditing notification
  • The taxpayer submits a VD
It gives the Authorities more chance to execute tax evaluations within the given timeframe, appearing in judgment.

In addition, the following additional sections are added for offenses involving taxes, reviews of valuations, complaints, and reviews.

Article no. Details
26 Measures and Techniques
27 Agreement on Tax Fraud Charges
28 Petition for a Taxation Modification
29 Increase in Timelines

2. Cabinet Decision No.99 of 2022 revised Executive Regulation – Law No. 8 of 2017 and will prevail on January 1, 2023.

The concept of service has now been changed in Article 3, exempting services offered by an entity to carry out duties as a board of any private or Government organization.

Article 72, which deals with monitoring the contributions made, has already been modified to the following extent:

  • Where a taxpayer has a business located in the UAE, no permanent premises must have detailed records
  • When services provided by a taxpayer into an ECO surpass AED 100,000,000, they must maintain documents to demonstrate the Emirate wherein the supply is acquired
  • The crossover threshold is also used to determine the provision’s relevance
Our Comments:

Since adjustments must be made to how enterprises are now operating, a modified federal decree-law, tax regulations, and administrative regulations are released. Therefore, organizations must ensure that the changes above are made to the relevant evidence and procedures as soon as possible before the law takes effect to prevent any legal implications.

How can IMC help?

IMC can assist your business by conducting a simulated audit that replicates the type of assessment the FTA may work. This audit will pinpoint any areas of non-compliance and provide recommendations to align your business with the UAE VAT regulations.

How To Calculate Your UAE Corporate Tax Liability

Overview

To get better prepared for the UAE corporate tax regime, calculation of the final amount of the Corporate Tax (CT) payable for a financial year must be learnt and clearly understood by all businesses. Compliance to CT is vital for companies and a well reputed professional Corporate tax advisory in Dubai, UAE can provide effective tax solutions to help companies comply with CT requirements. With all the needed expertise and knowledge, such tax consultants can help calculate CT payable very accurately with all applicable tax incentives e.g. deductions, exemptions in perspective and save money for the companies.

Though the final print of UAE CT as a set of regulations or laws is yet to be officially published, businesses can refer to the Public Consultation Document that provides information on the major aspects of CT. Final tax related decisions however must be made after official announcement of CT laws. The final amount of CT payable for an assessment year will be determined from the taxable income for the relevant financial year.

The Proposed Tax Bracket

As announced by the UAE Ministry of Finance (MOF), Corporate Tax in UAE will apply at a standard rate of 9% with the below mentioned tax brackets and rates:

  • 0% for taxable income up to AED 375,000
  • 9% for taxable income above AED 375,000
  • A different and possibly higher tax rate which is not yet specified for large multinationals fulfilling certain specific criteria

Method of CT Payable Calculation

The Public Consultation Document issued in April 2022 by the MOF has outlined a method for calculating the CT payable for a financial year. Businesses can seek additional information and advice from a reputed Dubai based professional tax consultant, IMC Group to accurately evaluate the CT liability as specified in the consultation document.

The 9 % CT will be imposed on businesses only if the taxable value exceeds AED 375,000. CT in UAE is calculated at a flat 9% rate of the net profit shown in the company’s financial statements after deducting all applicable deductions and excluding the exempted income. Any taxes paid in overseas jurisdictions will also be allowed for reduction from the profit shown in the financial statement. The net profit derived after all deductions will be considered as taxable income.

Hence, all applicable deductions when subtracted from the net profit will give the net income. When the exempt income of AED 375,000 is deducted from this net income, we can arrive at the taxable income. CT @ 9% on this taxable income will give the final tax liability. Foreign Tax Credit, if any when subtracted from this final tax liability, will give the Final CT Payable.

UAE CT will apply to UAE resident companies on their global income including overseas income which may be subject to a similar tax like UAE CT in another jurisdiction outside of UAE. The proposed UAE CT regime, for avoiding double taxation, will allow a credit for the tax paid in an overseas jurisdiction on the foreign sourced income against the UAE CT liability as a foreign tax credit.

The maximum Foreign Tax Credit that can be availed will be determined by the amount of tax that is paid in the foreign jurisdiction; or the UAE CT payable on the foreign sourced income and whichever is lower.

Unutilised Foreign Tax Credit, if any can not be carried forward or adjusted back to other tax periods. The Federal-Tax-Authority (FTA) will not refund any unutilised Foreign Tax Credit.

UAE Corporate Tax Relief for Small Businesses

The corporate tax regime involves a certain level of complexity which is unavoidable, especially in a diversified economy like the UAE. However, the UAE government has made provisions to keep the UAE corporate tax regime as simple as possible, which may help businesses to minimise their compliance costs. In line with this policy, the UAE corporate tax regime will provide relief for small businesses in the form of simplified financial and tax reporting obligations. The provision for small business relief is significant as the relative burden of tax compliance is disproportionately higher for small and medium-sized businesses across the world. Small business owners can consult with corporate tax advisors in Dubai to know further about the relief for small businesses under the corporate tax regime.

Hire the Best Corporate Tax Consultants in Dubai, UAE

Corporate tax agents in Dubai such as Jitendra Chartered Accountants (JCA) can advise business owners on critical tax matters such as the calculation of payable tax. JCA has a team of corporate tax advisors in Dubai who can help the businesses to comply with such complex provisions in the corporate tax regime.

Our services at JCA as Corporate Tax Consultants include CT Assessment & Advisory Services (one-time or retainer basis), CT Compliance Services & CT Agent Services to Represent to Federal Tax Authority (FTA) of UAE in case of any notices served by FTA. Ensure corporate tax compliance and avoid relevant penalties by availing of JCA’s corporate tax services in Dubai, UAE. JCA offers customised tax solutions to allow businesses to comply with the UAE corporate tax hassle-free.

What are the Exempt Income Categories Under UAE Corporate Tax Regime?

Overview

The UAE Corporate Tax (CT) regime, as per the Public Consultation Document released by the Ministry of Finance (MOF) on 28 April 2022 proposes to exempt certain forms of income from taxation to prevent incidences of double taxation.

For the UAE-based companies, the Income generated from investments in other companies and income earned from operations undertaken outside the UAE, either through foreign subsidiaries or foreign branches is primarily exempted from UAE CT.

The exempt income scheme to be administered by the Federal Tax Authority shall include participation exemption or similar principles followed in international markets.

Exempt Incomes Under UAE CT

The following income shall be in general exempt from income tax. There will be no UAE withholding tax on domestic and cross-border payments.

Dividend Income

UAE companies earning dividend income from their qualifying shareholding shall not be liable to pay income tax. This would help prevent double taxation as profit money paid as dividends are already taxed once. All the domestic dividends earned from UAE companies will be CT exempt including dividends paid by a Free Zone entity enjoying CT holidays.
Dividend incomes from foreign companies will also be CT-exempt.

Capital Gains

UAE corporate shareholders will be exempted from CT on capital gains earned from the sale of shares of a subsidiary company as it would avoid double taxation of corporate profits.

Capital gains from the sale of shares in a Free Zone Person will be exempt from corporate tax in the event of the Free Zone Person being a holding company and most of its income being earned from shareholdings in subsidiary companies.

Capital gains from the sale of shares in both UAE companies and foreign companies are CT exempt subject to fulfilling certain conditions such as the UAE shareholder company owning a minimum of 5% of the shares of the subsidiary company and the CT rate of foreign companies being at least 9%.

Profit of Foreign Branch

UAE companies can avail of CT exemption either through the credit method or through the exemption method. They can claim a foreign tax credit for taxes paid in the foreign branch country or claim an exemption for their foreign branch profits.

Claiming for foreign branch profit exemption will be irrevocable and will apply to all foreign branches of the UAE company. The exemption for foreign branch profits can’t be availed if the foreign branch doesn’t come under a tax jurisdiction with a sufficient level of tax. Better insights on availing foreign branch profit exemption become possible when a company prefers to outsource the professional services of a corporate tax advisory in UAE.

Other Incomes

Profits made from a reorganization of groups and intra-group transactions shall be CT-exempt. Exemption can also be availed for income earned by a non-resident operating or leasing aircraft or ships as well as any associated equipment for international transportation. However, the such exemption can only be sought if similar tax treatment, as reciprocation, is granted to a UAE business in the relevant foreign jurisdiction.

The Bottom Line

The UAE companies must evaluate if they can fulfill the prescribed conditions, as and when appropriate, to avail the exempt income scheme and an understanding of the types of income exempt from the UAE corporate tax regime will help businesses prepare better.

Seeking professional help from corporate tax consultants in Dubai will enable you to assess the potential impact of corporate tax on your business. You can consult with the best corporate tax advisors in Dubai such as Jitendra Chartered Accountants (JCA) to prepare effectively for the corporate tax.

IMC Group is one of the leading corporate tax services providers in UAE and can help companies with smooth and seamless transition to the new tax regime. The services mainly include corporate tax assessment, corporate tax compliance and corporate tax agency.

Kuwait and UAE Sign the Double Taxation Treaty

On 30th August 2022, the Kuwait Ministry of Finance announced that the State of Kuwait (Kuwait) and United Arab Emirates (UAE) have signed a long awaited double tax treaty, the first of its kind signed by Kuwait with any Gulf Cooperation Council (GCC) member state.

How will it benefit both the countries?

It aims to strengthen the cooperation frameworks in tax matters and boost cross-border trade and investment between both the countries. It is expected to bring together the financial, economic, and investment partnership between both the countries.

The tax treaty between Kuwait and UAE attempts to take advantage of the growing investment opportunities, uplifting commercial trading and strengthening the development goals in both the regions by way of diversifying the sources of national income and offering complete protection for goods and services.

The double taxation treaty provides a more favourable tax treatment in substitution to each country’s domestic tax legislation in respect of many income taxes (corporate and personal) and withholding tax matters.

How will it impact you?

The tax treaty may reduce the taxation burden of UAE residents in Kuwait and vice versa. This is because the double taxation treaty will override domestic tax legislation. Multinational companies in both the regions will have to revisit their existing tax structures to assess the impact of DTT rules.

What will happen next?

Currently, the tax treaty is signed between Kuwait and UAE. It should be followed by the final ratification and finally be published in the official Gazette. From there, it will be put into force as per the official date declared.

How can IMC Group help?

Our tax expert team at IMC Group is keeping a close eye on the taxation matters in the UAE and Kuwait. We will keep you updated with the latest provisions of the tax treaty. For more information, get in touch with us!

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