UAE Economy – May Update
May 12,2020 / Haroon Juma / Blogs
This month has seen range of announcements made to support businesses operating from different license jurisdictions. In this blog, we summarise the range of incentives and clarifications that affect your business and the UAE economy.
Compliance: Economic Substance Regulations
The Ministry of Finance has now issued further detailed guidance on the Relevant Activities for Economic Substance. This publication provides further details to assess whether your business is subject to the ESR Relevant Activity definition.
The DIFC also announced that the Economic Substance Notification will be released by 1 May 2020 and must be submitted by 12 June 2020. In preparation for the ESR Notification, DIFC companies are required to review their financial year-end and submit it on the DIFC Portal if not already completed.
UAE Economic Incentive to Enterprises
New incentives have been put in place by the UAE authorities in the past days. The Dubai Financial Service Authority (DFSA) announced new measures to help local SMEs to raise funds through the capital markets.
This was followed by the DIFC Directive 4-2020 to support DIFC employers and employees during Covid 19 while different UAE free zones continue to implement new stimulus packages to reduce business costs and help boost the UAE economy.
Dubai Financial Service Authority (DFSA)
DGSA introduced a listing regime for Small and Medium Enterprises to raise funds through the capital markets by issuing shares, listing on the DFSA Official List of Securities. This regime allows SMEs companies to:
• obtain equity financing through the capital markets;
• list with less than three years’ track record;
• benefit from lower fees when filing a Prospectus for approval; and
• appoint a compliance adviser, rather than a sponsor, to assist it in complying with DFSA requirements at application and on an ongoing basis.
The Dubai International Financial Centre (DIFC)
The Dubai International Financial Centre (DIFC) has published Presidential Directive No. 4 of 2020, to address the issues currently being faced by employers and employees within the DIFC until 31 July 2020. The Directive details many extended measures that an employer is lawfully allowed during the emergency period including reducing working hours, imposing vacation leave, decreasing remuneration temporarily, and restricting workplace access. The Directive provides more protection to employees who fall sick as a result of COVID-19.
Federal Authority for Identity and Citizenship
With the recent announcement made by the Federal Authority for Identity and Citizenship concerning the extension of residency visa validity until 31 December 2020, the DIFC has issued an update on VISA and establishment card matters:
• All employees and dependents (inside or outside the UAE) with visas expiring after 1 March 2020 will have their visa validity extended until 31 December 2020. Employee records in DIFC’s portal will be updated accordingly.
• All individuals inside UAE with entry permits (visit visa, tourist visa or residency entry permit) that are expired after 1 March 2020 will have their entry permit validity extended until 31 December 2020.
• Employers who wish to submit applications for visa renewal can still apply on the DIFC Portal. The visa will be valid from the renewal date up to 3 years and medical fitness test will not be required.
• Individuals with expired visas who are eligible for the extension and need to exit the UAE are required to renew the visa before exiting the country.
• Employees with cancelled visas that could not exit the UAE due to the current lockdown will be able to have their overstay fines waived at the airport at the time of exit.
• Employees with cancelled visas or visit visa that are in the process of obtaining a new visa with a new employer must complete the change of status within the permitted grace period to avoid fines. Fines will still be applicable for this category.
• Entity establishment cards must be renewed on time. Late fines will still be applicable for delay in renewal of establishment cards. Entities must ensure that the DIFC license is renewed to be able to apply for establishment card renewal. The penalty for each month of delay is AED 100.
• The residency Visa of Individuals (with valid visa) who completed 6 months outside the UAE after 1 March 2020 will not be blocked until 31 December 2020.
• Individuals with cancelled visas that are applying for a new visa while they are inside the UAE (given that no over stay fines are issued to them) will be allowed to complete the new visa process without the medical fitness test. However, the visa will be issued for one year only. Visas issued for 3 years will still require a medical fitness test to be completed.
• The Federal Authority for Identity and Citizenship have started issuing electronic visa stamping and the same will be available under the service request documents list upon completing the visa process. Individuals who need to have the visa stamped on the passport must have a valid air ticket.
Dubai Free Zone Council, Dubai Silicon Oasis (DSO)
The Dubai Free Zone Council, Dubai Silicon Oasis (DSO) announced exemptions, incentives, and flexible payment plans for companies while Dubai World Trade Center Authority (DWTCA) decreased annual fees for all new business registrations and license renewals and waived the administration fee on all new, transfer and renewal visas.
RAK ICC introduced a 50% reduction on agent registration fee and new incorporation while 25% discount will be offered on Premium Packages until 30 June 2020.
Furthermore, all active companies are to file the ESR Notification. The deadline remains 30 June for all companies due to file by then.
ADGM announced extra incentives to support new entities. From 3rd May 2020 until 31 December 2020, the new incentives are applicable to financial, non-financial and retail licenses, excluding Special Purpose Vehicles (SPVs), ADGM Foundations, Venture Capital firms, Tech Start-Ups (seed and emergent), Accelerators and Incubators, and Professional Associations and include:
• 50% reduction on fees associated with the incorporation of new ADGM companies and limited liability partnerships (including branches).
• 100 percent reduction on continuation fees for companies continuing into ADGM from a foreign jurisdiction.
• Existing ADGM companies and limited liability partnerships are now able to request an extension on the nine-month timeline for filing of annual accounts by demonstrating to the Registrar the circumstances affecting their ability to comply with this obligation.
The new announcement supports recently introduced measures directed at mitigating the effects of COVID-19 on ADGM entities, and included:
• 50 percent waiver on the ADGM FSRA supervision fee
• 100 percent waiver on the renewal of commercial licensing fees, including the business activity renewal fees and the data protection renewal fees imposed by the ADGM RA, which will be applicable until 25 March 2021.
Federal Tax Authority
The Federal Tax Authority (FTA) issued a new directive last week to extend the deadline of the submission of VAT returns and settlement of payable tax as follow:
If the VAT registrants are subject to monthly filings, file their tax returns, and settle their payable tax for the period from 1st to 31st March 2020, no later than Thursday, 28th May 2020.
If they are subject to quarterly filings, file their tax returns, and settle their payable tax for the period from 1st January 2020 to 31st March 2020, no later than Thursday 28th May 2020.
Dubai Government Centers
Last week the Government of Dubai ordered the re-opening of many centers following the 24-hour Stay National Disinfection Program. The Dubai government offices have resumed their activity to the public. These steps have been taken to reignite the UAE Economy and support UAE’s long-term economic development.
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