UAE introduces Economic Substance legislation
The Ruler of Dubai issued the Resolution of the Cabinet of Ministers No. 31 for 2019 concerning economic substance rules on 20 June 2019. The legislation, which entered into force as of 30 April, is intended to secure the UAE’s removal from the European Union’s blacklist of uncooperative jurisdictions.
The blacklisting was announced in March, after the EU’s Code of Conduct Group (Business Taxation) named the UAE as one of the jurisdictions it considered to be facilitating offshore structures or arrangements aimed at attracting overseas profits that do not reflect real economic activity in the jurisdiction.
The economic substance regulations apply to companies engaged in core income generating activities (CIGA) including banking, insurance, fund management, financing and leasing, headquarter companies, shipping business, investment holding, IP activities and distribution and service centres.
DMCC launches exclusive set-up offer for JLT residents
The Dubai Multi Commodities Centre (DMCC), the world-leading free zone for commodities trading and enterprise, has launched an exclusive 40% discount on business set-up for residents of Jumeirah Lakes Towers (JLT).
As of June 2019, new and existing JLT residents can establish a business in DMCC for just AED 30,000 (approx. USD 8,200) subject to terms and conditions. The initiative is designed to boost Dubai’s SME (Small and Medium-sized Enterprises) community and support aspiring entrepreneurs and freelancers to start a business.
“Flexibility is key when starting a business and by launching this exclusive offer, we hope to help those with entrepreneurial or freelance ambitions transform their ideas into successful business ventures. Jumeirah Lakes Towers is home to over 100,000 people and I have no doubt that there are thousands within this community with great business ideas,” said DMCC Chief Operating Officer Feryal Ahmadi.
Rethinking ‘End of Service’ benefits – the DIFC story
The DIFC has recently announced plans to replace its end of service gratuity (ESG) scheme, where a lump sum is paid to an employee leaving employment, with a defined contribution savings scheme where employees and employers contribute on a monthly basis. The DIFC Employee Workplace Savings (DEWS) Trust scheme, which is to be introduced from 1 January 2020, will also offer a voluntary savings component for employees.
Under the proposed new regime, all DIFC employers and employees will be required to participate in the DEWS scheme unless an employer operates a qualifying system of its own. It forms part of the new DIFC Employment Law – Employment Law, DIFC Law No. 2 of 2019 – which was enacted on 30 May and is due to come into effect after 90 days on 28 August.
The DIFC reviewed the existing ‘lump-sum’ ESG system against international standards and changing demographics. It is not currently mandatory for companies in the UAE to set aside payment for ESG, which is calculated as 21 days of pay per year of service for five years of service, and 30 days of pay per year of service after. This does not include allowances.
Umm Al Quwain free zone starts ‘Smart City’ expansion
The Umm Al Quwain Free Trade Zone (UAQ FTZ) has started construction on an ambitious two million square metre expansion to create a sustainable industrial ‘Smart City’, where small and medium enterprises, Fintech start-ups, R&D centres, logistics, outsourcing and alternative power-related industries can flourish.
“We are building a smart city where residents will be able to ‘walk to work’. The city will function as an independent business and industrial hub, with amenities for families and employees such as schools, hospitals, hotels, shopping malls and even an art and exhibition centre,” said Sheikh Khalid Bin Rashid Al Mu’alla, chairman of UAQ FTZ.
“The new free zone location is poised to become a strategic economic hub and is conveniently located near the highly accessible state highway, Sheikh Mohammed Bin Zayed road, connecting UAQ with the emirates of Sharjah, Dubai and Abu Dhabi. Proximity to two international airports as well as multiple seaports, make it logistically ideal.”