UAE Tederal Tax Authority extends the Excise Tax

On the 1st of October 2017, the Federal Tax Authority (FTA) implemented an Excise Tax on certain products, including 100% on both tobacco-related products and energy drinks and 50% tax on carbonated drinks.

Due to the success of these taxes in reducing the consumption of these products, the FTA, as per Cabinet Decision No (52) of 2019, has chosen to extend this Excise Tax, as follows:

  • 100% on any liquids used in electronic smoking devices and tools, regardless of it containing nicotine, in accordance with the Customs Codes as determined by a decision issued by the Finance Minister;
  • 100% on any electronic smoking devices and tools, regardless of it containing tobacco or nicotine, in accordance with the Customs Codes as determined by a decision issued by the Finance Minister; and

50% on any sweetened drinks, including any products to which sugar or other sweeteners are added and produces:

  • ready-to-drink beverages;
  • concentrates, powders, gels, extracts or any form that can be converted into a sweetened drink;
  • any type of sugar determined under Standard 148 of the GCC Standardisation Organisation under the heading “Sugar”; and
  • any type of sweeteners determined under Standard 995 of the GCC Standardisation Organisation under the heading “Sweeteners Permitted in Food”.

Products which will be exempt from the definition of sweetened drinks and therefore not subject to the new Excise Taxes include:

  • ready-to-drink beverages containing at least 75% milk;
  • ready-to-drink beverages containing at least 75% milk substitutes;
  • baby formula, follow up formula or baby food;
  • beverages consumed for special dietary needs, as determined under Standard 654 of the GCC Standardisation Organisation under the heading “General Requirements for Pre-packaged Foods for Special Dietary Use”; and
  • beverages consumed for medical uses as determined under Standard 1366 of the GCC Standardisation Organisation under the heading “General Requirements for Handling of Foods for Special Medical Purposes”.

The expansion of the Excise Tax on the additional products shall take effect on the 1st of December 2019.

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New Efforts to Boost Dubai’s position for Commercial Arbitration

The newly formed board of trustees of the Dubai International Arbitration Centre (DIAC) held its first meeting earlier today at Dubai Chamber of Commerce Industry’s head office where it discussed new plans and efforts to boost Dubai’s position as a global centre for commercial arbitration.

The meeting comes after H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, issued a decree related to DIAC, an initiative of Dubai Chamber, which established the centre’s new board of trustees.

The board is joined by legal experts and business leaders, while UAE nationals represent 80% of new members.

The meeting was chaired by Dr. Ahmed Hassan Mohammed bin Al Sheikh, Chairman of the Board of Trustees, and attended by Dr. Ahmed Saeed bin Hezeem Al Suwaidi, the board’s Deputy Chairman; and board members Saeed Mohammed Al Shared Al Falassi; Ahmed Saeed Majed Belyouha; Ahmed Mohammed Ali Al Rashid; Jehad Kazim; Dr. Hassan Mohammed Arab Darwish; Abdulaziz Mohammed bin Shafaar Al Marri; Graham Kenneth Loufit; and Robin Joy Abraham.

During the meeting, board members thanked H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, for his trust and confidence in the new board which has been tasked with enhancing Dubai’s reputation as a preferred destination to settle commercial disputes.

Dr. Ahmed bin Al Sheikh pointed out that the new board offers a wealth of legal and business expertise which will enhance its ability to meet the evolving demands of Dubai’s maturing business community, and stressed the important role of commercial arbitration in advancing the emirate’s global appeal as an attractive place to do business. He added that the board is in the process of developing new plans and strategies in line with Dubai’s ambitious vision and sustainable development goals, adding that its efforts would help boost investor confidence in the market.

For his part, H.E. Majid Saif Al Ghurair, Chairman of Dubai Chamber, described DIAC as the leading commercial arbitration centre in the Middle East and North Africa, offering a high calibre of arbitration services and facilities applying best international practices in settling commercial disputes.

H.E. Al Ghurair, expressed his confidence in the board of trustees’ ability to achieve its objectives, raise arbitration standards and improving ease of doing business in Dubai.

The Dubai International Arbitration Centre (DIAC), the largest arbitration centre in the Middle East, provides local and international business communities with commercial arbitration services. DIAC was initially established by the Dubai Chamber of Commerce and Industry in 1994 as the Centre for Commercial Conciliation and Arbitration.

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Regulatory Update for the UAE Insurance Authority

The UAE Insurance Authority has recently published new regulatory directions on their website. Sharing a summary of the regulatory guidance.

a. Insurance Authority Resolution No. (49) of 2019 Concerning the Regulations for Life Insurance and Family Takaful Business

Previous editions have highlighted the irregularity in both commissions and payments, particularly in relation to pay-out to intermediaries. It was noted in the previous draft, that the commission cap for pure protection policies would be 10% of the annual premium for each year of the term of the policy. This continues to be retained, with the overall cap of 160% of the annualized premium. As for single premium policies, it remains to be limited to a maximum of 10% of the premium. With any premium changes, the pricing actuary must consider non-recurring changes in the annualized premium, due to add-on coverages, riders or similar options, by using the same method and restrictions as the first-year annualized premiums.

With regards to indemnity commission, the commission paid must be based on the annualized premium collected. In circumstances where the mode of premium payment is semi-annually, quarterly or monthly, the commissions paid can be based on the annualized premium. However, this must be financed by the company and not by the policyholder. Affirmed by the previous draft, the first year of commissions paid on the annualized premium must be capped at 50% of the annualized premium or at 50% of the total commissions payable under the product, depending on whichever is less. In circumstances where it is found that the premium payment is of 20 years or more, the pricing actuary may propose a non-fixed payment plan, subject to prior approval.

b. Insurance Authority Board of Directors’ Decision No. (40) of 2019 Concerning the Amendment of Certain Provisions of the Insurance Authority Board Decision No. (3) of 2010 On the Instructions Concerning the Code of Conduct and Ethics to be Observed by Insurance Companies Operating in the UAE (“the Code of Conduct”).

This decision extends the applicability of the Insurance Authority’s Code of Conduct to “insurance-related professions”. The Code of Conduct provides the various terms and conditions that must be complied with by any entity licensed by the Insurance Authority, including but not limited to guidance on operations, publicity and advertisement, pricing, proposal form, policy wording, claims and renewal. In its original form, the application of the Code of Conduct was limited to only the insurance companies licensed by the Insurance Authority, but following this amendment, the Code of Conduct also applies to all professionals licensed by the Insurance Authority, such as Insurance Agent, Actuary, Insurance Broker, Surveyor or Loss Assessor, Insurance Consultant or any other insurance-related profession regulated by the Insurance Authority.

c. The Insurance Authority Board of Directors’ Decision No. (41) of 2019 Concerning the Supervisory Rules for the Experimental Environment of Financial Technology in the Insurance Industry

This decision issued by the Insurance Authority has laid down the financial technology regulatory framework of the Insurance Authority, which the objective “to define the regulatory framework for the operation and management of the experimental environment of the insurance sector, in order to create an attractive environment for the insurance sector using innovative systems, as well as, making it a platform to interact with FinTech companies, improving the regulatory framework, and contributing to economic growth and risk management.”

The decision is aimed at supporting the Emirati FinTech companies and transforming the UAE insurance market into a smart insurance market. The decision identifies Innovative Solution Owners, FinTech companies licensed in free zones and financial free zones, National fintech companies and Foreign FinTech companies. If the applying entity fulfils all the requirements laid down by the Insurance Authority, they shall be accepted for the pilot phase, which will run between 6 to 12 months, aimed at testing the feasibility of the business. This is a great forward-looking step by the Insurance Authority, which will likely result in the development of indigenous solutions in the insurance sector, and has set a high benchmark for other insurance regulators in the region.

d. The Insurance Authority Board of Directors’ Decision No. (42) of 2019 On the Amendment of Certain Provisions of the Insurance Authority Board of Directors’ Decision No. (13) of 2018 Instructions Concerning Marketing Insurance Policies through Banks (“the Bancassurance Regulations”)

This decision amends certain provisions of the Bancassurance Regulations. The Bancassurance Regulations currently require the Designated Officer of the bank to acquire practical training of no less than two months at any insurance company, which has now been replaced by a training requirement of 30 (thirty) hours.

The requirement for an insurance company to have a branch in the Emirate in which the bank is selling the insurance policies has now been replaced by a requirement to have a “Point of Sale” in such Emirate or “electronic services” that enable customers to communicate with the company to receive their feedback, inquiries and complaints, subject to the terms in the revised provision. This implies that insurance companies can utilize the Bancassurance channel for distribution even in the Emirates where they do not have an Insurance Authority licensed “Branch” if they have either a “Point of Sale” in such Emirate or provide insurance services through electronic means.

e. Administrative Decision No. (140) of 2019 Concerning Exemption of Some Insurance Policies from Arabic Language Drafting Condition

The Administrative Decision (the Decision) issued by the Insurance Authority dated 14 October 2019 has now been published on the Authority’s website. The Decision follows the Administrative Circular No 7 of 2019 relating to Administrative Fine, which laid down the fines applicable if an insurer does not comply with the requirement of issuing the insurance policy in Arabic. Following multiple requests from the Insurers who expressed their inability in translating policies of international nature to Arabic language, the Decision lists down the polices which have been exempted from translation to Arabic, such as marine and aircraft policies, oil and gas related insurance policies, space related insurance policies and other insurance policies of international nature. The Decision further provides a list of documents that need to be submitted to the Authority for approval of the policy wordings, in relation to each life insurance policies and those in relation to general insurance policies. In addition, there is a requirement to provide an undertaking that the product complies with applicable legislations.

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UAE Federal Tax Authority publishes new guide

Clarifications are used when there is a question about the VAT Law and how it will apply in a certain case. The main change with the new guide is the extension of the time limit required for receiving a Clarification upon submission of all relevant information and documents to the FTA, from 40 business days to 45 business days.

There is further an additional paragraph which explains that if a case is very complex, for e.g. the FTA may have to consider other legislation or contractual or factual information, then a further 45 business days may be required.

In essence, for complex cases, the FTA may require 90 business days from the date of the initial submission to determine a case.

Download the guide here

New Dubai RERA Law Issued

His Highness Sheikh Mohammed bin Rashid Al Maktoum, in his capacity as the Ruler of Dubai, earlier this week issued the Dubai law No. (4) of 2019 (“New Law”) pertaining to the Real Estate Regulatory Agency (“RERA”) initially established by law No. (16) of 2007 as predominantly the regulatory arm of the Dubai Land Department (“DLD”).

The New Law provides for a reorganization of RERA’s legal capabilities and capacities and defines a set of important objectives for RERA, including the contribution to the advancement of the real estate sector through an integrated system of regulatory and control measures which shall enhance its role in the overall economic development of Dubai, provide an assuring and supportive environment for the real estate development projects to safeguard the rights of both real estate developers and investors, keep pace with the steady growth of the real estate sector and all related activities, enhance the role of UAE nationals in this sector and implement programs that will enable them to participate in real estate activities, as well as to develop the codes of principles and ethics required for practicing real estate activities.

The New Law confirms that RERA will continue to exercise certain powers established under the previous law, including the organization and supervision of real estate development escrow accounts, approving qualified banking and financial institutions to manage these accounts, and the adoption of rules governing practitioners of the real estate development activity, the sale and rental of real estate, real estate brokers, real estate assessment and joint ownership of real estate property.

The New Law came with a number of key modifications and additions to RERA’s functions and specialties broadening thereby its scope of authority over real estate activities in the Emirate. The newly introduced powers include that RERA shall now be responsible for organizing and licensing real estate activities and supervising the practitioners of these activities in order to ensure their compliance with the laws and regulation governing the real estate sector. RERA will also be responsible for the supervision and inspection of the management, operation and maintenance of joint real estate properties, proposing the necessary legislations to regulate the work of real estate practitioners, and issuing the necessary regulations for the training and qualification of employees in the organizations licensed to practice real estate activities through the Dubai Real Estate Institute (“DREI”), in addition to the registration and issuance of identification cards to practitioners of real estate industry.

Launch of Joint Initiative to Streamline UAE’s Real Estate Sector

A memorandum of understanding (MoU) between DLD and BSA was signed to promote foreign and local investment opportunities in Dubai through an innovative framework that will boost transparency and streamline transaction processes for investors in the sector. As part of the REL initiative, DLD is introducing several investment products to lift restrictions in the current real estate laws that will allow for more vigorous real estate investment in Dubai. The new initiative will especially facilitate the purchase and sale of properties by corporate entities with ultimate foreign ownership, therefore opening up the market to more corporate investors.

Sultan Butti bin Mejren, director general of DLD, said: “At DLD, we are keen to support the directives of our wise leadership and the strategies to make Dubai the smartest and happiest city in the world. The MoU with BSA further supports our mission to consolidate and attract foreign and corporate real estate investments to Dubai. We are working to strengthen the real estate sector in the Emirate through such partnerships that ensure the ease and speed of regulatory and investment procedures.”

Dr Ahmad bin Hezeem, Senior Partner, BSA, said: “The overarching goal of this progressive initiative is to open up Dubai’s real estate market to more investors, increasing investment flows in the process. The REL initiative will provide a legal framework that streamlines and facilitates the process for investing capital in the city. This, in turn, will attract a wider range of investors and transactions. It’s a pleasure to once again be joining forces with DLD in support of the work we have been doing over the past 20 years reinforce our clients’ investment interests in Dubai’s real estate sector. In essence, the enhanced investment framework proposed by the REL will simplify the processes for clients.”

Majid Saqer Al Marri, CEO of the Registration and Real Estate Services Sector at DLD, said: “Our MoU with BSA is another step on our journey to ensuring the comfort and happiness of our customers through streamlining the processes of Dubai’s real estate sector. We will remain vigilant and progress upon our path of helping achieve objectives and keeping pace with developments in the field of registration and real estate services.”

The announcement comes after BSA’s previous collaboration with DLD to host ‘Legal Clinics,’ which provided the public with a six-hour window to access free advice from 25 expert lawyers, who specialise in areas as varied as real estate, construction, employment, compensation claims, criminal matters, debt recovery, tenancy disputes, inheritance, and family matters.