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UAE Federal Tax Authority Publishes 2019 Guide

The UAE Federal Tax Authority, the government entity responsible for the administration, collection and enforcement of federal taxes, was established in 2016 by the President of the United Arab Emirates, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, via Federal Decree-Law 13 of 2016.

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.

The UAE’s citizens and residents enjoy exceptional public services, such as healthcare, roads, education, parks and social services. The full cost of these services is paid for by the government.

The introduction of VAT and Excise taxes will help the UAE diversify sources of revenue so that government departments can continue to deliver excellent public services and ensure a high quality of life for coming generations.

This is also in line with a key pillar of the UAE’s Vision 2021 – The Sustainability of Infrastructure – more information about which can be found here.

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

Foreign Ownership for Thirteen Sectors in the UAE

In general, foreign ownership occurs when multinational corporations, which do business in more than one country, inject long-term investments in a foreign country, usually in the form of foreign direct investment or acquisition.

Following the enactment of the Federal Law No. 19 of 2018 on Foreign Investment, the UAE Cabinet has announced the positive list of activities covered by and benefiting from Article 7-3 of the FDI.

The UAE cabinet has approved 122 economic activities across 13 sectors that will be eligible for up to 100% foreign ownership.

These sectors include:

  • Transport and storage;
  • Agriculture;
  • Space;
  • Manufacturing;
  • Renewable energy;
  • Hospitality and food services;
  • Information and communication;
  • Professional, scientific and technical activities;
  • Administrative and support services;
  • Educational activities;
  • Healthcare;
  • Art and entertainment; and
  • Construction.

The eligible sectors will offer new economic opportunities for international investors looking to explore the United Arab Emirates market particularly for projects involving e-commerce, research laboratories, advancement in biotechnology, logistics and supply chain, production of solar panels, hybrid power plants and green technology.

The UAE Cabinet has further confirmed that it will be left to the discretion of the local governments at an emirate level to decide on the percentage of foreign ownership for each sector/ activity.

This announcement represents a much-awaited step towards the development of foreign investment regulations in the UAE.

It is expected to considerably boost the level of FDI in the UAE as a whole and cement the role of the UAE as a global business hub for foreign investments.

The list of privileges awarded to Foreign Direct Investment projects are extensive and include the following:

  • FDI Companies licensed under the FDI Law shall be treated as national companies within the limits prescribed by the legislation in force in the UAE and the international agreements to which the UAE is a party.
  • FDI Companies may transfer their returns outside the UAE including net annual profits, proceeds from the liquidation of the investment or the sale of all or part of their assets; and funds collected from the settlement of disputes in relation to their activities in the UAE.
  • Employees of FDI Companies may transfer their salaries, indemnities and entitlements outside the UAE.
  • FDI Companies shall be guaranteed confidentiality of technical, economic and financial information as well as investment initiatives submitted to the competent authorities or the licensing authority in accordance with the provisions of the FDI Law in a manner that is compliant with UAE applicable laws and regulations including enforced international treaties in the UAE.
  • FDI Companies, subject to obtaining the required approvals, can admit one or more shareholders; sell the business; change their legal form or enter into a merger without losing the privileges awarded to them under the FDI Law.

We will be posting regular updates in respect of the implementation and development of the FDI Law.