April 2023 / United Arab Emirates

The Ministry of Finance has issued Ministerial Decision No. 73 of 2023 on Small Business Relief for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”).

The decision is issued in accordance with Article 21 of the Corporate Tax Law, which treats the taxable person as not having derived any taxable income in a given tax period where the revenue did not exceed a certain threshold.

Small Business Relief is intended to support start-ups and other small or micro businesses by reducing their Corporate Tax burden and compliance costs. The Ministerial Decision on Small Business Relief specifies the revenue threshold and conditions for a taxable person to elect for Small Business Relief and clarifies the provisions of the carried forward Tax Losses and disallowed Net Interest Expenditure under the Small Business Relief scheme.

The Ministerial Decision on Small Business Relief stipulates the following:

• Taxable persons that are resident persons can claim Small Business Relief where their revenue in the relevant tax period and previous tax periods is below AED3 million for each tax period. This means that once a taxable person exceeds the AED3 million revenue threshold in any tax period, then the Small Business Relief will no longer be available.
• The AED3 million revenue threshold will apply to tax periods starting on or after 1 June 2023 and will only continue to apply to subsequent tax periods that end before or on 31 December 2026.
• Revenue can be determined based on the applicable accounting standards accepted in the UAE.
• Small Business Relief will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020 on Organising Reports Submitted by Multinational Companies. MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than AED3.15 billion.
• In tax periods defined in the decision where businesses do not elect to apply for Small Business Relief, they will be able to carry forward any incurred Tax Losses and any disallowed Net Interest Expenditure from such tax periods, for use in future tax periods in which the Small Business Relief is not elected.
• With regard to the artificial separation of business, the Ministerial Decision specifies that where the Federal Tax Authority (FTA) establishes that taxable persons have artificially separated their business or business activity and the total revenue of the entire business or business activity exceeds AED3 million in any tax period and such persons have elected to apply for Small Business Relief, this would be considered an arrangement to obtain a Corporate Tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law.

All Cabinet Decisions and Ministerial Decisions issued relating to the Corporate Tax Law are available on the Ministry of Finance’s website.

• Dubai’s real estate sector sees transactions worth AED157 billion in the first quarter of 2023, an 80% rise from Q1 2022
• Maktoum bin Mohammed: Outstanding performance of Dubai’s economic sectors reflects Mohammed bin Rashid’s vision and foresight
• “As one of the most important pillars of the Dubai economy, the real estate sector is a major contributor to the emirate’s efforts to achieve the goals of the Dubai Economic Agenda D33”
• Dubai records 38,700 real estate transactions in Q1 2023, a 49% increase from Q1 2022
• Value of real estate sales reaches AED89 billion in Q1 2023, a 62% year-on-year growth
• Number of new investors entering the emirate’s real estate market in Q1 2023 rises to 13,338, a 12% growth from Q1 2022
• Non-resident investors account for 45% of total acquisitions in Q1 2023, an increase of 25%

His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai and Deputy Prime Minister and Minister of Finance of the UAE, said the outstanding performance of Dubai’s economic sectors reflects the vision and foresight of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and the goal of the Dubai Economic Agenda D33 to consolidate the emirate’s position as one of the world’s top three cities.

HH Sheikh Maktoum’s comments followed a review of the performance of Dubai’s real estate sector in the first quarter of 2023. The sector recorded a total transaction value of AED157 billion in Q1 2023, an 80% increase from the same period in 2022. The sector had recorded annual transactions worth a total of AED528 billion in the year 2022.

“Dubai’s real estate sector is one of the key drivers of economic growth and a major factor in maintaining Dubai’s position in the global economy,” HH Sheikh Maktoum said. “As one of the most important pillars of the economy, the sector is a vital contributor to the emirate’s efforts to achieve the goals of the Dubai Economic Agenda D33. We remain committed to further raising the investment attractiveness of Dubai’s real estate sector and its emergence as one of the world’s pre-eminent real estate investment destinations,” His Highness added.

Exceptional performance Dubai’s real estate sector maintained its high growth momentum in Q1 2023, recording 38,700 transactions worth AED157 billion, an 80% increase in value and 49% increase in volume from Q1 2022, which saw 26,000 transactions worth AED87 billion. The growth supports the objectives of the Dubai Economic Agenda D33, announced by HH Sheikh Mohammed bin Rashid Al Maktoum, to increase private sector investments and place Dubai at the forefront of global cities.

Key measures undertaken by the Dubai Land Department to ensure the sustainable growth of the sector helped achieve real estate sales worth AED89 billion in Q1 2023, a 62% increase from the same period in 2022 that saw sales worth AED55 billion. The number of new investors entering the emirate’s real estate market in Q1 2023 rose to 13,338, a 12% growth from Q1 2022. Non-resident investors accounted for 45% of total acquisitions, an increase of 25%.

Record results His Excellency Sultan Butti bin Mejren, Director General of the Dubai Land Department, said: “We are strongly committed to the comprehensive development of the sector as part of our efforts to ensure Dubai reinforces its position as one of the world’s best real estate investment destinations.

“The sector saw record results last year, an achievement made possible by Dubai’s robust infrastructure, as well as its sound legislative framework and the visionary initiatives of HH Sheikh Mohammed bin Rashid Al Maktoum,” he added.

Dubai’s real estate sector registered AED528 billion worth of transactions in the year 2022, a 44.7% increase in volume and 76.5% increase in value compared to 2021.

The Dubai Land Department continues to work to maintain the growth momentum of the emirate’s real estate sector by providing proactive and streamlined real estate services backed by integrated legislation, productive partnerships, a state-of-the-art digital infrastructure, and a highly qualified team.

Source: Media Office - Government of Dubai 

The United Arab Emirates Ministry of Finance has set the conditions for federal and local government entities to be considered single taxpayers.

Federal government entities will be treated as a single taxpayer if the following conditions are met:

• the application to be treated as a single taxpayer must include all businesses and business activities of the federal government entities;
• the businesses and business activities of the federal government entities must be carried on under a licence issued by a licensing authority; and
• the application to the authority to be treated as a single taxable person can be made only by the representative federal government entity.

Local government units will be treated as a single taxpayer if the following conditions are met:

• the application to be treated as a single taxpayer must cover all the businesses and business activities of the local government entities;
• the businesses and business activities of the local government entities must be carried on under a licence issued by a licensing authority;
• the businesses and business activities of the local government entities must be carried on within the same emirate; and
• the application to the authority to be treated as a single taxpayer can be made only by the representative local government entity.

Upon submission of the application to the Federal Tax Authority (FTA), the taxpayer will be treated as a single taxpayer from the beginning of the period for which the application has been submitted or any other period determined by the FTA.

All enterprises and business activities attributable to the single taxpayer will be consolidated by the representative federal or local government body for the relevant tax period, eliminating transactions between enterprises forming part of the single taxpayer.

In addition, the decision provides that any new business or business activity of the federal/local government entity that meets the above conditions will be considered part of the single taxable person, and the representative government entity must notify the FTA within 20 business days of the occurrence of such an event. Similarly, if a government entity or licensing authority ceases to carry on business or perform a business activity, the representative government entity must notify the FTA within 20 business days of the change.

Decision No. 68 of 2023 was issued on 29 March 2023 for the purpose of the provisions of article 5 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

The foreign trade sector in Dubai is actively pursuing the goals outlined in the Dubai Economic Agenda D33. This initiative was launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, with the objective of doubling Dubai's economy over the next decade and solidifying its position as one of the world's top three economic cities.

In the first quarter of this year, there has been a notable increase in customs transactions, with a record of 7 million transactions, according to Ahmed Mahboob Musabih, Director General of Dubai Customs and CEO of the Ports, Customs and Free Zone Corporation. Dubai Customs' smart services and projects support Dubai's journey to becoming one of the fastest growing cities in the world, with its ability to automate customs procedures, enhance business operations and increase returns on commercial activities, attracting more investments and companies in the commercial sector. Dubai Customs values continuous communication and interaction with its clients, as evidenced by the Consultative Council's first meeting this year, which included business groups and trade representatives discussing the ambitious goals of the Dubai Economic Agenda. Additionally, a Ramadan gathering for clients was held to exchange opinions and ideas towards maximizing the role of the commercial sector as one of Dubai's most important economic resources.

9.6 million counterfeit goods

Dubai Customs has intensified its efforts to combat counterfeit goods and protect intellectual property rights. In the first quarter of 2023, the government department handled 112 cases of intellectual property disputes, involving 9.6 million counterfeit goods with a total value of AED 28.85 million. The government department also continued to organize recycling operations for counterfeit goods, completing 24 recycling processes involving 43.78 thousand counterfeit goods.

In addition, Dubai Customs has carried out three awareness campaigns aimed at raising awareness about the dangers and negative impacts of counterfeit goods. These initiatives were attended by 91 participants and were presented at two community events, 11 events for schools and universities, and five events for customs administrations and centers. Furthermore, Dubai Customs organized three workshops in partnership with trademark owners. In addition, the department registered 91 trademarks and 86 commercial agencies.

502 seizure reports

During the first quarter of this year, Dubai Customs made 502 seizure reports. These efforts are part of Dubai Customs' commitment to protecting the community and the economy, and promoting security and stability as the first line of defense for society. Dubai Customs also strives to play its vital role in supporting the national economy by contributing effectively to an attractive investment environment, and enhancing the country's position as a leading global business and trade hub. These efforts are in line with the directives of the leadership to advance the country's global standing in all areas and strengthen its position on global competitiveness indices.

Innovation

In recognition of its commitment to promoting a culture of innovation in customs work, Dubai Customs honored 25 creative employees with disabilities for their innovative ideas and solutions presented during the Innovation Month. More than 10 initiatives were organized and managed at department and customs centers levels, strengthening Dubai Customs' leadership in driving innovation in the customs sector both locally and globally. Dubai Customs is the world's first customs reference in innovation, where three customs organizations including New Zealand Customs, South Korea Customs, and Abu Dhabi Customs, have benchmarked with Dubai Customs to benefit from its innovative experience, skills, and expertise in translating its innovative ideas into tangible reality.

67 community initiatives

As part of its annual strategy that supports the launch of sustainable development initiatives, the department has successfully targeted approximately 17,500 beneficiaries during the first quarter of this year through 67 community and volunteering initiatives.

740 training courses

Dubai Customs, represented by its Customs Training Center, conducted 740 training courses, both in-person and online, during the first quarter of this year. These courses covered a diverse range of topics, including security, information technology, dealing with people of determination, SIMFOX simulation system for training inspectors on scanning devices, customer service, innovation, inspection, occupational safety and health, general administrative skills, human resources, leadership development, intellectual property protection, data science, artificial intelligence, and many public awareness workshops. Additionally, Dubai Customs has maintained its commitment to providing the best work environment for the third consecutive year (2022-2023), as recognized by the American organization, Great Place to Work. This commitment is demonstrated through several initiatives that enhance the work environment, such as electronic systems for managing human resources services, a 100% transition to the GRP system, completion of more than 3 million electronic transactions, and setting up an electronic archiving system for employee files.

Source: Media Office - Government of Dubai

Dubai’s DET and Free Zone Council activate applications for legacy virtual Assets operators to become fully regulated under VARA

• Virtual Assets (VA) Sector including all businesses offering products, services, and associated activities, is fully regulated and falls under the purview of VARA in the Emirate of Dubai
• All existing businesses operating in, or providing services associated with the VA Sector are required to respond to an Initial Disclosure Questionnaire (IDQ) by the deadline of 30-April-2023

All entities that qualify for a regulated Full Market Product (FMP) Licence will commence their transition to a VARA regulated regime by 31-August 2023

The Virtual Assets and Related Activities Regulations 2023, establishes clear requirements for the VA sector to be fully regulated under VARA in the Emirate of Dubai, including all businesses offering products and services associated with the sector. VARA is working closely with Dubai’s Department of Economy and Tourism (DET) and Free Zone Authorities (FZAs), towards meeting the set deadline of 30 April for all initial disclosure questionnaires (IDQs) across the sector to be received as the first step towards the migration of the market to a regulated regime.

Under Cabinet Resolution No. 111 of 2022 Concerning the Regulation of Virtual Assets and their Service Providers, which came into effect on 15 January 2023, all companies operating in or seeking to operate in this sector in or from the Emirate of Dubai must be licensed by VARA. VARA has been actively engaged, with DET and Dubai’s numerous FZAs to facilitate the seamless transition of existing Virtual Asset Service Providers (VASPs) into the VARA regulatory regime as well as formalise the application process for new regulated licences.

His Excellency Helal Saeed Almarri, Director General Dubai’s Department of Economy & Tourism said: “Under the directive of His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council, we are making progress with Dubai’s D33 Agenda which outlines our mission to establish the Emirate as the capital of the Future Economy anchored by Metaverse, AI, Web3.0 and Blockchain. The virtual assets sector that spans all these pillars is integral to the strategy presenting a dynamically evolving ecosystem that fuels all aspects of sustainable economic growth. Ensuring that our marketplace is secure, participants are responsible, and investors and consumers are effectively protected is our top priority.  With key stakeholders responsible for commercial licensing across the Emirate working closely to deploy VARA’s full market regulatory construct, we aim to set a benchmark that positions the Emirate of Dubai as a global role model for VA sector development”.

Legacy market operators carrying out VA activities in Dubai (excluding DIFC) are required to declare their desire to undertake regulated activities by submitting an IDQ to their current licensing authority – DET or any of FZAs, by the final deadline of 30-April 2023. Upon subsequent receipt of an Application Acknowledgement Notice (AAN), operating VASPs will commence the appropriate course of action for those requiring to be regulated or registered under VARA by 31 August 2023.

H. E. Dr. Mohammed Al Zarooni, Secretary-General of the Dubai Free Zones Council, remarked: “Dubai’s Free Zones have been an integral part of the business landscape for decades, providing start-ups, entrepreneurs and overseas companies looking to establish regional headquarters with access to a geographically strategic, multicultural, dynamic and bureaucracy-free environment. We have witnessed growing interest from virtual assets-focused entities who are keen to adhere to the VARA licensing regime. Adopting the new regulations, provides a safe and sustainable operating environment for VA companies and further establishes Dubai as a credible destination for this sector”.

Ahmad Al Falasi, CEO, Department of Economy and Tourism, said: “Dubai’s reputation as an easy-to-navigate, pro-business destination home to over 200 nationalities, is an attractive proposition for virtual asset companies, looking for a safe, regulated environment. DET is working closely with VARA to ensure that all existing VA services providers will be in full adherence to the regulations within the defined timelines”.

A total of seven distinct types of regulated VA activity licences can be applied for:  Advisory Services, Broker-Dealer Services, Custody Services, Exchange Services, Lending and Borrowing Services, Transfer and Settlement Services and Management and Investment Services.

Commenting on the imminent April deadline to receive all legacy operator IDQs as the first phase of the migration plans, Henson Orser, Chief Executive Officer, VARA, said: “VARA has been working closely with both DET and the emirate’s Free Zone Authorities in order to ensure a smooth transition for legacy Virtual Assets Service Providers (VASPs) in Dubai, many of whom were at the forefront of innovation in this space. This transition was further supported by VARA’s Minimum Viable Product (MVP) programme, a timebound initiative that enabled new applicants to set up operations and become market ready until official release of our full suite of regulations on 7 February 2023. The introduction of the Virtual Assets and Related Activities Regulations gives the existing companies, a clear timeline to ensure that they submit their initial disclosures by the end of April.”

VARA’s Full Market Product (FMP) Regulations are designed to specifically cater for the provision of permissible activities and services to customers and investors, by operators from the Emirate of Dubai. With bespoke rules and guidelines designed to provide clarity, assure certainty, and mitigate market risks, VARA seeks to develop a model framework for global economic sustainability within an innovation-centric environment that is truly borderless, technology agnostic, and future-focused.

More details of the VARA’s licensing process for both legacy market operators and new applicants are available at vara.ae

Source: Media Office - Government of Dubai