June 2023 / United Arab Emirates

June 5 2023

United Arab Emirates Clarifies Nexus for Non-Resident Legal Entities

The United Arab Emirates has clarified that any non-resident legal entity is deemed to be connected to the United Arab Emirates if it derives income from immovable property situated in the United Arab Emirates.

The taxable income attributable to the immovable property includes income derived from the right in rem, sale, disposal, assignment, direct use, leasing, including subletting, and any other form of exploitation.

The decision also introduces an anti-fragmentation rule, which provides that if a non-resident person artificially transfers or otherwise disposes of his right in rem in immovable property in the United Arab Emirates to another person, and such transfer or disposal is not for a valid commercial or other non-fiscal reason that reflects economic reality, this would be considered an arrangement to obtain a corporate tax advantage under the general anti-avoidance rules.

Immovable property means any of the following:

  • any area of land over which rights or interests or services may be created;
  • any building, structure or engineering work permanently affixed to the land or to the seabed; and
  • any fixture or equipment which forms a permanent part of the land or which is permanently attached to the building, structure or engineering work or which is attached to the seabed.

Cabinet Decision No. 56 of 2023 determining the nexus of a non-resident person in the United Arab Emirates for the purpose of corporate tax was published on the official website on 1 June 2023.

June 5 2023

United Arab Emirates Clarifies Regime for Activities of Free Zone Qualifying Persons for Corporate Income Tax

The Minister of Finance (MoF) has clarified the qualifying and excluded activities carried out by Qualified Free Zone Persons (QFZPs) for corporate tax purposes.

Qualifying activities

The qualifying activities are as follows:

  • manufacture of goods or materials;
  • processing of goods or materials;
  • holding shares and other securities;
  • owning, managing and operating ships;
  • reinsurance services subject to regulatory supervision by the competent authority of the United Arab Emirates;
  • fund management services subject to regulatory supervision by the competent authority of the United Arab Emirates;
  • wealth and investment management services subject to regulatory supervision by the competent authority of the United Arab Emirates;
  • headquarters services to related parties;
  • treasury and financing services to related parties;
  • financing and leasing of aircraft, including engines and rotating components;
  • distribution of goods or materials in or from a designated area to a customer who resells such goods or materials, or parts thereof, or who processes or modifies such goods or materials, or parts thereof, for the purpose of sale or resale;
  • logistics services; and
  • any activity ancillary to those listed above.

Excluded activities

The following activities are excluded:

  • all transactions with natural persons, except for transactions relating to the following eligible activities:
    • the ownership, management and operation of ships;
    • fund management services subject to regulatory supervision by the competent UAE authority; and
    • asset management and investment services subject to regulatory supervision by the competent authority of the UAE;
  • financing and leasing of aircraft, including engines and rotating parts;
  • banking activities subject to regulatory supervision by the competent authority of the United Arab Emirates;
  • insurance activities subject to the supervision of the competent authority of the United Arab Emirates, except for reinsurance services subject to the supervision of the competent authority of the United Arab Emirates;
  • financing and leasing activities subject to regulatory supervision by the competent authority of the State, other than treasury and related party financing services and the financing and leasing of aircraft, including engines and rotating parts;
  • owning or operating real estate other than commercial real estate located in a free zone, provided that the transaction relating to such commercial real estate is carried out with other persons in the free zone;
  • the ownership or operation of intellectual property; and
  • any activity ancillary to the above (an activity is considered ancillary if it has no independent function but is necessary for the exercise of the main activity).

In addition, the Ministry of Finance has confirmed that a QFZP must meet the following two conditions, in addition to those set out in the CIT Act:

  • its non-qualifying income must not exceed 5% of its total income during the tax period or AED 5 million whichever is less; and
  • it prepares audited financial statements in accordance with Ministerial Decision No. 82 of 2023.
Decision No. 139 of 2023 on qualifying and excluded activities for the purposes of corporate income tax can be read on the official website of Ministry of Finance or be downloaded here
June 1 2023

Dubai’s Department of Economy and Tourism launches ‘QR Code’ initiative for Holiday Homes in Dubai

Dubai’s Department of Economy and Tourism (DET) today announced the launch of a new QR Code initiative for Holiday Homes in Dubai, as part of efforts to improve transparency and increase confidence among investors and visitors in the short-term rental market.

Launched as part of Dubai's commitment to supporting the continuous growth of the hospitality industry, the initiative is closely aligned with the goals of the Dubai Economic Agenda (D33) to further consolidate Dubai's position as one of the top three global cities. Additionally, the initiative is in line with Dubai's digital transformation strategy, which seeks to establish the emirate as a leading global smart city.

As part of the initiative, owners of Holiday Homes will now be required to display a QR code on the main entrances of their vacation properties in Dubai. This code enables visitors and guests to conveniently scan it and access essential information about the operator of the Holiday Home and the relevant contact details for DET. The initiative will also facilitate oversight and inspections conducted by the Dubai Corporation for Consumer Protection and Fair Trade, part of DET, ensuring strict compliance with procedures.

DET’s Dubai Business License Corporation will oversee the implementation of the QR Code project, which will further enhance the city’s diverse hospitality infrastructure catering to the varied preferences and budgets of international travellers.

Shaikha Al Mutawa, Director of Hospitality Affairs Department at Dubai’s Department of Economy & Tourism (DET) said: “As we continue to navigate the ever-changing landscape of the tourism industry, we recognise the importance of innovation and technology in further bolstering Dubai’s image as a must-visit destination. To ensure the effective governance of the Holiday Homes segment, we are introducing QR codes, as a part of the ongoing digital transformation process across customer and visitor touchpoints in the city. It is also a testament to our commitment to providing exceptional experiences for our guests in line with the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to make Dubai the best city to visit, live in and work. We are also continuously taking steps to offer flexible and multiple options year-round in the short-term rental market, thereby strengthening confidence among investors and potential guests.”

According to DET data, the Holiday Homes segment has registered excellent growth, reaching 21,132 units (+45.5% YoY), with 32,794 rooms (+40.7 % YoY) by the end of March 2023, compared to the same period in 2022 (14,518 units and 23,299 rooms). Additionally, Holiday Homes hosted 137,144 guests in Q1 2023.

Dubai’s Holiday Homes features a diverse range of residential units, including studios, apartments, and villas in gated communities, as well as properties in farms located in the Hatta area, providing privacy and ample space for families as well as a unique vacation opportunity for guests that transcends traditional hospitality experiences.

The Dubai Business Licence Corporation (DBLC) offers licences and permits for licensed establishments to manage and document their activities based on the Holiday Homes classification system. Dubai’s Holiday Homes market undergoes a rigorous classification process, periodically categorised into tourist and luxury units and villas, based on the conditions set by DET, which conducts inspections to ensure that the units meet the approved classification criteria. Detailed information can be found by accessing a guide for operating vacation homes, available on DET’s website for Holiday Homes at https://hh.dtcm.gov.ae/holidayhomes/Welcome.aspx. The guide is updated regularly to align with updates in the sector and as per the needs of stakeholders.

The Department also addresses complaints and disputes, offering solutions in a timely manner via ecomplaints@dubaitourism.ae. Non-compliance with the Holiday Home standards, rules and requirements will result in warnings for violators, and if there is any recurrence in violations it could lead to the imposition of penalties on the operator. The Department will also not issue a classification certificate to the Holiday Homes property unless all specified conditions, specifications, requirements, and technical equipment are met. For updates, procedures, and instructions on Holiday Homes, visit https://www.dubaitourism.gov.ae/en/legislative-news/holiday-homes-regulation-guide-2022

Dubai has experienced remarkable growth in the hospitality industry, including significant demand from investors due to its sophisticated infrastructure, vast potential, and legislation on par with international standards. The emirate has also established itself as a top tourist destination, welcoming 4.67 million visitors in the first quarter of 2023, a 17% YoY growth, which is 98% of pre-pandemic levels, making Dubai the fastest recovering destination globally. The city has further consolidated its position as a must-visit destination after being chosen as the No.1 Global destination in the Tripadvisors Travellers’ Choice Awards 2023 for the second year in a row, becoming only the second city in history to have achieved this feat.

Source: mediaoffice.ae

June 1 2023

DMCC publishes latest “future of trade” report on gaming and esports

Gaming revenues are expected to almost double by 2027 from 2021 in the Middle East and North Africa (MENA) region, reaching USD 6 billion, according to DMCC’s latest Future of Trade 2023 report titled ‘Gaming in the Middle East and North Africa (MENA): Geared for growth’. A young and digital-savvy population, high levels of digital connectivity, and government support are driving the region’s emergence as a consumer and creator hub.

Gaming and esports are both fast growing consumer segments, benefiting from rapid advancements in technology as well as broader and more inclusive audiences. The UAE and Saudi Arabia lead the region, supported by high income levels, strong digital engagement, and public investment initiatives. Globally, Asia Pacific constitutes the largest market share and China, the US, and Japan are the largest individual markets.

The report gathers contributions from key industry leaders including Jad El Mir, Partner at Strategy&, and Klaus Kajetski, CEO and Founder of YaLLa Esports, to establish the critical drivers of the industry’s accelerated growth in the MENA region and beyond. It also examines the impact on gaming and esports from a technology, culture, and business perspective, covering global consumer trends, the emergence of MENA as a gaming and esports hub, and the key challenges that the industry needs to address to increase revenues further.

Guiding the global industry’s accelerated growth from nearly USD 200 billion in revenues in 2021 to USD 340 billion in 2027, the report outlines a set of key recommendations for governments and businesses, namely:

  • Diversify esports revenue streams from sponsorship to new direct-to-fan monetisation models – including digital merchandising, loyalty programmes and training platforms for amateur gamers – to boost revenues.
  • Develop appropriate regulatory safeguards to ensure privacy, security and safety online in the digital gaming ecosystem and provide a business-friendly environment – including smoother visa systems to allow esports professionals and audiences to attend live events – to attract talent into the region and elevate it into a global industry leader.

Ahmed Bin Sulayem, Executive Chairman and Chief Executive Officer, DMCC, said: “Gaming has come to the fore of entertainment globally, driving rapid growth especially in the MENA region, which now constitutes 15% of the global player base. The rise of gamification in areas such as education, healthcare, and other sectors has demonstrated gaming’s role in facilitating economic activity more broadly. Ensuring the accelerated growth of the gaming sector will have a measurable impact on the future of markets around the world, as well as the future of trade. As DMCC seeks to solidify Dubai’s reputation as a global trade and economic hub, efficiently activating opportunities within the gaming sector will prove essential.”

Among the most closely watched segments is esports, which is expected to post revenue growth of 23.3% between 2019 and 2024 in MENA. Fuelling this is the region’s young demographic, engagement from international broadcasters and sponsors, and government support. Tapping into this economic potential, DMCC partnered with YaLLa Esports, the Dubai-based professional esports organisation, to launch the DMCC Gaming Centre in December 2022. The Centre supports the growth of the industry in Dubai by providing gaming businesses with access to global capital, leading industry talent, and an ecosystem that allows them to operate efficiently and with confidence.

Due to the UAE’s strong business environment and infrastructure, as well as its status as a gateway to the Middle East and Asia Pacific regions, various international gaming developers have set up their regional headquarters in the country. Ubisoft is based in Abu Dhabi, while the gaming giant Tencent set up its MENA HQ in Dubai along with Riot Games. In Saudi Arabia, the kingdom has included gaming as a core element of its Neom project and has already made investments worth over $1.7 billion on the gaming industry.

This special edition of DMCC’s Future of Trade report follows the launch of its flagship biennial report in July 2022, which set out the key drivers of global trade over the next decade. The Future of Trade report series has been downloaded and viewed a total of 1.3 million times.

    Source: mediaoffice.ae