June 2023 / United Arab Emirates

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.

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

Source: mediaoffice.ae

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