March 2020 / United Arab Emirates

March 4 2020

Refund of VAT paid on goods and services connected with Expo 2020 Dubai – guide issued

The UAE Federal Tax Authority (FTA) has published the Refund of VAT paid on goods and services connected with Expo 2020 Dubai Guide for Official Participants (the guide).

The guide provides that the offices of the Official Participants are able to reclaim VAT incurred on the import and acquisition of the following five categories of goods or services without the need to use them for making taxable supplies:

  • goods and services in direct connection with the construction, installation, alteration, decoration and dismantlement of their exhibition space;
  • goods and services in direct connection with the works and activities of organizing and operating the Official Participant's exhibition space and any presentations and events within the Expo 2020 site;
  • goods and services relating to the actual operations of the Official Participant provided that the value of each goods and services, for which the Office of the Official Participant makes a claim, is not less than AED 200;
  • all operations, services and activities provided for the purpose of participation in Expo 2020 Dubai, whether located within or outside the boundaries of the Expo 2020 Dubai site; and
  • import of goods for personal use of the Official Participant's Section Commissioner-General, Section Staff and the Beneficiaries.

Official Participants are entitled to obtain refund of input VAT whether they are VAT registered or not. Those who are VAT registered may claim the refund on their regular return.

Those who are not registered may apply for the VAT refund using a special refund application process within the following time frame:

  • within 15 days of the end of the calendar month in which the total VAT value to be claimed is AED 10,000 or more; and
  • within 15 days of the end of the calendar quarter where the total VAT value to be claimed is less than AED 10,000.
March 5 2020

Clarification on renewal of designated zone registrations – issued

On 3 March 2020, the Federal Tax Authorities (FTA) issued clarification (EXTP005) on the renewal of designated zone registrations.

In accordance with provisions of article 15(3) of Cabinet Decision No. 37 of 2017 on the Executive Regulations of the Federal Decree-Law No. 7 on Excise Tax, a warehouse keeper must submit an application to the FTA in order to register each of the designated zones over which it is responsible.

The FTA requires the warehouse keeper to pay a registration fee in order to register the designated zone for a period of 12 months. Hence, the warehouse keeper should renew the registration for the designated zone in order to maintain its status.

The renewal form must be available to be filed 30 days before the expiry date of the designated zone registration. As part of the renewal process, the warehouse keeper will be required to provide the following:

Details relating to designated zone based on previous 12-month period

  • an estimate of the value of the annual throughput of excise goods entered into the designated zone (the total value of excise goods passing through the designated zone in a 12-month period); and
  • an estimate of the average value of excise goods held at month-end in the designated zone. This should be based on the average end of month stock value, calculated over a 12-month period to allow for seasonal variations.

Financial guarantee

The warehouse keeper should provide a financial guarantee which will be calculated by The FTA based on the aforementioned details. The new financial guarantee must be received by the FTA within 20 business days from the date requested.

Where the calculation indicates that the value should be less than the current guarantee, the warehouse keeper will be given the option of whether to arrange for a lower guarantee to be lodged or to maintain the current value.

Payment of renewal fee

The renewal fee for a designated zone is AED 2,000 payable no later than 20 business days of the expiry date of the current registration.

In the event where a warehouse keeper fails to pay the renewal fee within the allowed period, the designated zone will be treated as suspended for 20 business days, after which if no action is taken, it will be treated as 'expired'.

March 9 2020

Dubai Multi Commodities Centre – new law issued

On 23 February 2020, the Supreme Legislative Committee announced that the ruler of the Emirate of Dubai has issued new Law No.3 of 2020 on the Dubai Multi Commodities Centre (DMCC). The DMCC free zone was established through Decision No.4 of 2002 to enhance commodity trade through Dubai.

Under the Law, the DMCC Authority established as per the guidelines of the new Law will be responsible for supervising the free zone. It is stated that entities and individuals operating in the DMCC will be exempt from all taxes including income tax for a period of 50 years.

The new Law also regulates customs duty exemptions and tax exemptions for commodities trade, re-export and storage within the DMCC and the establishment of private, commercial and joint venture companies. As per the law, all companies registered within the DMCC must identify themselves as a free zone company in all of their correspondence, contracts, advertisements, invoices and stationery. Also, DMCC companies may not transfer their license to any third party without obtaining prior written permission from DMCC Authority.

The DMCC Board of Directors will issue the by-laws required to implement the DMCC Law at a later stage.

March 10 2020

List of designated zones amended

On 9 March 2020, the Federal Tax Authority (FTA) updated the list of designated zones (for the purposes of the Federal Decree-Law No. (8) of 2017 on Value Added Tax) by modifying the names of 2 designated zones as follows:

  • Emirate of Dubai: the "Free Zone Area in Al Qusais" is changed to "DAFZA Industrial Park Free Zone – Al Qusais"; and
  • Emirate of Ras Al Khaimah: the "Ras Al Khaimah Free Trade Zone" is changed to "Ras Al Khaimah Port Free Zone".

This amendment has no implication of the effective date for both areas becoming designated zones.

March 20 2020

DIFC issues Economic Substance Regulations communication

On 17 March 2020, the Dubai International Finance Centre (DIFC) issued a communication with regard to Economic Substance Regulations providing inter alia the following:

  • all DIFC firms are required to submit an Economic Substance notification on the DIFC Portal;
  • the 31 March 2020 deadline previously advised is no longer applicable;
  • the UAE Ministry of Finance will issue a Relevant Activities Guide which should assist businesses in determining whether a business conducts a relevant activity and falls within the scope of the Economic Substance Regulations. Once the Relevant Activities Guide has been issued, the Registrar will make the requisite notifications available on the DIFC Portal and issue a communication to all DIFC firms about the notification process and deadlines involved; and
  • businesses may be required to file an Economic Substance Return within 12 months of the financial year end to demonstrate that a business meets the Economic Substance Regulations requirements. Information relating to the return will be issued in the second half of this year.
March 25 2020

COVID-19 pandemic: emergency customs duty measures

On 22 March 2020, the Dubai customs authorities issued Customs Notice 1/2020 on the implementation of the government's economic stimulus package to mitigate the consequence of the Covis-19 pandemic.

The Notice provides the following incentives:

  • a refund of 1% of the customs duty imposed on imported goods sold locally into the UAE market which are normally subject to a customs duty rate of 5%; and
  • traditional wooden commercial vessels registered in the United Arab Emirates will be exempted from berthing service for fees for arrival and departure, as well as direct and indirect loading fees at Dubai Creek and Hamriyah Port.

These incentive are valid during the period from 15 March 2020 to 30 June 2020.

In addition, the Notice provides that the AED 50,000 bank or cash guarantee required to undertake customs broker activities will be revoked, and that the bank or cash guarantee deposited by existing customs brokers and clearing companies will be refunded.

March 25 2020

UAE – VAT administrative exceptions guide amended

On 21 March 2020, the UAE Federal Tax Authority (FTA) updated the VAT administrative exceptions Guide by adding an exception related to "Evidence to prove export of goods".

In accordance with the provisions of article 30 of Cabinet Decision No. (52) of 2017 on the Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax (The Executive Regulations), in order to prove the export of goods, the taxpayer must provide the following documents:

  • "official evidence" meaning export documents issued by the local Emirate Customs Department in respect of goods leaving the state; and
  • "commercial evidence" which must include an airway bill, a bill of lading, a consignment note, or a certificate of shipment.

Furthermore, article 30 (6) of the Executive Regulations provides that the FTA may specify alternative forms of evidence according to the nature of the export or the nature of the goods being exported.

The Guide provides that the taxpayer may request the FTA to allow the use of an alternative form of evidence to prove the export of goods. In its request, the taxpayer must provide the actual reasons or circumstances for seeking an approval to allow the use of an alternative form of evidence.

March 28 2020

Dubai Free Zones economic stimulus: Postponement of rent payments for up to 6 months

Dubai: The postponement of rent payments for up to 6 months has been announced by the Dubai Free Zones as part of the economic stimulus package under the directives of Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai.

The raft of measures launched on Saturday (March 28, 2020) include the following:
  • Postponement of rent payments for up to 6 months.
  • Facilitating financial payments through easy installments on a monthly basis.
  • Refunding various insurance and guarantees claims.
  • The cancellation of number of penalties for companies and individuals.
  • Allowing intra-corporate tranfer of laboor between companies and sectors operating in the free zones through permanent or temporary contracts without penalties during 2020.
There are nearly 45,000 companies located in Dubai Free Zones, with nearly 390,000 employees.  The free zones account for about a third of Dubai's gross domestic product.
In a statement, Sheikh Ahmed bin Saeed Al Maktoum, Chairman of Dubai Airport Free Zone, confirmed on Saturday that the Dubai Free Zones Council is continuously working to support the economic system to enhance Dubai’s competitiveness by ensuring business continuity in all sectors, especially for small and medium enterprises.

Working together

In the current exceptional circumstances, Dubai Free Zones are working together to highlight their strategic role and social responsibility to support Dubai's economy.
Dubai Free Zones Council announced an economic stimulus package complement the Dubai Government’s efforts to overcome the current situation. This initiative complements an earlier package announced recently to reduce business costs and enhance financial liquidity of companies operating in the free zones.
The Dubai Free Zones Council’s package contributes to strengthening and supporting Dubai’s businesses by reducing the impact of the current economic situation.
It includes five key elements: postponement of rent payments by a period of 6 months; facilitating installments for payments; refunding security deposits and guarantees; cancellation of fines for both companies and individuals; and permitting temporary contracts that allow the free movement of labour between companies operating in the free zones for the rest of the year.

Benefit for workers

These advantages also benefit workers seeking better job opportunities, and those who have been granted unpaid leave by facilitating their re-employment in jobs in Dubai.
Sheikh Ahmed bin Saeed Al Maktoum stressed that ensuring the business continuity of companies and providing them the support they need are critical to the Dubai economy’s ability to successfully overcome the crisis. He added that the Dubai Free Zones’ stimulus measures complement national efforts to reduce the impact of recent global challenges. They provide companies with the liquidity necessary to tackle the current situation and maintain competitive advantage and sustainable growth. This initiative supports a wide range of SMEs in maintaining their competitiveness.
Dubai Free Zones play a prominent role in promoting sustainable economic growth, attracting investments and supporting Dubai's vision to be the world’s preferred investment destination and the ideal place to live, work and visit. Their contributions to Dubai's Gross Domestic Product reached 33%.
They provide a base for 44,985 companies and provide a total of 389,336 jobs Entities that contributed to this economic stimulus package, in coordination with the Dubai Free Zones Council, include: Dubai Silicon Oasis Authority, Dubai Airport Free Zone Authority, Jebel Ali Free Zone, Dubai World Trade Centre, Dubai International Financial Centre, Dubai Development Authority, Dubai South, Meydan City Corporation, and Dubai Multi Commodities Centre.
Sultan Ahmed bin Sulayem, Group Chairman and CEO of DP World and CEO/Chairman of Ports, Customs & Free Zone Corporation, said: "During these difficult times, the business sector is facing major challenges. We are keen to provide the necessary support for companies through a package of discounts and exemptions from fees in Jebel Ali Free Zone (JAFZA), National Industries Park (NIP) and Dubai Cars & Automotive Zone (DUCAMZ). This includes waiving fines on expired trade licenses for companies operating in these zones. In addition, new companies can start their businesses without paying license fees for the first year".


Helal Saeed Almarri, Director General of the Dubai World Trade Centre Authority, said: "Dubai's economy has a great flexibility and the potential to adapt to unpredictable global fluctuations. This has been proven as the world faces a challenging reality that requires strong coordination and rapid collective action, in addition to strengthening collaboration efforts between public and private sectors and society. As an essential tourism pillar in Dubai, DWTC bears national responsibility to support its partners in dealing with the current risks of COVID-19. We can help maintain sustainable commercial operations through these measures and reduce burdens on the sectors most affected by this crisis, such as SMEs", by providing the necessary support to all customers, partners and suppliers.
Dr. Mohammed Al Zarouni, Vice Chairman and CEO of Dubai Silicon Oasis Authority, and Director General of the Dubai Airport Free Zone Authority (DAFZA) stressed that Dubai’s wise leadership took all the necessary measures to protect society in every way.
This enhances confidence in the emirate and increases its competitive advantage globally. He added: "The world is facing difficult challenges given the current uncertain and unstable situation which threatens the economic climate. Through its initiatives, Dubai is proving its ability to mitigate the negative effects of the crisis and speed up the revival of its economy, with future positive returns for the Emirate and the region, in addition to the preventive measures it has taken to limit the spread of COVID-19".

Supporting community

Essa Kazim, Governor of Dubai International Financial Centre (DIFC), said: "As the leading financial centre of the region, and in line with Dubai government’s economic stimulus package, and the directives of His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, we are committed to supporting our community during these unprecedented times.
"The new economic stimulus package presented by the Dubai International Financial Centre shows its continued dedication to implementing comprehensive measures to support businesses and enable companies to continue their operations easily and flexibly".
DIFC proposes implementing five initiatives over the next three months, which centre on enhancing its efforts to support companies during these exceptional circumstances. Initiatives include waiving annual license fees for new companies during the next three months, and a 10% discount on renewal fees for existing licenses during the same period.
Furthermore, companies will enjoy additional facilities, such as the postponing of payment plans for all commercial properties owned by DIFC Investments for a period of 6 months. DIFC will reduce its ownership transfer fees from 5% to 4% for any property sale that occurs within the authorised three-month period, if ownership transfers are registered at DIFC within 30 days after the end of the three-month period.
Saeed Humaid Matar Al Tayer, Chairman and CEO of Meydan Group, said: "In line with our government's directives to develop initiatives that support the business sector during these difficult times, and after consulting with business owners at the Meydan Free Zone, we are committed to collaborating with them on our collective economic recovery. A package of initiatives has been developed in coordination with the DFZ Council to reduce financial burdens on individuals and companies, including waiving fines on expired licenses, facilitating payments installments, and waiving licensing fees for the first year. We salute our leaders for their honourable efforts in providing all kinds of support for society".
Malek Sultan Al Malek, Director General of the Dubai Development Authority (DDA) and Group CEO of TECOM Group said: "Launching this package is testimony to Dubai’s commitment to the wise leadership’s directives, which aim to tackle all challenges by reducing the economic impact on the Emirate and strengthen its position as a global and regional investment destination. Over the last 20 years, we have managed to build a sustainable economic sector, and we will continue to provide all the necessary support to our partners and investors to tackle the consequences of the current global crisis."
The package presented by DDA and TECOM Group include a set of initiatives which provide the necessary resources and support to SMEs in order to ensure their continuity. Companies can postpone payments, and new firms can postpone their lease periods and cancel their registration fees for a period of 6 months. They can also cancel all fines on expired licenses and other financial and administrative fees. The package also offers flexible fee payments, including building licenses and services, in addition to refunding security deposits and guarantees to enhance their liquidity.


Khalifa Al Zaffin, Executive Chairman of Dubai Aviation City Corporation and Dubai South said: "We launched a package of initiatives in line with the directives of the wise leadership and their vision to support partners and investors, in light of the global economic challenges resulting from the spread of the novel Coronavirus.
"The package offers four initiatives including waiving fees on residential land and expired licenses, facilitating payments through monthly checks and exempting licensing fees for the first year. The package aims at supporting our partners and investors during these exceptional circumstances and responds to the leadership vision and its initiatives to support the Emirate's economy and resume its strong performance. Dubai South is fully prepared to launch any additional initiatives that contribute to supporting Dubai’s economy".
Ahmed Bin Sulayem, CEO and Executive Chairman of DMCC said: "Today, we are experiencing unprecedented conditions, and we at DMCC feel the suffering of all those affected by the spread of COVID-10. We stand in solidarity with all effected parties and support the UAE government’s proactive efforts and help. DMCC is committed to supporting the national economy during these difficult times by taking a set of effective measures to reduce the cost of doing business in Dubai".

"We have also offered large exemptions on a wide range of fees for the 17,000 registered companies, by reducing registration fees by 50% for new companies joining the center, while current companies now have 30% discounts on renewal and amendment fees. In addition, we have launched many flexible payment options for various sectors. We will continue supporting their needs and announce additional details in due course".

March 30 2020

UAE – Economic Response by Dubai Authorities on CoViD-19

The UAE economy is being affected by the spread of global epidemic CoViD-19, with the related shutdowns and economic knock-on effects. Besides the procedures enacted by local authorities to limit the spread of the virus, including closure of venues, wide-ranging travel restrictions and remote work measures, the Government has addressed immediate challenges faced by resident individuals and economic operators, such as demand declines and cash management problems. Below the main responses:

Economic stimulus package to companies based at Dubai Free Zones

  • Postponing rent payments for up to 6 months
  • Facilitating installments for payments
  • Refunding security deposits and guarantees
  • Cancellation of fines for both companies and individuals
  • Temporary contracts that allow the free movement of labor between companies operating in the free zones
  • Reducing registration fees
  • Waiving annual license fees for new companies

The stimulus package will be implemented* by Dubai Silicon Oasis Authority, Dubai Airport Free Zone Authority, Jebel Ali Free Zone, Dubai World Trade Centre, Dubai International Financial Centre, Dubai Development Authority, Dubai South, Meydan City Corporation, Tecom and Dubai Multi Commodities Centre.

*For further details, you can contact your Free Zone authority or one of our consultants

(Source: Government of Dubai, Media Office - 28/03/2020)

Tax Response

  •  A refund of 20% of customs duties paid on imported goods that are sold locally, cancellation of bank guarantee required to clear goods;
  • A 90% reduction of customs clearance fees;
  • Revocation of AED 50,000 bank or cash guarantee which is required to undertake customs broker activity. Existing bank or cash guarantee of current customs broker and clearing companies shall be refunded.

(Source: Government of Dubai, Dubai Customs - 19/03/2020)

Monetary Response

The Central Bank of the UAE (CBUAE), after reducing interest rates by 125 basis points early this year, announced a AED 100 billion (6.7% of GDP) targeted economic package comprising:

  • zero-interest rate collateralized loans to banks (AED 50 billion);
  • allowing the use of banks’ excess capital buffers (AED 50 billion);
  • 15-25 percent reduction in provisioning for SME loans;
  • increase of loan-to-value ratio for first-time home buyers by 5 percentage points;
  • limiting bank fees for SMEs;
  • waiver of all payment service fees charged by CBUAE for six months;
  • raising the limit on banks' exposure to the real estate sector from to 30% of risk-weighted assets, subject to adequate provisioning.

(Source: Central Bank of the UAE, IMF - 14/03/2020)

Financial Response by Dubai Banks

Dubai Islamic Bank, Emirates Islamic

  • Customers who have availed personal finance, auto finance or mortgages can apply for a one month repayment holiday with zero fees
  • Financially impacted customers (unpaid leave, other valid reasons) can request up to 3 deferred monthly installments without fees and profit charges
  • Customers using credit cards for cash withdrawals will enjoy 50% reduction in the cash advance charges
  • Credit cardholders can avail 0% Easy Payment Plans on school fee transactions with zero processing fee
  • Debit and credit cardholders can request refunds on foreign currency charges related to Travel / Hotel cancellations

Commercial Bank of Dubai, Mashreq, Emirates NBD

  • Customers who have availed personal finance, auto loans or mortgages can apply for a one month repayment holiday with zero fees
  • Retail loan customers who have been placed on unpaid leave by their employers can approach the bank for repayment holiday of up to three months with zero interest and fees
  • Customers who may need to cancel their travel bookings done on their credit and debit cards will receive a refund of the foreign currency transaction fees charged by the bank
  • Customers using credit cards for cash withdrawals will enjoy 50% reduction in the cash advance charges
  • Credit card customers can benefit from interest-free installment plans for all school fee payments as well as grocery purchases with no processing fees for up to 6 months

(Source: Government of Dubai, Media Office - 21 March 2020)

This is a brief overview by DIACRON on recent announcements by the UAE Government and the information contained herein is provided on an “as is” basis with no guarantee of completeness, accuracy, usefulness or timeliness

Contacts: Lorenzo Bagnoli (Partner Diacron Dubai) Davide Bellino (Business Development Manager)