doing business in dubai
TRANSCRIPT
Doing Business in Dubai
Lalit Lahoty
Partner Axis Auding & Accounting, Dubai 17 October 2014
About Myself:
Lalit Lahoty CEO,
Axis Auditing & Accounting, Dubai
Paradigm Pioneers Group of Companies, UAE
+971-56 2138873, +971-55 9072850
Past Experience:
VP & CFO: Fujitsu Consulting, India
Sr. Officer: Bharat Petroleum, India
INDEX
My experience with Dubai
Doing Business in Dubai
Demographics
Language & Religion
Tax Framework
Is Dubai a TAX HEAVEN?
UAE Economy
Alternate Strategies for entry
DUBAI:
My Experience You cant google it!
: Lots of possibilities, often unwritten.
: Statutory Authorities – powerful, act as facilitators for a lot of business needs.
: We set-up for Visa purposes – our team was mobile, could work in whole of GCC.
: We got special approvals from Free Zone Authorities which facilitated business in
UAE. Easy of doing business.
: Had a number of team members moved to Dubai. A salary of £90k in Dubai nets
you the equivalent of around £150k in London.
: We were able to take up some regional Projects under UAE Office. Profits from
UAE Office can be used effectively for business purposes – better planning.
: We were able to make effective procurements – no tax issues.
Doing Business in Dubai
Opportunities
Access to a Diversified Economy: 2nd largest in the GCC
Access to wider GCC Region
Growing hub for world trade and re-exports enjoying
Well established ports and infrastructure/banking
Favourable tax environment
Convenient time zone
Stable political situation
Fixed Currency
Highly skilled expatriate workers
Free-zones facilitate entry and access
Challenges
7 Emirates, 36 Freezones,
Federal and Emirate laws may be often different and need to be understood
Main land entities need to have a Local Sponsor.
The UAE is not an English common law jurisdiction
Ease of Doing Business Index,
UAE ranks 23rd out of 183 economies
The Global Competitiveness
Report, ranks the UAE 12th out of 144
economies
Demographics
Dubai is unusual in that its population
is comprised mainly of expatriates
A quarter of the population reportedly
trace their origins to neighboring Iran
Dubai is also home to some 200,000
British and other western expatriates
Language and religion
The official language is
Arabic but English, German,
Hindi are also widely spoken
Islam is the majority religion
of the Emiratis and while a
vast majority of the locals are
Sunnis
Tax framework
Taxation Environment
• No VAT levied in the UAE
• No withholding taxes
• No transfer pricing rules
• No personal income taxes
• No corporate taxes in Free Zones
• No requirement to file corporate tax returns in the UAE
• 5% import tariff on most goods levied ONLY ONCE at the first port of entry to the
GCC
• Corp. taxes are levied in the UAE only on Oil & Gas transactions and transactions
of foreign Bank branches
• The UAE has signed double taxation treaties with over 70 countries
Certain financial intermediaries are subject to
special laws
Services and industries relating to national
resources are also subject to separate
legislation
The Federal Laws do permit sole
proprietorships, partnerships and JVs as well
– however these are not commonly deployed
Alternative Strategies for Entry 100% owned by foreign company
Restricted activities
Not licensed to do conduct business/market
directly
UAE national service agent must be appointed
8-12 weeks establishment time usually required
Similar to a branch but may not
undertake income generating
activities
8-12 weeks establishment time
usually required
Must be 51% owned by UAE national (s)
Profits may be shared differently from the
capital contributions
Capital requirements vary by Emirate
Potentially subject to federal and emirate
taxes (varies up to 55% in principle)
Subject to local laws, including
emiratisation
Potential for local taxation
Governed by own regulatory authorities
Activities within zones tend to be industry specific
Formation is usually a 2 stage process – initial
approval followed by provision of a Trade License
May be 100% foreign owned
No corporate or personal taxes
100% repatriation of capital
Exempt from import and export taxation
Access to infrastructure and warehousing
4-6 weeks lead time for establishment
Cant do business outside of the Freezone in the UAE
Client
Entry
Strategy
UAE Branch
Office
Representative
Office
UAE
Company
(typically
LLC)
Free zone
Entity
Other
Is Dubai a
TAX HEAVEN?
Dubai is not a “TAX HEAVEN”
Dubai is not included in any “black list”. It is a real economy.
The UAE is one of the top countries in the list of the International Organization
for combating illicit funds (FATF) and meets all the regulation requirements
regarding combating illicit money.
UAE has DTA with over 70 Countries, including most of the Western Countries.
Dubai is not involved in international agreements on the exchange of
information with other countries. It is not expected that this status will change,
because Dubai gains no tax benefit from participation in such agreements.
Dubai provides a lifestyle better than Monte Carlo.
Dubai provides infrastructure better than Modern Europe.
Dubai provides Privacy better than Switzerland!
The UAE Economy Abu Dhabi
Dubai
Major exports 2010 % of total Major imports 2010 % of total
Crude petroleum 28.3 Jewels & Precious metals 20.7
Re-exports 40.6 Machinery & electrical equipment 14
Gas 5.5 Vehicles & other transport equipment 9
Base metals & related products 6.2
Leading markets 2010 % of total Leading suppliers 2010 % of total
Japan 17.8 China 16.9
South Korea 13.4 India 14.3
Thailand 6.8 US 7.8
India 6.1 Germany 5.7
Country Metrics
Population 6.7 million
Currency AED
Peg USD1 : 3.675
Key Languages Arabic, English, Hindi
GDP USD298 bn
Expected Growth 3-4%
FDI Inflows 3.8% GDP
Exports $780 bn
Imports $590 bn
ADX Market Cap $100 bn
Growth opportunities GDP growth of 4.4 % for 2012
Safe haven within the wider
region One of just 3 countries in the MENA region that has not witnessed significant demonstrations
Resilient economy, better
structured Asset prices are far less “frothy” and there is no sign of a credit bubble
Real estate assets still stand up to 50% lower than their peak values
Lending growth has started to return gradually
Oil ties the economy to Asia
more than the West UAE is the 4th largest oil producer in the region
High oil prices continue to provide shore-up budgets
Oil exports are predominantly tied to Asia and not the West
Key Themes
Questions ?