What is FATCA in the United Arab Emirates (FATCA UAE)?

FATCA in the UAE

The UAE has multiple agreements with foreign countries that ensure compliance with the tax laws in the countries involved. An example of this is the FATCA in the UAE. All US investors residing in the country must comply with certain regulations in order to legally operate in the country.

In this article, you will find information about FATCA in the UAE, the aspects of this law, the individuals affected by it, the assets that must be reported, and how we can help you get to know more about this law appliance around the world.

  1. What is FATCA?
  2. Aspects of the FATCA 
  3. What must be reported under the FATCA?
  4. Types of taxpayers reporting to FATCA
  5. Who is affected by FATCA?
  6. FATCA in the UAE
  7. How to fill out the FATCA form in the UAE?
  8. How can we help you get to know more about FATCA in the UAE?

1. What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a law that requires U.S citizens living abroad or at home to file annual reports on any foreign account holdings they have.

The FATCA declaration started in 2010 as part of the Hiring Incentives to Restore Employment (HIRE). Its goal was to promote transparency in the global financial services sectors.

1.1 Some keynotes about this law

  • FATCA requires US citizens to file annual reports on any foreign account holding and pay any taxes owed on them.
  • The US residents who do not report their foreign accounts holding over $50,000 in a single year are subject to penalties.
  • The tax revenues brought in by the FATCA pay for the business incentives introduced in the HIRE Act

2. Aspects of FATCA

The FATCA act was signed by former US President Barack Obama as part of the Hiring Incentives to Restore Employment (HIRE).  This law was designed to incentivize companies to hire unemployed workers. This was a response to the high rate of unemployment during the 2008 financial crisis.

One of the principal incentives offered to businesses through the HIRE act was an increase in the business tax credit for any new employee that worked for at least 52 weeks. Other incentives include benefits, a payroll tax holiday, and an increase in the expense deduction limit for new equipment purchased in 2010.

2.1 FATCA: Focus on tax evasion

This law looks to eliminate tax evasion by American businesses and individuals that are earning taxable income abroad. While it is not illegal to keep an offshore account, failure to disclose it to the Internal Revenue Service (IRS) is illegal since the country taxes all assets and income of its citizens on a global scale.

The FATCA declaration was in part created to fund the costs of the business incentives offered in HIRE. FATCA provisions that every US taxpayer report all financial assets held outside the country annually and pay any taxes due on them. The revenues produced by this act cover the costs of the hiring incentives offered in the HIRE act.

The US residents that do not report their financial assets and their foreign account holdings are likely to receive sanctions.

3. What must be reported under the FATCA?

As said before, every American taxpayer with financial assets totaling $50,000 or more must fill out a FATCA form. Those assets can be in stocks, bonds, bank accounts, and other financial instruments. However, there are certain exceptions. One major one is the assets from a foreign branch of a U.S institution.

3.1 Foreign institution compliance

Non-financial foreign entities (NFFE) and Foreign financial institutions (FFI) must comply with this law by disclosing the identities of US citizens with accounts. And the value of the assets in those accounts to the FATCA Intergovernmental Agreement (IGA) or the IRS.

The FFI that does not comply with the Internal Revenue Service will be excluded from the market of the United States and have a 30% of any withholdable payment withheld from them as a tax sanction. These payments can include income generated from the U.S financial assets held by these banks such as periodic profits, dividends, and interests.

NFFEs and FFFIs that agree to the law must report annually the address, name, and tax identification number (TIN) of each account holder that meets the requirements of a U.S citizen. As well as the account balance, account number, and any withdrawals and deposits on the account for the year.

3.2 Reporting thresholds for individual taxpayers

The reporting thresholds for foreign assets can vary whether you live abroad or you file a joint income tax return. According to the IRS:

  • If you file separately from your spouse or you are single, you must submit a form if you have more than $200,000 foreign assets at the end of the year if you live abroad. Or more than 50,000 if you live in the U.S
  • If you file tax with your partner, the threshold doubles. 

4. Types of taxpayers reporting to FATCA

4.1 For taxpayers living abroad

The IRS requires the taxpayers living abroad to fill out a form under the following circumstances:

  • You are in a marriage filing a joint income tax return and the total value of your foreign financial assets is more than $400,000 on the last day of the tax year. Or more than $600,000 at any moment during that single year.
  • You are not a married person filing a joint income tax return and the total value of your foreign financial assets is more than $200,000 on the last day of the year or more than $300,000 at any moment during that single year.

4.2 For taxpayers living in the U.S

The IRS requires the taxpayers living in the United States to fill out a form under the following circumstances:

  • You are unmarried and the total value of your foreign assets is more than $50,000 on the last day of the tax year or more than $75,000 during the whole year.
  • You are married filing a joint income tax return and the total value of your financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any moment during that single year.
  • A similar situation happens when you are in a marriage but filing separate income tax returns. And the total value of your foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

4.3 Penalties for non-compliance

There are penalties for failing to file the FATCA form. The IRS can impose a $10,000 penalty for failing to file taxes. And an additional penalty of up to $50,000 if the citizen continues to not file after the notification by the IRS. And a 40% penalty for understanding taxes attributable to non-disclosed assets.

4.4 The cost of compliance

Although the non-complying costs with FATCA are high, the compliance costs for foreign financial institutions are also high. Some studies stated that 250,000 foreign financial institutions were being impacted by FATCA’s reporting requirements.

5. Who is affected by FATCA?

The FATCA declaration has an important impact on all businesses that are owned by U.S citizens. This includes Dual Nationals and U.S passport holders who live abroad. Also, Green Cards holders, people that spend a certain amount of days per year in the U.S, and U.S partnerships and corporations.

The FATCA legislation affects all of the above. It also affects every bank in the world. In fact, your bank will need to share your account information on an annual basis with the IRS. The IRS will mainly look at the highest amount of money that was on your account during that year.

6. FATCA in the UAE

In the UAE, generally, depository institutions like banks, custodial institutions like mutual funds, private equity funds, investment entities like hedge funds, and certain types of insurance companies must comply with the FATCA.

To implement the Foreign Account Tax Compliance Act effectively, the US has signed Intergovernmental Agreements (IGA) with the United Arab Emirates (US-UAE IGA) in 2015 and 112 other jurisdictions.

Under the UAE law, all Emirates and entities should comply with the US-UAE IGA, and the entities can be classified into the following:

  • Financial institutions (FIs) (can further be categorized into Reporting FIs and Non-reporting FIs.
  • Non-financial foreign entities (NFFE)

Authorities like ADGM, DIFC, and the Central Bank of UAE are responsible for regulating the Reporting FIs. Such FIs get the support of their respective regulatory authority to comply with FATCA. Other FIs that do not get the support of any specific regulatory authority are called unregulated FIs and obtain the support of the Ministry of Finance (MoF) in FATCA in the UAE compliance.

The US-UAE IGA deals with exempt and deemed compliant FIs, and it has been categorized into four classes:

6.1 Exempt beneficial owners: Other than funds

The international organization, government entity, and the central bank are the exempt beneficial owners from FATCA. The government entities include the government of the UAE, any political subdivision of the government, etc. And all of these are exempt from FATCA in the UAE compliance.

These entities must be wholly controlled by one or more UAE government authorities. Such entity’s earnings fall into its account or in the account of any government authority. And at the time of dissolution, all the assets will vest in any government entity.

6.2 Exempt beneficial owners: Funds

Entities like pension funds of beneficial owners, broad and narrow participation retirement funds, and investment funds owned by the exempt beneficial owners, fall under this category and are exempt from FATCA in the UAE compliance.

Narrow participation retirement funds are very different from the broad participation retirement funds. The main difference is that the first one has less than 50 participants, and non-resident partners cannot use more than 20% of the fund’s assets.

6.3 Deemed compliant: Limited or small scope FIs

This deemed compliant category comprises local banks, financial institutions with a local client base, qualified credit card issuers, and financial institutions with only low-value accounts. The value of the accounts of these FIs is very low and they have a local presence. Each FIs under this section has specific conditions to comply with if they want to fall in this category.

6.4 Deemed compliant: Investment entities

This category includes foreign corporations, sponsored investment entities, investment advisors, investment vehicles, collective investment vehicles, and investment management. Each entity under this section must comply with a lot of conditions before they classify in this category.

Non-reporting FIs, generally, do not need to report information to the UAE. However, they must provide self-certifications to withholding agents to avoid withholding US source payments to them. Then, once considered exempt or deemed compliant, there would not be too much work, which means less burden on the team and will reduce costs.

Certain saving accounts, like accounts held by an estate, escrow accounts, life insurance contracts having certain terms, and partner jurisdictions accounts are excluded from the definition of financial accounts and therefore the reportable FIs do not report them.

7. How to fill out the FATCA form in the UAE?

The process to fill out the FATCA form in the UAE is the following:

  • Login to your NPS account
  • Click on “FATCA Self-Certification”
  • Submit the required details under the “FATCA/CRS Declaration Form”.
  • Click on submit
  • Read and tick “Declaration and authorization by all customers”
  • Click on confirm
  • Enter OTP received on your registered mobile number
  • Lastly, after authentication through OTP, Acknowledgment for the completion of FATCA Self-Certification will appear.

8. How can we help you get to know more about FATCA in the UAE?

On Connect Zone, we count on a team of legal advisors and tax specialists ready to assist you through every administrative and legal process you need. Our professionals can offer you guidance and can carry out every procedure related to this act so you can concentrate on other aspects of your business. You and your company can benefit from many FATCA in the UAE related services, for example, our VAT and tax consultancy.

In addition, we offer multiple solutions for those looking to settle or relocate their companies into the UAE. Therefore, we guide you through the application process for a freelance visa, or if you wish yo set up a free zone business, we can help you too.

Are you ready to have us as your business partner? Find out all the details you need to know about our services by contacting us. Do it now! +971 43 316 688. Also, write us an email with all of your concerns: contact@connectzone.ae. 

If you are looking for a job opportunity in the Middle East, try the best job platform, thetalentpoint.com. Here, you will find multiple enterprises offering new job opportunities every day. Send your resume and start a new chapter in your life. Also, you can send your CV to contact@thetalentpoint.com.

Connect Zone offers product registration in Dubai

product registration in Dubai

Dubai is one of the places that offer the best opportunities to import, distribute, manufacture, and re-export a large number of products. For example, food, cosmetics, hand sanitizers, and many others. This emirate is the center of trade between different markets on an international level, for this reason, the UAE government has tried to make the product registration in Dubai as efficient and easy as possible.

In this article, you will find information about product registration in Dubai, the various products that you can register in this emirate, the benefits that registering these products gives you, and how we can help you with this process.

  1. What is product registration?
  2. How to register a product in Dubai?
  3. Benefits of registering a product
  4. Cosmetic product registration
  5. Food product registration
  6. Health supplement registration
  7. Ministry of Health product registration
  8. How can we help you register your products in the UAE?

1. What is product registration?

Product registration in Dubai is a process carried out by the relevant government authorities to register any manufactured or imported product. Different types of products go through this process. And each of them must be registered before import, promotion, and sale in Dubai. Several authorities, such as the Safety and Health section of Dubai Municipality (DM), the Ministry of Health, and the Food Department, conduct the product registration process.

This process ensures that each product, whether it is a package food product or cosmetic product, has all the necessary information on its label. In this way, it ensures that the customer gets clear information about the products they are going to buy. For cosmetic products, Dubai Municipality is responsible for checking the presence of any substance that may be harmful to humans. The same happens with food products, everything that is not suitable for human consumption cannot be imported into Dubai.

All products registered in this emirate are integrated into a single system. This makes it easy for traders, customers, and the government to get detailed information about all the registered products.

2. How to register a product in Dubai?

2.1 Set up a company

The product registration in Dubai can only be processed through a company in the emirate or in one of the UAE free zone. You must have a valid trade license to be able to operate in the country. Please note that only a local UAE company with the appropriate business activity can register their products with Dubai Municipality.

2.2 Registration of the company with Dubai Municipality

After forming your company in Dubai or in the UAE free zone, the next step is to register it in Dubai Municipality. This requires certain information, for example, the trade license of the company, contact details, email address, etc.

2.3 Submission of the necessary documents

The third step in the product registration in Dubai is the submission of the required documents to apply for the label assessment of the products as per the product category. In addition to this, you must provide a product sample to the CPSS.

When the assessment of the label is done, then the Dubai Municipality will deliver a label assessment report which comprises a product description.

3. Benefits of registering a product

Some of the benefits that you can acquire when registering your products are the following:

  • The product can be imported, sold, and promoted in the Dubai Local Market
  • Except for a few unethical and harmful products, there is a wide variety of products that can be registered in Dubai.
  • Registering your product in Dubai will make it eligible not only in Dubai and the UAE, but you can also launch your product in the whole GCC area.
  • Hassle-free trade in the UAE and internationally.

Note that the product registration in Dubai is valid for 5 years for each registered product.

4. Cosmetic product registration

One of the most important items to import in Dubai is cosmetics. In order to export and import these items, the government of the UAE needs them to register according to international standards:

  • This registration can be only done through local companies that hold a valid trade license in Dubai Mainland or the UAE Free Zones.
  • These products must meet the requirements set by the health and safety departments.
  • Cosmetic product registration is compulsory. In other words, all companies that wish to sell, import or distribute cosmetic products must register those products.

4.1 Important aspects to keep in mind about cosmetic product registration

  • The main functions of cosmetics are to protect, cleanse, change appearances, perfume, correct body odors and keep it in good condition.
  • Those products included in “cosmetics” are those that are intended for the oral cavity, teeth, and external parts (lips, nails, epidermis, hair, etc.) of the body.
  • You cannot sell, manufacture, import, and place in the market any cosmetic before registering it with the relevant authorities and licensing its brand.
  • All the ingredients included in the cosmetic must be safe for the human body. Any prohibited ingredient or unsafe amount of any restrictive item will make it unsuitable for registration in Dubai.
  • There are different authorities for the registration process depending on the cosmetic product. For this reason, the authorities may require specific documents for the licensing and registration process.
  • In the case of importing any cosmetic product in Dubai, these documents must be certified by the UAE Embassy.

4.2 Why is cosmetic product registration compulsory?

The cosmetic products industry is one of the top industries in the world. The UAE has a great market and the cosmetic business is growing every day. The main reason why product registration in Dubai is mandatory is to provide safety to residents of this emirate.

Cosmetics are those constitutes that change the appearance of the face or the texture of the body. Both natural and artificial items are used for the preparation of cosmetic products. This is why the government of the United Arab Emirates is very keen to make sure the quality of such products through comprehensive and modern assessment.

4.3 Benefits of cosmetic product registration

The benefits of registering your cosmetic products are the following:

  • Tax-free or very low tax business opportunities.
  • Access to profitable markets of UAE, Dubai, and other countries of the Gulf.
  • Label protection and brand protection.
  • Right to manufacture, import, and re-export cosmetic products.
  • Complete assistance from the government of Dubai.

4.4 List of cosmetic products

Some of the accepted cosmetics in Dubai are the following:

  • Lotions, gels, creams, and also oils for the skin.
  • After-bath powders, make-up powders, hygienic powders, etc.
  • Shower and bath preparations (foams, salt, oils, gels, etc.)
  • Face mask (with the exception of peeling products)
  • Shaving products (lotions, foams, and also creams)
  • Skin-whitening products
  • Tanning and sunbathing products.
  • Hairdressing products (lotion, brilliantine, and also lacquers)
  • Deodorant soaps, toilet soaps, etc.

5. Food product registration

Dubai is the perfect place for the manufacture and import of food products. To ensure this the government has created a complete procedure for food product registration in Dubai. This process is, generally, quite strict because one of the priorities is to allow only the best food products in Dubai, free from all types of harmful effects.

5.1 Relevant factors about food product registration

  • The first requirement is to register the food product with Dubai Municipality. This entity is responsible for registering all food products on its food import & re-export system (FIRS)
  • You will need to submit certain documents to Dubai Municipality. For example, email, trade license, location in Dubai, fax/telephone number, and name and number of the company’s representative.
  • All products must include the following: Product name, brand name, net weight, expiration/manufacture date. Using incorrect tags or posting false descriptions can result in a fine from AED 10,000 to AED 100,000.
  • In the case of imported products, you must present the following additional documentation: An original health certificate from the country of origin, a packing list, and also a Halal certificate from an approved Islamic organization.
  • For food product label approval in Dubai Municipality, the company must mention the country of origin, shelf life, and also storage condition on the label.
  • The food officer will take a sample of your product, which will be lab-tested in the food department in Jebel Ali for standard checking.
  • You cannot apply for prohibited items, for example, alcohol, poppy seed, and others mentioned by authorities.
  • The name and account of any food product must be unique.

6. Health supplement registration

Dubai is one of the most lucrative places for traders and merchants from around the globe. But it is also one of the strictest regarding the quality of various products. This is the case with health supplements.

6.1 Critical aspects of health supplement registration

Some of the most important requirements that you should take into account are supplement requirements the following:

  • Pharmaceutical companies and other types of companies must market and prepare these products.
  • It is necessary to put on their labels that they are food supplements and not actual food.
  • Health supplements include those products that a person takes to provide additional nutrition to the body apart from food. For example, minerals, herbs, vitamins, etc. They, generally come in the form of tablets, capsules, liquids, powder, etc.
  • Any type of misleading information or contrary to scientifically proven claims will result in the ban of such products.
  • The health supplements cannot contain any flavor, color, or ingredient banned by the government of Dubai.

7. Ministry of Health product registration in Dubai

All pharmaceutical companies must register with the respective department of the Ministry of Health and Prevention. Only after that, companies will be able to register medical and pharmaceutical products, devices, and instruments. Note that health supplement registration in Dubai is a different process.

7.1 Requirements from the Ministry of Health

  • You must submit the documentation and the technical requirements together with the application. The documents and requirements will vary depending on the type of device or product.
  • The local representative or manufacturer must submit the application in the related apartment of the Ministry of Health. This application can be in Arabic or English.
  • After approval, the registration will be valid for five years. After that time, you must renew the registration.
  • Approval from the Ministry of Health may take several months.

7.2. Benefits of Ministry of Health product registration

  • After the registration of certain products, companies can manufacture, import, and also re-export devices and medical products to other countries as well.
  • Due to the adoption of international standards, products registered in the Ministry of Health and Prevention are accepted in GCC and other foreign countries without much hassle.
  • The UAE has a vast market with an affluent and health-conscious population, so there is a large scope for the growth of medical products in Dubai.
  • Medical tourism has increased in recent years, especially in Dubai. Thousands of people come to the emirate to take advantage of world-class medical facilities at a much lower price compared to other advanced countries. This increases the scope of the UAE and Dubai markets.

8. How can we help you register your products in the UAE?

Connect Zone is a business setup consultancy and company formation agency with more than twenty years of experience. Helping new and experienced entrepreneurs build the company of their dreams.

With hundreds of happy customers, Connect Zone is the ideal partner to register products for you, we will take care of all the necessary paperwork, and we will be the communication bridge between your company and the corresponding government entities. Also, we can help you with other types of procedures. For example, we can assist you with your visa application process, and the opening of a bank account.

Do you want to learn more about product registration in Dubai? Do not hesitate to contact us at +971 43 316 688. Alternatively, reach us through the email contact@connectzone.ae. One of our representatives will attend to all your concerns.

For those looking for employment, The Talent Point has all the opportunities you need. Sign up on thetalentpoint.com and begin submitting applications. Also, send your resume to contact@thetalentpoint.com as another way to apply. Change your life now!

Know about tax residency certificate in the UAE by Connect Zone

tax residency certificate in the UAE

The United Arab Emirates has transformed itself from a country once completely reliant on oil revenue, to one with a diverse economy attracting investment from all around the world. Certain emirates like Dubai or Abu Dhabi have become financial centers that attract hundreds of entrepreneurs thanks to their multiple incentives. One of these incentives is the favorable tax environment. For this reason, we will now learn in-depth how to obtain a tax residency certificate in the UAE.

In this article, you will find information about the taxation system in the UAE, the process to obtain a tax residency certificate in the UAE, and how we can help you with this process.

  1. Taxation in the United Arab Emirates
  2. What kind of taxes exist in the UAE?
  3. Tax residency certificate in the UAE
  4. Requirements to obtain the tax residency certificate
  5. Process of obtaining the tax residency certificate in the UAE
  6. How long does it take to obtain the tax residency certificate in the UAE?
  7. Benefits of obtaining the tax residency certificate
  8. How can Connect Zone help you get a tax residency certificate in the UAE?

1. Taxation in the United Arab Emirates

In a globalized world, companies no longer have to be restricted to a single geographical territory, instead, they are spread across the globe. As total income is generated by different countries, each country wishes to tax the profits earned and the global tax income of its residents on its land.

In order to curb double taxation and ensure that entrepreneurs do not pay tax for the same income twice, countries like the UAE have entered into the Double Tax Avoidance Agreement (DTTA). Then, once the DTTA is signed between the two countries, it mandates tax authority to produce a tax residence certificate, which helps individual residents and investors claim the treaty benefits.

1.1 Double Tax Avoidance Agreement

UAE’s double taxation treaty (DTT) or DTAA is a bilateral agreement that upholds and preserves the interest of companies and foreign investors coming from other taxable jurisdictions and investing in the UAE. Any national or foreign company already paying taxes abroad for the profits earned in its business can mitigate any potential tax burden as a result of this treaty. Investments in the United Arab Emirates are 100% tax-free and the government does not impose any taxes through DTT on the business owners planning to establish their business.

Not only the companies, but the individuals who are fiscal residents in the United Arab Emirates for more than 180 days and can deliver the documents required by the Federal Tax Authority (FAT) are eligible to use the advantages of the treaty.

The United Arab Emirates has signed the Double Taxation Treaty (DTT) or Double Taxation Avoidance with the following countries:

  • Andorra
  • Armenia
  • Austria
  • Bulgaria
  • Belarus
  • Belgium
  • China
  • Croatian
  • Egypt
  • Fiji
  • France
  • Germany
  • Japanese
  • Italy
  • Russia
  • Mexico
  • Spain
  • Turkey
  • United Kingdom
  • Venezuela, etc.

2. What kind of taxes exist in the UAE?

One of the characteristics of the United Arab Emirates is the almost non-existent tax policy. However, there is a latent tax system:

2.1 Corporate taxation

This type of tax is only payable in certain industries in the United Arab Emirates. The tax rate is the following:

  • The progressive rate of up to 55% for oil and gas companies
  • Rate up to 20% for foreign bank branches
  • No tax rate for all other companies and industries

In order to fully enjoy the tax exemptions and be able to declare to foreign tax authorities that your company is a Dubai company, you must obtain a tax residence certificate.

Although the Emirati laws do not stipulate articles regarding the tax residency of companies, the Ministry of Finances provides a tax residency certificate in the UAE for a company under certain circumstances. Generally, they require the company to be incorporated under Emirati law, have resident directors, and be domiciled in the UAE.

These rules imply that companies must follow the following substance tests:

  • The entrepreneurs must manage their  companies in the UAE (board meetings in the country)
  • Companies must demonstrate that core revenue-generating activities have been carried out in the nation.
  • The company must have an adequate number of qualified employees in the country, have an office (or co-working space), and incur expenses in the nation.

2.2 Taxation of individuals

In the United Arab Emirates, there is no personal income tax, therefore there is no law that governs it. Hence, an individual residing in the UAE will not have to pay taxes on his personal income.

As there is no law, there is no concept of tax residence, so until recently the UAE Ministry of Finance did not issue a tax residency certificate for an individual.  This meant that anyone moving there could not provide their tax residence since the only certificate available was the certificate of nationality.

Fortunately, the Ministry of Finance now provides a tax residency certificate for an individual who can prove that he resided in the country for more than 183 days during a tax year.

2.3 Other taxes: Real estate and VAT

The UAE does levy real estate taxes in the form of a 5% municipal tax on the annual rental value of the residential property. In addition to this, there is an incipient value-added tax or indirect tax since 2018 of 5% on some consumable goods.

2.4 More tax advantages

Certain emirates, like Dubai, do not have gif tax, inheritance tax, and no wealth tax. The country has signed 88 treaties to avoid double taxation and has signed the multilateral instrument, making some Emirates a great financial center from which to coordinate your company.

For this reason and given this attractive tax framework, many professionals, digital nomads, athletes, etc, have decided to relocate to the UAE.

3. Tax residency certificate in the UAE

A tax residency certificate is an official document delivered by the Federal Tax Authority (FTA) to a company operating in the country to establish tax residency and allow it to benefit from the double taxation avoidance agreements.

The Dubai tax residency certificate aims for any business operating in a free zone or in the Mainland that has been in the country for at least a year. Offshore companies cannot apply for this certificate and must receive a tax exemption instead of the tax residence certificate.

As well as companies, this Dubai tax residency certificate is also available for individuals who have resided in the country for at least 180 days and who wish to establish tax residence in the country. This is beneficial for individuals whose native countries do not have a double taxation agreement with the UAE. Keep in mind that an individual must have a valid United Arab Emirates resident visa for more than 180 days to apply.

4. Requirements to obtain the tax residency certificate

The documents needed to apply for this Dubai tax residency certificate vary if you are a company or an individual. The steps for both cases are the following:

4.1 Requirements for an individual to obtain the tax residency certificate in the UAE

Some documents are the following:

  • 6 months of personal bank statements, certified by the bank.
  • Emirates ID copy
  • Proof of income in the United Arab Emirates – e.g share certificate, salary certificate, employment agreement.
  • Passport copy and valid visa copy.
  • A copy of the certified tenancy contract or title deed, valid for at least three months prior to application.
  • A report from the General Directorate of Residency and Foreign Affairs (GDRFA) showing all exits and entries from the UAE.

Note that the tax residency certificate in the UAE cost is around AED 2000, payable to the FTA. This fee must be paid through the UAE e-Dirham card.

4.2 Requirements for a company to obtain a tax residency certificate in the UAE

  • Memorandum of Association’s copy
  • The organizational chart structure of the company
  • Passport, valid UAE resident visa copy, and Emirates ID of the company directors, managers, or shareholders.
  • A copy of the certificate of incumbency for the company – normally the Chamber of Commerce certificate.
  • Certified  commercial tenancy contract copy or title deed, valid for at least three months prior to application, physical office space is mandatory (virtual office space will not be sufficient)
  • Valid UAE trade license (Mainland DED or free zone) the company must have been active for over 1 year.
  • Latest certified audited financial statements or UAE company bank statements from the last 6 months, stamped by the bank.

The tax residency certificate in the UAE cost around AED 10,000 payable to the FTA, paid through the e-Dirham Card.

5. Process of obtaining the tax residency certificate in the UAE

The certificate of residence in the UAE was created to take advantage of the double taxation avoidance agreements signed between the UAE and the foreign jurisdictions. Note that the FTA issues Commercial Activities Certificates to enable individuals to refund the VAT paid in advance outside the country, whether or not DTAAs are applicable.

To obtain the tax residency certificate in the UAE login you must complete the following:

  • Create an account on the payable FTA portal
  • Complete the application form
  • Attach the required documents in JPEG or PDF format
  • Your attached documents and applications will be verified and if they meet the criteria, you will receive email confirmation and be asked to pay the remaining fees via the system.
  • After payment confirmation, you will receive the certificate of residence in the UAE via express courier.

5.1 What happens if the tax residence certificate is lost or damaged?

For damaged, lost or an extra copy of origin you have to pay AED 100 for issuing a replacement plus AED 3, paid through the e-Dirham Card.

5.2 Eligibility for tax residence certificate

To be eligible to obtain a tax residency certificate in Dubai sample, you must be the following:

  • Freezone company
  • An individual employee
  • Companies operating in UAE Mainland
  • An individual business/investor owner

Not eligible:

  • Offshore company
  • Branch of a foreign company
  • A non-employed individual (with a spouse visa)

6. How long does it take to obtain the tax residency certificate in the UAE?

If all the necessary documents are correct, the pre-approval process with the FTA generally takes 4-5 business days. Following pre-approval and confirmation that all documents are correct, the FTA then takes up to a further 5 working days to issue the tax residence certificate.

The tax domicile certificate or tax residence certificate is valid for 1 year, and can then be renewed each year, subject to resubmission and renewal process.

7. Benefits of obtaining the tax residency certificate

Entrepreneurs in the United Arab Emirates enjoy access to international markets when they decide to establish their company in one of the country’s Emirates. The added benefit of being a tax resident in the nation and obtaining the UAE tax residence certificate is to receive tax incentives and avoid double taxation by being a resident. Companies and individuals can obtain a separate UAE tax residence certificate which allows income to be covered both at the corporate and individual levels.

An overall view of your business structure and individual circumstances should support your effective tax planning. Therefore, we recommend you always seek professional tax advice, along with finance and accounting support to ensure that your individual situation and corporate structure are in line with tax rules to obtain the maximum benefit from UAE tax residence.

8. How can Connect Zone help you get a tax residency certificate in the UAE?

Whether you are an individual resident or the owner of a company, maintaining a legal and administrative order and being up to date with the tax laws of the country will allow you to reside in the UAE without problems. The government of this country is very strict regarding the following of the tax regulations and the residency status. This is why hiring a team of professionals, such as Connect Zone, to support you during these stages is more than necessary.

Connect Zone’s professionals are highly trained to complete the entire tax residency certificate in the UAE format on your behalf. Our agency has more than 20 years helping entrepreneurs in the United Arab Emirates achieve their goals. Some of our services include a wide range of PRO services, and full guidance during your freelance visa application.

Do you want to meet your goals with a team of professionals willing to assist you at every step? Feel free to share all of your concers with us. Contact us now by calling at +971 43 316 688. On the other hand, write us an email at contact@connectzone.ae.

Is your job search taking too long? Try looking for jobs on thetalentpoint.com. By uploading your CV, you will be able to connect with several enterprises looking for talents like yours. In addition, you can send your resume to contact@thetalentpoint.com.

What is an IPO and how does it work?

IPO process

Diversifying investments will allow entrepreneurs to receive varied sources of income in the short and long term. An investment in an initial public offering has the potential to generate attractive returns. However, before you invest, you need to understand the rules associated with the IPO process, the additional risks, and how the process of trading these securities differs from ordinary stock trading.

In this article, you will learn about the IPO process, the advantages and disadvantages of this process, what to expect when you invest in these securities, the reasons why a company goes public, as well as how we can help you learn more about this matter.

  1. What is the IPO process?
  2. How does an IPO process work?
  3. The Initial Public Offering process
  4. Benefits and challenges of an IPO
  5. Why does a company go public?
  6. What to expect when you invest in an Initial Public Offering?
  7. How can we help you learn more about IPOs?

1. What is the IPO process?

An Initial Public Offering is a process of a public offering of shares of a private corporation in a new issue of shares. This offering allows a company to raise capital from public investors. The transition from a private to a public company can be an important process for private investors to fully realize the return on their investment, as it typically includes an issue premium for current private investors. In the meantime, it also allows new entrepreneurs to enter this offering.

Some key aspects of this process are the following:

  • Companies hire investment banks to gauge demand, set the price and date of the Initial Public Offering, and more.
  • An Initial Public Offering can be seen as an exit strategy for early investors and company founders, who get the full benefit of their private investment.
  • Companies must meet the requirements of exchanges and the Securities and Exchange Commission (SEC) to conduct an initial public offering.
  • IPOs provide companies with the opportunity to raise capital by offering shares through the primary market.
  • The IPO meaning is “Initial Public Offering” and refers to the process of offering shares of a private company to the public in a new issue of shares.

2. How does an IPO process work?

Before an Initial Public Offering, you can consider a company private. As a pre-IPO private company, the business has grown with a low number of shareholders, including early investors like the founders, friends, and family along with professional investors such as angel investors or venture capitalists.

This kind of offering is an important step for a company as it provides access to a lot of money. This gives the business a greater ability to expand and grow. The share listing credibility and increased transparency can also be a factor in helping in obtaining better terms when seeking borrowed funds as well.

When a company reaches a stage in its growth process where it thinks it is ready for the rigors of SEC regulations along with the responsibilities and benefits to public shareholders, it will start to promote its interest in going public.

Generally, this stage of growth will occur when the company reaches a private valuation of approximately $1 billion, people call this the unicorn status. However, private companies with various proven profitability potential and strong fundamentals can also qualify for an Initial Public Offering, depending on their ability to meet listing requirements and the market competition.

The Initial Public Offering shares of a business are priced through underwriting due diligence. When a company stops being private, the previously owned share ownership converts to public ownership. And the existing private shares become worth the public trading price.

Meanwhile, the public market opens up great opportunities for hundreds of investors to buy shares in the company and contribute capital to the shareholders’ equity of a company. The public consists of every person who wants to invest in the business. Overall, the shares the company sells and its prices are the generating factors for the company’s new equity value.

3. The Initial Public Offering process

This comprehensive process consists of two parts. The first part is the pre-marketing phase of the offering, while the second part is the IPO itself. When a business has an interest in the process, it will advertise to underwriters by soliciting private bids or it can also make a public statement to generate interest.

The company chooses the underwriters and they lead the IPO process. The business may choose one or many underwriters to manage different parts of the process collaboratively. The underwriters are involved in every aspect of the initial public offering, document preparation, due diligence, filling, marketing, and issuance.

Some of the steps to perform this procedure are the following:

3.1 Proposals

Underwriters present valuations and proposals discussing their services, the best type of security to issue, the number of shares, the offering price, and the estimated time frame for the market offering.

3.2 Underwriters

The business chooses its underwriters and formally agrees to underwrite terms through an underwriting agreement.

3.3 Team

Initial public offering teams are made up of lawyers, underwriters, certified public accountants (CPAs), and Security and Exchange Commission (SEC) experts.

3.4 Documentation

Information about the company is gathered for the required IPO documentation. The Registration Statement is the first document you need to take care of. It has two parts, the private held filing information, and the prospectus.

The Registration Statement includes preliminary information about the expected date of the filing. It will be revised often throughout the pre-initial public offering process. The included prospectus is also revised continuously.

3.5 Marketing and updates

Marketing materials are used for pre-marketing of the new share issuance. Executives and underwriters market the share issuance to estimate the demand and establish a final offering price. The underwriters can review their financial analysis throughout the marketing process. This may include changing the issuance date or the initial public offering price as they see fit.

Businesses take the necessary steps to meet specific public share offering requirements. The companies must adhere to SEC requirements for public companies and the exchange listing requirements.

3.6 Boards and processes

Form a board of directors and ensure processes for reporting accounting and auditable financial information every quarter.

3.7 Shares issued

The business issues its stocks on an initial public offering date. The stakeholders receive the capital from the primary issue as cash and record it as stockholders’ equity on the balance sheet. Subsequently, The value of the shares on the balance sheet becomes dependent on the valuation of the capital per share of the company’s shareholders.

3.8 Post-IPO

Some post-IPO provisions may be instituted. Underwriters may have a specific time frame to buy the number of shares after the initial public offering date. Meanwhile, certain entrepreneurs may be the subject in some periods.

4. Benefits and challenges of an IPO

The objective of an initial public offering is to gain extra capital for a company. It can also come with other benefits, but also disadvantages.

4.1 Benefits

One of the main advantages is that the company gets access to investment from the entire investing public to raise capital. This increases the company’s exposure, and public image, which can help the company’s profits and sales and facilitates acquisition deals.

Also, the full transparency that comes with the required quarterly reporting can, generally, help a company receive more favorable credit borrowing terms than a private company.

Some specific advantages are the following:

  • Retain and attract skilled employees and better management through liquid stock equity participation (e.g ESOPs)
  • You can raise additional funds in the future through secondary offerings.
  • An initial public offering can give a company a lower cost of capital for both debt and equity.

4.2 Challenges

Businesses can confront several disadvantages to going public and potentially choose alternative strategies. Some of the biggest drawbacks include the costs of maintaining a public company ongoing and the fact that Initial Public Offerings are expensive.

Fluctuations in the share price of a company can distract management, which can be evaluated and compensated based on stock performance, rather than real financial results. As well, the company requires to disclose accounting, financial, tax, and other business information. During these disclosures, it may have to publicly reveal business methods and secrets that could help competitors.

Strict governance and leadership by the board of directors can make it more difficult to keep proper managers willing to take risks. Remaining private is always an option. Instead of going public, the businesses may also request bids for a buyout. In addition to this, there may be some alternatives that companies may explore.

Some specific disadvantages are the following:

  • The increased effort, time, and attention required of management for reporting.
  • Significant marketing, accounting, and legal costs arise, many of which are ongoing.
  • There are stronger agency problems and frequent loss of control.

5. Why does a company go public?

5.1 Raise capital for expansion and growth

Every business needs money to create new products, pay off existing debts or increase its operations. Going public is the ideal way to earn the much-needed money for the company.

5.2 Allowing owners and early investors to sell their stakes to make money

Going public is an exit strategy for venture capitalists and initial investors. A business becomes liquid through the sale of stocks in an initial public offering. The capitalists sell their shares in the company at this time to reap returns and exit from the business.

5.3 Greater public awareness

Initial public offerings are in the stock market calendar. There is a lot of publicity and buzz around these events. This is a great way for a company to advertise its services and products to its new set of customers in the market.

6. What to expect when you invest in an Initial Public Offering?

When a company decides to raise money via an Initial Public Offering, it is only after careful consideration. This exit strategy will raise the most capital for the business and maximize the returns of early investors. Therefore, when it is decided to carry out the Initial Public Offering, the prospects for future growth are likely to be high.

The Initial Public Offering is, generally, discounted to ensure sales, which makes them more attractive. Especially when they generate a lot of buyers from the primary issue. Initially, the price of the IPO process is, generally, set by the underwriters through the pre-marketing process. At its core, the Initial public offering price is based on the valuation of the company using certain fundamental techniques. The most common is discounted cash flow, which is the net present value of the future cash flows of the company.

Interested investors and underwriters look at this value on a per-share basis. Other methods you can use for setting the price include enterprise value, comparable firm adjustment, equity value, and more. The underwriters do factor in demand but they also discount the price to ensure success on the Initial Public Offering day.

6.1 Tips for entrepreneurs investing in Initial Public Offering

It can be quite hard to analyze the technicals and fundamentals of an Initial Public Offering issuance. The entrepreneurs may watch new headlines, but the main source of information should be the prospectus, which is available as soon as the company files its Registration Statement. The prospectus provides a lot of useful information.

The entrepreneurs should pay more attention to the management team and their commentary, as well as the specifics of the deal and the quality of the underwriters.

Successful IPOs will, generally, get support from big investment banks that can promote a new issue well. Overall, the road to an initial public offering is a very long one. As such, investors can follow developing headlines and other information along the way to help supplement their assessment of the best and potential offering price.

7. How can we help you know more about IPOs?

Every company goes through different processes of adaptation and transformation according to its objectives and its presence in the market. Going through these processes without the help of a professional can be long and tedious. For this reason, Connect Zone is here to offer you all kinds of services that make managing your company easier.

Our professionals have more than twenty years of experience managing companies and we have achieved the successful establishment of more than a thousand clients. Some of the services we can offer you are, full guidance during the process of your freelance visa, a proper VAT and tax consultation, and a wide range of PRO services for your business. Find out all we have to offer you!

Do not miss the opportunity to work side-by-side with highly qualified professionals, you can contact us at +971 43 316 688 or via email at contact@connectzone.ae. Our advisors are ready and waiting for you!

Check out the best job offers in the Middle East. Go to thetalentpoint.com and discover all the job opportunities available for you. You can also try your luck by sending your CV to contact@thetalentpoint.com and have your resume reviewed by the best recruiters. Also, remember that your safety is a priority for us, we will not share or store your information.

 

Know about the UAE-India Investment Forum

UAE-India Investment Forum

Historically, India and the United Arab Emirates have maintained a good commercial and political relationship. With the signing of CEPA, these relations have reached a new level. And multiple business leaders in the private and public sectors are setting their sights on the massive opportunities that the UAE-India Investment Forum will create for companies in the two countries.

In this article, you will learn about the UAE-India Investment Forum, the background of the relations between India and the Emirates, the CEPA agreement, benefits and key clauses of this agreement.

  1. What is the UAE-India Investment Forum?
  2. What is CEPA?
  3. Key clauses of the CEPA
  4. Background of the relations between India and the UAE
  5. Benefits of the CEPA
  6. How can we help you know more about business opportunities between the UAE and India?

1. What is the UAE-India Investment Forum?

The UAE-India Investment Forum marked a new beginning in the flourishing economic ties between the two countries. This was the perfect place to discuss new opportunities, large corporations, and also the potential to attract investors across sectors.

Some of the topics discussed at the event include the strategic importance of the Comprehensive Economic Partnership Agreement (CEPA); bilateral food security, the startup ecosystem; information technology; and healthcare partnerships, among others.

According to the UAE authorities, the CEPA will open the doors to innumerable opportunities for investment and trade. The bilateral trade is expected to raise around AED 367 billion over the next five years. Note that this agreement is comprehensive, futuristic, and ambitious with a holistic coverage of a wide range of commitments and sectors. Including government procurement, intellectual property rights (IPR), hundred sub-sectors in services, digital trade, telecom, etc.

The agreement is the fastest to have been negotiated between any two countries. It took around 88 days and reflects the confidence and trust that the nations place in each other. For this reason, it marks a new era of prosperity between the United Arab Emirates and India.

 

1.1 Additional information

The UAE-India Investment Forum comes at the perfect time, both nations seek to ratify the recently signed agreement. India and the United Arab Emirates enjoy complementary economies. Further, there are many things the two countries can help each other with, as they embark on a new era of collaboration and cooperation.

The agreement offers many benefits to the citizens of both countries across a broad spectrum of industries. This event was held close to the signing of CEPA on February 18. And it came into effect on Labor Day (May 1) this year. It will open a comprehensive array of gains for India in sectors such as furniture, plastics, agriculture, and food products. Also, it is estimated that at least one million jobs will be created due to the trade pact between India in the UAE.

The United Arab Emirates is India’s third-largest trade partner. This trade agreement will allow the two countries to deepen their economic ties by removing barriers to trade, creating opportunities for small and medium-sized enterprises, and also increasing foreign direct investment (FDI). Exporters will enjoy simplified customs procedures, tariff removal or reduction, access to government contracts, and new opportunities for professional services.

This agreement means a great gain for India. The UAE has agreed to automatic registration and market authorization for India in medicines, in case of their regulatory approval in developed countries such as the European Union (EU), the UK, the UAE, and also Japan. This negotiation also has a permanent safeguard mechanism they can activate in situations of a sudden surge in imports, along with strict rules of origin.

This will prevent products from other countries through the CEPA route.

2. What is CEPA?

The Comprehensive Economic Partnership Agreement (CEPA) was signed on February 18 of this year. It is the first deep and full trade agreement to be signed by India with any country in the past decade.

This agreement will cover trade in goods, trade in services, rules of origin, technical barriers to trade (TBT), dispute settlement, sanitary and phytosanitary (SPS) measures, movement of natural persons, pharmaceutical products, telecom, customs procedures, government procurement, investment, IPR, digital trade and also cooperation in other areas.

3. Key clauses of the CEPA

Some of the notable aspects of this agreement are the following:

3.1 Initial provisions and general definitions

  • Exclude the energy sector from all aspects and provisions of the agreement, including dispute settlement obligations and related procedures.
  • References the enabling clause as a legal basis for trade in goods, allowing the UAE to benefit from the special and differential treatment in its relations with India as well as within the WTO framework.
  • Allows the Joint Committee to assess, review and also propose amendments to the agreement. Including improving market access, in the light of the experiences gained during the application of this agreement and its objective.

3.2 Trade in goods

  • Establishes a robust legal framework on technical regulations, standards, and also conformity assessment procedures to ensure the smooth flow of trade in goods.
  • Avoid the use of export subsidies on Indian products destined for the United Arab Emirates.
  • Provides UAE exporters greater access to the Indian market through tariff elimination or reduction on more than 80% of goods.
  • Establishes a mechanism for consultations on non-tariff measures that may create trade barriers.
  • Establishes a committee to discuss all related issues about trade in goods between the UAE and India under the CEPA.

3.3 Rules of origin

  • Sets special qualifying rules for steel, gold, and also copper sectors to reflect the current capabilities of those industries in the UAE.
  • Preferential rules of origin govern the criteria for which traded goods are eligible for tariff reduction or elimination. The agreed rules are based on compound criteria of change in tariff classifications (CTC) of the good plus a minimum percentage value-added.

3.4 Sanitary and phytosanitary measures

  • Enhances understanding and the transparency of the application of the UAE and India’s phytosanitary and sanitary measures.
  • Establishes clear rules on import checks, audits, and certification.
  • Encourages the adoption and development of science-based international standards.
  • Establishes a detailed mechanism on phytoplankton and sanitary measures that protect human, plant, and animal health while ensuring such measures do not create unjustified trade barriers.

3.5 Technical barriers to trade

  • Affirm the use of international conduct as a basis for technical regulations.
  • Ensures that conformity assessment procedures, technical regulations, and standards do not create unnecessary barriers to trade.
  • Clarifies cooperation mechanism on conformity assessment procedures and technical regulations.
  • Establishes a sub-committee to facilitate technical discussions and monitor the operation and implementation of technical barriers to trade measures.

3.6 Trade in services

  • Ensures that each party receives a customized treatment.
  • Contains legal parameters to regulate cross-border commerce in services. And also offers service providers an open and non-discriminatory environment for cross-border trade.
  • Include a total of 11 sectors and more than 100 sub-sectors. Also including business services (professional services, computer accounting, etc), tourism and travel-related services, educational services, construction, and also related services, etc.

3.7 Small and medium enterprises

  • Provides a mechanism for information sharing concerning all trade-related aspects. Including procedures, regulations, laws, business registration, standards, technical regulations, and also SME programs.
  • Establishes an SME committee with clear functions to enable SME engagement and also provide them with tools to benefit from the opportunities provided in the CEPA.
  • Provides a platform for SMEs in the UAE to expand internationally by granting them access to new customers, avenues of collaboration, and also networks.

3.8 Intellectual property

  • Strengthen the enforcement and also protection of intellectual property rights to promote technological innovation and to transfer and disseminate technology.
  • Ensures intellectual property provisions are balanced with existing regulations, UAE laws, and also the UAE’s international commitments.
  • Aligns intellectual property commitments with the Doha Declaration on TRIPS and Public Health. Affirming the right to take measures to promote public health.

4. Background of the relations between India and the UAE

Historically, India and the United Arab Emirates have enjoyed excellent bilateral relations, which are deep-rooted and historically nurtured and sustained by civilizational and close cultural affinities, vibrant people-to-people linkages, and also frequent high-level political interactions. The UAE-India comprehensive strategic alliance was initiated during the visit of the Prime Minister of India to the UAE in August 2015.

The growing commercial and economic relations contribute to the strength and stability of a deepening bilateral and rapidly diversifying relationship between the two countries. The UAE and India have been each other’s leading trading partners. These excellent relations have continued to enhance and deepen over time. From AED 180 million per annum in the 1970s, UAE-India bilateral trade has steadily increased to AED 60 billion in 2019-2020.

With exports to the United Arab Emirates valued at AED 29 billion for the year 2019-2020, the UAE is the second-largest export destination of India, while Indian imports from the UAE were valued at around AED 30 billion. The UAE is an important source of India’s energy supply and a key partner for the development of strategic petroleum reserves, upstream, and downstream petroleum sectors. This country is also the eighth largest investor in India with an estimated investment of AED 18 billion.

The India-UAE CEPA will further cement the already close, deep, and strategic relations between the two countries and will create new employment opportunities, improve the general welfare of the people of the two countries, and raise living standards.

5. Benefits of the CEPA

CEPA provides an institutional mechanism to improve and encourage trade between the two countries. This agreement between the UAE and India covers almost all the tariff lines dealt in by the UAE (7581 tariff lines) and India (11,908 tariff lines) respectively. Note that India will benefit from preferential market access provided by the United Arab Emirates on over 97% of its tariff lines, which account for 99% of Indian exports to the UAE in value terms.

This will affect especially all labor-intensive sectors such as leather, textile, sports goods, jewelry, plastics, footwear, furniture, agricultural and wood products, medical devices, engineering products, and automobiles.

India will also offer preferential access to the UAE on over 90% of its tariff lines, including lines of export interest to the country. In addition, as regards trade in services, India has offered the UAE the market access in around 100 sub-sectors from the 11 broad service sectors such as:

  • Health-related and social services
  • Engineering services
  • Transport services
  • Recreational, cultural, and sporting services
  • Financial services
  • Environmental services, among others.

Both sides have also agreed to a separate annex on pharmaceuticals to facilitate Indian pharmaceutical companies’ access to products, especially automatic registration and marketing authorization in 90 days for products meeting specified criteria.

6. How can we help you know more about business opportunities between the UAE and India?

Trade relations between the United Arab Emirates and India bring multiple benefits for the citizens and entrepreneurs of both countries. In the UAE-India Investment Forum, new opportunities will open the doors to investors of large, medium, and even small businesses. For this reason, knowing the process of establishing a company and getting a business setup consultant becomes critical.

With more than a thousand happy clients and 20 years of experience, Connect Zone is the ideal business setup agency. We will accompany you in every legal and administrative process you need. Furthermore, our professionals are highly trained to offer you end-to-end support and to solve any inconvenience that may occur.

Among the services we can offer you are a proper VAT and tax consultancy, full guidance through your freelance visa solicitation process, and more. You should note that with us, you will only obtain the very best!

Contact us and receive more information about the UAE-India Investment Forum. You will be able to find out about all the solutions we have for you by calling us at +971 43 316 688 or emailing us at contact@connectzone.ae.

Do you want to find the best employment opportunities? Try looking for them on thetalentpoint.com. It is as easy as creating an account and uploading your resume. Connect with a wide range of enterprises in the Middle East! Also, you can send your CV to contact@thetalentpoint.com.

What are business setup consultants in the UAE?

business setup consultants

Starting a company in the United Arab Emirates requires countless approvals, exhaustive paperwork, and also really hard work. However, thanks to the help of business setup consultants in the UAE, this process is easier. Choosing the right consultant for you can be difficult, in this country you will find several options, each with different characteristics that can benefit your business. For this reason, we will help you choose the best business setup consultants in Dubai.

In this article, you will find information about the role of company setup consultants, which businesses need these services, and also why you need to hire them.

  1. What are business setup consultants in the UAE?
  2. Things to keep in mind while hiring business setup consultants
  3. What businesses need a consultant?
  4. What benefits can you get by hiring business setup consultants in the UAE?
  5. Why you should hire business setup consultants in the UAE?
  6. Why should you choose the business consultancy services of Connect Zone?

1. What are business setup consultants in the UAE?

A business consultant in the UAE is an individual who works closely with the managers and business owners to improve operations and efficiency. Business consulting includes helping to address, identify, and also overcome obstacles to meet a company’s goals.

1.1 Characteristics of the business setup in Dubai

The best business setup consultants in Dubai generally have an area of ​​expertise greater than the staff of a common corporation. So they are able to offer innovative solutions to problems.

The consultants are usually part of a business consulting firm, whose main objective is to help entrepreneurs set up their companies. So, when hiring these services, it is a good idea to take into account the advantages of having an expert partner in the laws and regulations of the United Arab Emirates and in the creation of companies.

1.2 What does a business consultant do?

The business setup consultants in DMCC can assist you with almost any need your company may have. Further, there are business consultants who specialize in specific industries, while others take a more general approach.

Some of the responsibilities of a business consultant in the UAE are the following:

  • Determine what changes must be made and help implement them.
  • Assist in business planning and creating new businesses
  • Implement new programs
  • Identify obstacles that are preventing growth or efficiency
  • Provide any necessary training and resources to management and staff
  • Assess, hire, and also fire staff, if necessary
  • Locate providers and partners to help meet goals
  • Analyze the budget of the company, suggest adjustments, and help establish those adjustments.
  • Bring out-of-the-box ideas to refresh a business.

2. Things to keep in mind while hiring business setup consultants

Some of the things you should consider when choosing the best business setup consultants in Dubai are the following:

2.1 Licensing and legal framework services

The first thing to consider is the licensing and legal framework for your business setup. Starting a company in any area of ​​the UAE brings with it the burden of legal guidelines and regulations. Therefore, choosing a consultant who knows in-depth the legal system of the area is necessary.

For operating a business growth within an emirate, the company trade licensing registration is compulsory. This is to ensure that no business activity can run without the registration of the government department and that there are no health hazards.

Once your company gets approval through a license, no authority has the right to shut down the business without any legal notice or no legal obligation on the business organization.

Dubai provides 3 main options to business startups, which are the following:

Entrepreneurs must decide which option adjusts better to their needs. The Dubai free zone has a special economic place for business setups and offers a wide range of services. For example, business registration, Dubai Freelance Visa obtention, Limited Liability Company (LLC) formation, etc.

On the other hand, the Mainland business registration allows to trade and perform in the Mainland area whether it is taking government or semi-government projects or providing services. The mainland business is most suitable in terms of opening a bank account, getting more visas under the company, and also opening more branches in the Emirates.

Connect Zone is the best agency to help entrepreneurs with proper guidance in company registration. Hence, if you plan to set up your business, please contact us and let us help you through this process.

2.2 Team expertise

An expert and well-established business setup consultant will streamline your business setup process. He will provide valuable recommendations and assess you on ongoing market trends. When selecting your consultant, an expert with expertise in successful business starts is a must-have.

2.3 Finding the location

The location is very important for your company’s growth. A consulting firm will assist you in choosing the right location for you. The right place will depend on the nature and the industry of your company. When selecting a consultant, you must keep in mind that they must know to evaluate factors like legal requirements, budget, etc, to guide you in the right direction.

2.4 Setting up your goals

Practice a goal-setting exercise with your consultant. Tell them about the key performance indicators and track the growth of your company. It is vital that you understand your consultants in terms of goal setting and clearly define your predetermined goals.

2.5 Government-partnership

Make sure your business consultant in the UAE is well aware of all the government services. And they must be constantly communicating with the government entities like the Dubai Land Department (DLD), the Department of Economic Development (DED), Dubai Health Authority (DHA), Ministry of Human Resource and Emiratization (MOHRE), etc. If you want a smooth establishment of your business, the association with government entities is vital.

3. What businesses need a consultant?

Any business can obtain benefits from a business consultant. However, some of the companies that can acquire the greatest benefits are the following:

  • Businesses focused on growth can use a business consultant’s strategic skills.
  • New businesses can use consultants to complete planning and start with the right foot.
  • Companies starting new campaigns can obtain benefits from the expertise and research of a consultant
  • Organizations that have a hard time meeting their financial goals can hire a business consultant to dig into their accounting.
  • Companies adding a new department can get help planning, staffing, and setting up that department.

4. What benefits can you get by hiring business setup consultants in the UAE?

Hiring a consultant can provide many advantages to a company. Some of the most important include utilizing insight and expertise picked up from other clients and industries, taking advantage of an outside perspective, receiving help creating plans as well the resources to make them happen, and more.

Some more specific examples are the following:

  • Business consultants often work with a variety of clients and in multiple industries. This gives them invaluable ideas and insight from many different avenues.
  • Designing new campaigns and business plans can be challenging and take a lot of time. The consultants help to develop these plans more clearly and quickly and then help you put them to work.
  • Business consultants can pinpoint weaknesses and strengths in your company that you might have become blind to over time.
  • Staying on budget is vital for the success of the company. These consultants can find weak areas in your spending and provide creative solutions for those areas.
  • Business consultants offer a “bird’s eye view” into a company. Many seasoned business owners and managers can struggle with seeing the complete picture as they are in the middle of it. A consultant offers a fresh mind and viewpoint, allowing them to see things that business owners might not.
  • Business setup specialists bring with them a network they have formed during diverse projects. Companies can use this to gain knowledge and use external resources that a business may not even be aware of.
  • These professionals can help increase sales by researching your desired client and creating a marketing plan to attract them.

5. Why you should hire business setup consultants in the UAE?

Starting a company requires a solid business plan, and to do it successfully you need a business consultant.

Some of the reasons why you have to hire this type of service are the following:

5.1 Define the right business activities

All companies in the United Arab Emirates must choose a productive activity in order to operate legally in the country. This activity determines the regulations and permits required by government authorities.

A proper consultant will help you establish a productive activity that suits your aspirations.

5.2 Choose the economic jurisdiction

In the UAE there are various jurisdictions, each with different benefits and rules. A business consultant in the UAE can help you choose the location that best suits your business.

5.3 Creation of a business plan

Understanding the process, operation, and legality of the United Arab Emirates market is essential when forming a company. For this reason, having a partner who advises and accompanies you is a very profitable investment.

5.3 Define your company structure

In the UAE there are multiple legally implied company structures, and each business must select one before starting the company registration process.

A consultant will guide you and choose the legal structure that best suits your requirements.

5.4 Mainland, free zone, and offshore company registration

To establish a company in one of the jurisdictions of the United Arab Emirates, the presence of a consultant may be essential. Note that this person will handle all legal and administrative paperwork, they will be responsible for finding an office in one of the business centers and they can even help you find a local agent

5.5 Handle all paperwork with the UAE authorities

A consultant is a person who knows in depth the laws of the UAE. Government authorities are responsible for delivering all licenses and permits so that your company can operate legally.

To obtain a license you need a series of documents. For example, name reservation certificate, passport copies, and depending on the productive activities of your company, certain additional approvals.

However, you can save yourself all this paperwork by hiring business consultancy services.

5.6 Paperwork for a company formation

Certain documentation requires the supervision of a professional. For example, the Memorandum of Association is vital to continue the formation of your company and a business consultant is the perfect partner to do it.

Also, he can help you with the rest of the documentation to ensure every step is done successfully. Another responsibility of the consultants is to pick up the licenses from the corresponding departments and obtain the necessary permits from the authorities.

5.7 Cost-effective process

Consulting firm prices may vary by the Emirate. You can find a low-cost business setup in Dubai that will allow you to carry out each paperwork and process in a cost-effective way.

In addition, obtaining offices and warehouses for rent, and even obtaining certain certifications, becomes very cost-effective since there are fewer chances of making mistakes and applying for unnecessary paperwork.

6. Why should you choose the business consultancy services of Connect Zone?

Although the United Arab Emirates has made the process of establishing a company easier, a certain level of expertise is still required to carry out each procedure satisfactorily. For this reason, it is highly advisable that you hire a business setup agency like Connect Zone to guide you in the right direction.

Our professionals are highly trained in legal and administrative matters, we will take care of establishing effective relationships with government authorities to ensure obtaining the necessary documents to be able to operate in the country.

Let us help you get your business to the next level. It does not matter what type of business are you looking forward to set up, you can always call us at +971 43 316 688 or you can email us at contact@connectzone.ae. One of our specialists will answer all of your questions and concerns.

Are you tired of applying for jobs without much luck? Go to thetalentpoint.com, upload your CV, and get to know multiple job opportunities from diverse enterprises in the Middle East. The chance to work with the best professional is just a click away! You can also send your CV to contact@thetalentpoint.com. Remember that your safety is our priority, we will not share or save your information.

Procedure for computing taxable profits in the UAE

taxable profits in the UAE

Starting a company in the United Arab Emirates is an easy process with the right guidance. However, to ensure the successful establishment of your business in the country, it is essential to meet the following conditions: Strict compliance with the laws and regulations of the UAE, an appropriate organization of the company’s resources, and good administration of corporate and individual tax. For this reason, in the following lines, we will talk about the taxable profits in the UAE.

In this article, you will learn about the aspects of taxable profits in the UAE, the process to calculate them, how to compute them and how we can help you with this process.

  1. What are taxable profits in the UAE?
  2. Aspects of taxable profits in the UAE
  3. Types of taxable profits
  4. How to calculate your individual taxable profits?
  5. The process to calculate your corporate tax
  6. The process to compute taxable profits in the United Arab Emirates?
  7. Taxable profits VS non-taxable profits
  8. The UAE taxation system
  9. How can we help you compute your taxable profits in the UAE?

1. What are taxable profits in the UAE?

Taxable profits are the part of your gross income that you use to calculate how much tax you owe in a given tax year. It can be described as adjusted gross income (AGI) minus standard deductions or allowable itemized. The taxable profits include bonuses, salaries, wages, and tips, as well as investment income and various types of unearned income.

2. Aspects of taxable profits in the UAE

Taxable profits consist of both unearned and earned income. The unearned profits that are considered taxable include government benefits (such as disability payments and unemployment benefits), canceled debts, lottery payments, and strike benefits. The taxable profits include the earnings generated from dividends, interest income, and appreciated assets that were sold during the year.

When it comes to deductions, the authorities offer individual tax filers the option to claim a list of itemized deductions or the standard deduction. Itemized deductions include interest paid on medical exceeding a specific threshold, mortgages, and a range of other expenses.

Generally, when businesses file their taxes, they do not report their revenue directly as taxable profits. Rather, they subtract their business expenses from their revenue to calculate their business profits. Then, they subtract deductions to calculate their taxable profits.

Important to realize: Marginal tax rates and tax brackets are based on taxable income, not gross income.

3. Types of taxable profits

Every person who pays taxes knows that the failure to file a report for one’s income tax can have serious consequences. So, to be sure about paying taxes, here we show you some types:

3.1 Employee compensation and benefits

This is the most common type of taxable income and includes wages and salaries, as well as fringe benefits.

3.2 Investment and business income

For self-employed individuals, they are also subject to tax liability, specifically through their business income. For example, partnership income and net rental income qualify as taxable income.

3.3 Miscellaneous taxable income

This type includes incomes that do not fit into the other types. Includes things such as death benefits, canceled debts, and life insurance. Alimony, items involved in barter trading, and income for one’s hobby are also miscellaneous taxable income

3.4 Assignment of income

This is the income that an agent recieve for you. If you agree by contract that an external party receives the income for you, you must include the amount in your income when the party receives it.

For example, if you and your employer come to the agreement that he has to pay a portion of your salary to your former spouse, you have to include the amount in your income when your former spouse gets it.

3.5 Constructively-received income

In this type, you are generally taxed on income that is available to you, regardless of whether you have it or not. A valid check that was available to you before the end of the tax year is an income you constructively receive in that year, even if you do not deposit it in your account or you do not cash the check until the next year.

For example, if the postal service tries to deliver a check to you on the last day of the tax year and you are not home to receive it, you must include the amount in your income for the tax year.

3.6 Prepaid income

Some prepaid incomes, such as compensation for future services, are included in your income in the year you receive them. However, if you use an accrual method of accounting you can defer the prepaid income before the end of the next tax year. In this situation, you must include the payment in your income as you earned it by performing the services.

4. How to calculate your individual taxable profits?

The steps to calculate your taxable profits in the UAE are the following:

4.1 Determine your filing status

To calculate your taxable profits for an individual tax return, the first thing you need to do is determine your filing status. If you do not have a spouse, you can file your taxes as a head of household (HOH) (if you have a qualifying person for whom you pay more than half of the support and housing cost) or you can fill it as a single filer.

In the case you have a spouse, you can file your taxes as married filing jointly. However, there are some instances when it makes sense to file as married filing separately.

4.2 Gather documents for all sources of income

Once you know your filing status, the next step will be to gather documents for all sources of income for yourself, your spouse (if applicable), and any dependents (if applicable). The result of all these sources of income goes by the name “gross income”

4.3 Calculate your adjusted gross income (AGI)

The next step is to calculate your AGI. Your AGI is the result of taking certain “extra attributions” to your gross income, such as loan interest, contributions to a qualifying individual retirement account, and certain education expenses.

We consider these items as “extra attributions” because they reduce your income before taking any allowable itemized deductions or standard deductions.

4.4 Calculate your deductions (itemized or standard)

After calculating your deductions, as mentioned above, you can either take the itemized deductions or the standard deduction. The standard deduction is an amount that tax filers can claim if they do not have enough itemized deductions to claim.

4.5 Calculate taxable income

The last step is to calculate your taxable income, you will need to take AGI, calculated above, and subtract all applicable deductions.

5. The process to calculate your corporate tax

The corporate tax is a form of direct tax levied on the net profit of corporations and other business entities. You can also find it as the “Business Profits Tax” or “Corporate Income Tax”. All companies whose taxable profit is greater than AED 375,000 fall under the purview of corporate tax and must pay a certain percentage of the net profit. In order to extend support to small businesses and start-ups, the corporate tax will be 0% if the net profit is up to AED 375,000.

This tax is 9% of the net profit in the company’s financial statements. For example, if the net profit is 200,000 AED, the corporate tax will be 18,000 AED (200.00×9/100).

6. The process to compute taxable profits in the United Arab Emirates

There are two approaches to calculating taxable profits, the direct method, and the indirect method. Under the direct method for calculating taxable profits, you can calculate taxable profits directly by deducting the tax allowable, the cost of goods sold, and other allowable deductions from the gross income of the corporations. In other words:

“Taxable profits = gross income – cost of goods sold – Tax allowable expenses and deductions + other taxable income”.

This is the most straightforward method of calculating taxable profits and would be even more effective if companies do not prepare their financials regularly. In the indirect method, you can calculate the taxable profit by making accounting profits as a base, adding back all disallowable expenses, deducting tax allowable expenses, adding other taxable income, and deducting non-taxable other income.

Generally, the tax authorities and companies prefer to use the indirect method to calculate taxable income. This is a reliable and very effective method to compute the corporate tax where businesses are preparing the financials regularly, and these financial statements are audited by external auditors. In addition to this, it is an easy way to calculate taxable profits as accounting profits are taken from the audited financials. And the count of any other numbers are available in the financial statements.

In both methods, the tax allowed incomes and expenses are based on the principles and rules defined in the corporate tax law and related regulations

7. Taxable profits VS non-taxable profits

Generally, the authorities consider almost any type of income taxable, but a small number of income streams are not taxable. For example, if you are a member of a religious organization who has taken a vow of poverty or work for an organization run by that order, and turns your earnings over to the other, then your income is not taxable.

Similarly, if you receive an employee achievement award, its value is not taxable as long as you meet certain requirements. If someone dies and you receive a life insurance payment, then that is a Non-taxable income as well.

Certain tax agencies define non-taxable and taxable income differently. For example, in the United States, lottery winnings are taxable. However, in Canada, lottery winnings and other unexpected one-time windfalls are non-taxable.

7.1 What is a non-taxable profit?

A non-taxable profit refers to the income received but it is not subject to taxation. However, even if these forms of compensation cannot be taxed, they still need to be reflected in the tax return.

Some examples of unearned profit are the following:

  • Interest
  • Capital gains
  • Inheritance
  • Meals and lodging
  • Child support payment
  • Gifts
  • Cash rebates from items bought
  • Welfare benefits

Other forms of unearned income can derive from loans that have been forgiven, winning from casinos or lotteries, and government benefits (like unemployment benefits or disability).

8. The UAE taxation system

The United Arab Emirates does not levy an individual income tax. However, it levies a corporate tax on foreign banks and oil companies. Excise tax is levied on items that are harmful to the environment or human health. Another type of tax is the Value Added Tax (VAT) and this is levied on a majority of services and goods.

9. How can we help you compute your taxable profits in the UAE?

Ensuring that a company lasts over time and can call itself successful is, without a doubt, a process that requires a lot of effort and time. However, our professionals can make this process easier for you. With more than twenty years of experience, Connect Zone is the ideal business setup agency to carry out any administrative or legal process you need. Our staff is highly trained to establish relationships with the corresponding government entities and to address any questions and inconveniences that may occur.

Some of the services you can enjoy with us are full support and guidance during the solicitation process for a freelance visa, a wide range of PRO services, and more.

In addition, if you are looking for a place where to set up your virtual office or a coworking space, we can offer you the best business centers in the UAE.

Do you want to start a new stage in your life by living and working in the United Arab Emirates? Our team is just a call away! You can call us at +971 43 316 688 or send us an email at contact@connectzone.ae. Our specialists will assist you as soon as possible when you contact us.

Has your job hunt been fruitful so far? Try thetalentpoint.com and meet recruiters in the UAE by registering and uploading your CV. A wide range of employers from all fields are looking for your talent! You can also send your CV to contact@thetalentpoint.com.

What really are deferred tax liabilities?

deferred tax liabilities

For a company to stay afloat, it takes more than investment and workforce. A prosperous business is based on a well-organized administration, the proper utilization of resources, and timely compliance with the country’s laws and regulations. One of the most important regulations to follow has to do with taxes and their administration. For this reason, in the following lines, we will talk about the deferred tax liabilities.

In this article, you will find information about the deferred tax, assets, and liabilities, how each of them works and how we can help you with the deferred tax liabilities of your company.

  1. The tax system in the UAE
  2. What is a deferred tax?
  3. What is a deferred tax asset?
  4. How do deferred tax assets work?
  5. What are deferred tax liabilities?
  6. How do deferred tax liabilities work?
  7. Is deferred tax liability a bad thing or a good thing?
  8. How can we help you with the deferred tax liabilities of your company?

1. The tax system in the UAE

The tax system in the United Arab Emirates, or rather the lack of taxes paid, is one of the main attractions of the region for many ex-pats. For instance, the employees do not pay income tax and there is no system for corporate and inheritance taxes, among others.

Some of the taxes that the UAE presents are the following:

1.1 Individual tax

Employees of the United Arab Emirates (who are GCC Nationals) are subject to a social security regime of 17.5%. Those who are UAE Nationals pay 5% (with an automatic deduction off their paycheck) and the employer pays the further 12.5%. The social security obligations also apply to employees of branches and companies registered in a free trade zone.

1.2 Corporate tax

The corporate taxes apply to oil companies and foreign banks in the UAE. However, if you establish your company in one of the 45 free zones in the country, you can be exempt from paying tax for a period that can be extended. There are no capital gain taxes unless the company is taxable under another income tax. Note that you can check out an extensive variety of information regarding corporate tax in our insights section.

1.3 Income tax

The United Arab Emirates does not levy a tax on income. In other words, an income tax return is not necessary since the individual tax is not applicable in the country. The same also applies to self-employed individuals and freelancers who live in the country.

1.4 Tourist facility tax

The resorts, hotels, and restaurants (among others) must charge the following taxes:

  • Service charge (10%)
  • City tax (6-10%)
  • Municipal fee (10%)
  • 10% on the room rate
  • Tourism fee (6%)

1.5 Property transfer tax

A transfer charge applies to all property transfers in the UAE. This varies according to the Emirate, for example, in Dubai, this tax is 4%. Although the seller and buyer share the burden of this, the buyer, generally, pays the transfer fee.

1.6 Value Added Tax (VAT)

The Value Added Tax rate of the UAE is 5%. However, this tax does not apply to certain products. For example:

  • International transportation
  • Investment-grade precious metals
  • Some education and healthcare services
  • Exports of goods and services outside the GCC
  • Newly constructed residential properties

In 2020, due to the COVID-19 pandemic, the government exempted some personal protective equipment, such as single-user gloves, chemical disinfectants, textile and medical masks, and antiseptics.

This is just a list of certain basic taxes. However, we will enter the world of managing a company and managing its taxes.

2. What is a deferred tax?

A deferred tax is an important part of a company’s balance sheet. Managing this factor helps reduce the taxable income. The deferred tax generally has a positive or negative effect on the balance sheet. This entry can be in the form of assets or liabilities.

In the event that the entrepreneur has paid advance taxes and has received a tax credit that can be used in the future, it will fall under assets. Alternatively, when a company is liable to pay additional taxes in the future, it will be considered a liability.

3. What is a deferred tax asset?

A deferred tax asset (DTA) is an entry in the balance sheet that shows a difference between the internal accounting of the company and the taxes owed. For example, if your company paid its taxes in full and then received a tax reduction for that period. You can use that unused deduction in future tax files as deferred tax assets.

3.1 What type of asset is a deferred tax asset?

This tax is an intangible asset because it is not a physical object like buildings or equipment. It only exists on the balance sheet.

3.2 Is the deferred tax asset a financial asset?

Yes, this tax is a financial asset because it shows a tax overpayment that can be redeemed in the future.

3.3 When does a deferred tax asset have to be used?

These tax assets have no expiration time, they can use it when and how best suits the business.

3.4 Where can you find the deferred tax assets on the balance sheet?

In the balance sheet, you can find this tax as “Non-current taxes”

3.5 Situations where deferred tax assets may arise

Some of the reasons why deferred tax assets may appear are the following:

  • The tax bases or rules for assets and liabilities are different
  • The tax of the revenue is ready before you recognized it
  • The taxing authority takes into account the expenses before they recognized it

Please know that while you can use the deferred tax assets for future tax files, you cannot use them to tax files in the past.

4. How do deferred tax assets work?

To better understand the concept of tax assets, we will present an example: Imagine that you use a rideshare service, but the car broke down and you had to walk home. In compensation, the company sent an AED 50 credit to your account in the app. If you had planned to spend AED 50 on ridesharing the next month, you can now budget that your spending will be 0, because the credit you have will cancel it out.

This is what the deferred tax assets represent. You haven’t used it yet, but you know it has value in the future and you can adjust your spending accordingly.

4.1 What causes deferred tax assets?

A deferred tax appears when there is a difference between the income on the tax return and the income in the accounting records of the company (income per book)

4.2 Example of deferred tax assets

  • Not operating loss: The company incurred a financial loss for that period.
  • Tax overpayment: You paid more of what you should in the previous period
  • Business expenses: When you recognize the expenses in one accounting method but not the other
  • Revenue: Instances where you collect the revenue during one accounting period but recognized in another.
  • Bad debt: Before an unpaid debt is written off as uncollectible, it is reported as revenue. When the unpaid receivable is finally recognized, the bad debt becomes a deferred tax asset.

5. What are deferred tax liabilities?

A deferred tax liability (DTL) is a tax payment that the company has marked on its balance sheet, but does not have to be paid until a future tax filing. A payroll tax holiday is a type of DTL that allows companies to put off paying their payroll taxes until a later date.

The tax holiday represents an advantage for the company today, however, in the long term it becomes a liability.

Some tax incentives may create a deferred tax liability journal entry, granting the business some temporary tax relief. However, you can collect this tax later.

In addition to this, depreciation expenses, like the annual devaluation of a fleet of company vehicles, can generate deferred tax liabilities.

5.1 Is the deferred tax liability a debt?

A DTL journal entry shows a tax payment that, due to timing differences in accounting processes, the payment can be postponed until a later date.

5.2 How can you find the deferred tax liabilities on the balance sheet?

You can find these taxes on the balance sheet as “non-current liabilities”

5.3 Reasons for deferred tax liability to arise

Some of the reasons why a deferred tax liability can arise are the following:

  • Companies, generally, try to push their profits to show maximum income to their shareholders.
  • Dual accounting of figures. For example, most companies keep multiple copies of financial statements for their personal use as well as those that are furnished to the tax authorities and the public. This is somewhat because the standard tax code and accounting rules differ heavily in key areas like expense, revenue, and depreciation of the asset.
  • Generally, companies try to push current profits also into the future to reduce the tax burden. This means more money for investment purposes rather than paying it off as tax to the government.

6. How do deferred tax liabilities work?

The deferred tax liability on a company balance sheet represents a future tax payment that the business is obligated to pay. This tax is calculated by multiplying the company’s anticipated tax rate by the difference between the taxable income and the earnings.

DTL is the amount of taxes that a company has not paid yet but it will in the future. This does not mean that the company has fulfilled all of its responsibilities. In fact, it recognizes a payment that is not yet due.

For example, a company that earned net income for the year knows that it will have to pay corporate income taxes. Because this tax applies to the current year, it must show the expenses for the same period. However, the company will not pay the tax until the next calendar year. In order to rectify the accrual/cash timing difference, the tax is saved as deferred tax liability.

6.1 What causes a deferred tax liability?

Any temporary difference between the amount of money owed in taxes and the amount of money to be paid in the current accounting cycle creates a deferred tax liability.

6.2 Deferred tax liability examples

  • Tax underpayment: The company did not pay the full amount of the tax in the previous cycle, and will have to make it up for it in the next cycle.
  • Installment sale: When you pay a product for installments, the company lists the full value of the sale on their balance sheet, but they only pay the taxes for each annual installment. The business recognizes that they have a DTL for future payments on that sale.
  • Depreciation of assets: Most businesses use an advanced asset depreciation model that results in the difference between the company’s balance sheet value and its value for tax purposes. This is the most common example of this tax.

7. Is deferred tax liability a bad thing or a good thing?

A DTL is either good or neutral, depending on the situation. This tax means that you owe money, but you do not have to pay it right away. The downside is that your business needs to have money set aside to pay this debt in the future.

8. How can we help you with the deferred tax liabilities of your company?

One of the most important aspects of a company is the administration of its finances and handling of taxes. Connect Zone is the best business setup agency to carry out all the administrative processes you need. Our professionals will accompany you at every step and will offer you valuable advice so that you make the best decisions.

With more than 20 years of experience, Connect Zone can offer you a series of top services for your company, such as the application for a freelance visa, and a virtual office so you can work in one of the greatest business centers.

In addition, we can provide you with Public Relations Officer services.

Would you like to know us better and the opportunities we offer? You can contact us at +971 43 316 688 or you can send us an email at contact@connectzone.ae One of our specialists will give you personalized attention.

If you are interested in learning about job chances in the Middle East, try thetalentpoint.com. Create an account and upload your resume to start sending applications. Finding the best opportunities has never been easier! You can also send your CV to contact@thetalentpoint.com for a chance to work with the best professionals.

Know about the VAT refund available in the UAE

VAT refund in the UAE

The United Arab Emirates is one of the countries that offer the greatest job opportunities for entrepreneurs. However, these opportunities bring with them a series of regulations that investors must comply to the letter. One of the many regulations has to do with taxes on companies, tourists, etc. In the following lines, we will talk about the VAT refund in the UAE.

In this article, you will find information about the Value Added Tax, the registration process, and the VAT rates. You will also get to know what is a VAT refund in the UAE and how we can help you with this process.

  1. What is VAT?
  2. How to register for VAT?
  3. What are the VAT rates?
  4. VAT implementation in the UAE
  5. VAT for businesses
  6. How is the VAT refund process in the UAE?
  7. Who is eligible for a UAE tourist VAT refund?
  8. How can we help you with the VAT refund in the UAE?

1. What is VAT?

The Value Added Tax or VAT is an indirect tax imposed on most supplies of services and goods that are bought and also sold. You can also find this tax as a “good and services tax”.

VAT is one of the most common taxes around the world. Around 150 countries have implemented VAT, including all the countries of the European Union, Australia, Canada, New Zealand, Malaysia, and also Singapore.

This tax appears in each step of the “supply chain”. Generally, final consumers bear the VAT cost while businesses account and collect for the tax. Acting, in a certain way, as a tax collector on behalf of the government.

A business pays the government all the taxes it collects from customers while it may also receive a refund on tax that it has paid to its suppliers. The tax receipt to the government indicates the “valued add” throughout the supply chain.

2. How to register for VAT?

The registration may be voluntary or mandatory, depending on the business revenue generated.

2.1 Mandatory registration

A company must register for VAT if the total value of its imports and sales within the UAE exceeds the mandatory registration threshold of AED 375,000 for the previous 12 months or within the upcoming 30 days.

2.2 Voluntary registration

A company can voluntarily register for VAT if the total value of its imports and sales within the UAE exceeds the voluntary registration threshold of AED 187,500 for the previous 12 months or within the upcoming 30 days.

Small scale businesses and startups can also register voluntarily if their expenses exceed the voluntary registration threshold, thereby making them eligible for a tax credit.

3. What are the VAT rates?

The VAT rate is 5% for most services and goods except for these exempted or 0% tax categories.

3.1 0% VAT

  • Goods and services exported outside the GCC
  • Certain education and healthcare supplies
  • International transportation
  • Newly constructed residential properties
  • Certain investment-grade precious metals (e.g silver and gold of 99% purity)

3.2 VAT exempt

  • Public transport
  • Life insurance
  • Residential properties
  • Certain financial services

4. VAT implementation in the UAE

The UAE Federal and Emirates government provide residents and citizens with many different public services. For example, roads, public schools, hospitals, waste control, parks, and police services. The citizens pay for these services using government budgets.

Value Added Tax provides the United Arab Emirates with a new source of income, thus contributing to the continued provision of high-quality public services in the future.

It also helps the government to reduce the dependence on income derived from oil and hydrocarbons.

4.1 VAT implementation in coordination with other GCC countries

The UAE is part of a group of countries that are connected through “the Economic Agreement between the GCC States” and “the GCC Customs Union”. This group of countries has historically worked together to design and implement new public policies that boost the economy of the nations.

5. VAT for businesses

All companies in the UAE need to record their financial transactions and ensure that these records are accurate and also up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial record) must register for VAT. Companies that do not believe it is necessary to register for VAT must maintain their financial record in any event. Just in case the government needs to establish whether they should be registered.

5.1 VAT-registered businesses generally

  • Keep a range of business records
  • Reclaim any VAT they’ve paid on business-related services or goods.
  • Charge VAT on services or taxable goods they supply.

If you register your company in the Value Added Tax, you must report the amount of VAT you have charged and also the amount of VAT you have paid to the government on a regular basis. This must be a formal submission and you must report it online.

If you charged more VAT than you paid, you will have to pay the difference to the government. If you paid more tax than you’ve charged, you are entitled to reclaim the difference.

5.2 VAT in real estate

The handling of VAT will depend on whether it is a residential or commercial property. Supplies (including leases or sales) of commercial properties are taxable at the standard VAT (i.e 5%)

On the other hand, the Value Added Tax does not apply to supplies of residential properties. This ensures that this tax does not constitute an irreparable cost to those who purchased property. In order to ensure that real estate developers can recover VAT on the construction of residential properties, the first supply of these properties within three years of completion at the time of VAT introduction is zero-rated.

5.3 Zero-rated sector

The following main categories of supplies will have a 0% VAT:

  • International transportation and related supplies
  • Exports of services and goods outside the GCC
  • Certain investment-grade precious metals (e.g silver, gold of 99% purity)
  • Supply of certain healthcare services, and also the supply of relevant goods and services.
  • Newly constructed residential properties.
  • Supply of certain education services, and also the supply of relevant goods and services.

5.4 VAT-exempt sectors

Some of the categories exempted from VAT are the following:

  • Bare land
  • Local passenger transport
  • Residential properties
  • The supply of some financial services

6. How is the VAT refund process in the UAE?

A company can receive a refund from the government on tax that it has paid to its suppliers. To get a tax refund you must follow these simple steps:

  • Log in to the respective governmental entity portal
  • Select a VAT refund request
  • Complete the requested form
  • You will receive an email from the respective governmental entity detailing the result of your application.

6.1 VAT refund in the UAE for business visitors

The foreign businesses that meet the following conditions are eligible to apply for a VAT return:

  • They are not taxable people in the UAE
  • The company has no place of establishment or fixed establishment in the UAE or any GCC-implementing state.
  • They are not carrying any business in the UAE

The time to claim each refund is twelve months, and the minimum amount of each tax claim submitted by business visitors under the Foreign Business Scheme is AED 2,000.

6.2 New residences

The new residence VAT refund scheme applies to all UAE nationals that meet the following criteria:

  • A natural person should be the one who makes the claim.
  • The claim should be related to a newly constructed building to be used solely as a residence of the person or the person’s family.

Under this scheme, people can claim a refund of the tax paid on the expenses of constructing the residence.

The VAT refund in the UAE applies to the following expenses:

  • Services provided by contractors, including services of engineers, architects, builders, and other similar services necessary for the successful construction of the residence.
  • Building material (goods of a type normally incorporated by builders in a residential building) This does not include electrical appliances or furniture.

You must deliver the refund form to the corresponding government entities within 6 months after the date of completion of the building. The date of completion is:

  • When the building is certified as completed by the municipality.
  • When the building becomes occupied.

6.3 Tourist

The visitors and tourists can claim a refund on VAT paid for purchases made during their stay in the country. The recovery of the payment will be made through a fully integrated electronic system that connects the retailers registered in the “Tax Refund for Tourists Scheme” with all ports of entry and exit from the UAE.

In order for a tourist to be able to claim a VAT refund in the UAE he must meet the following conditions:

  • The goods must be purchased from a retailer who is participating in the “Tax Refund for Tourists Scheme”
  • The tourist must have the explicit intention of leaving the UAE within 90 days from the date of supply.
  • The process of export and purchase of goods must be carried out according to the requirements and procedures determined by the Federal Tax Authority.
  • The individual has to export the purchased goods out of the UAE within 90 days from the date of supply.

6.4 Validation of the refund claim

All claims made by tourists must be validated at different validation points – special devices placed at departure ports. For example, border ports, seaports, and airports in the United Arab Emirates. Another example is if you are leaving Dubai as a tourist, you can perform the VAT refund process at the VAT counter at Dubai Airport.

A more detailed process is the following:

  • Go to the designed validation point before checking in your luggage.
  • Approach the immigration counter and present the original receipt with the Tax-free tag on it, a copy of your credit card, your passport, and obviously, the product purchased.
  • After the successful validation, you can choose to refund via cash or card.
  • Lastly, you will receive your refund.

Tourists can receive up to 85% of the total VAT amount. The remaining 15% is charged as administration fees. Also, please note that cash refunds are capped at AED 7,000 per day, following the new regulations imposed by the Federal Tax Authority.

This aims to reduce the shopper’s reliance on cash during financial transactions and help them to take advantage of the country’s technological advancement.

There is no limit on the maximum recoverable amount if the transactions are made through a credit card.

7. Who is eligible for a UAE tourist VAT refund?

Not all tourists can claim a VAT refund in the UAE. Due to certain regulations, only the following people are eligible for a VAT refund:

  • Travelers aged 18 or over who are not residents of the United Arab Emirates
  • GCC Nationals can claim VAT refunds
  • Not a crew member on flights leaving the country.

Noe that additional regulations may apply to GCC Nationals residing in foreign countries for studying

8. How can we help you with the VAT refund in the UAE?

A quality tax, accounting service, and a VAT refund in the UAE are essential for the development of any company. Our team of professionals is ready to offer an end-to-end service of guidance and support to run your business efficiently and smoothly.

Some of the services that Connect Zone can offer your company are the following, a wide range of PRO services to keep your company organized and up to date.

You will have our full support during your application process for a freelance visa, and also we will find an office for your business in one of the best business centers.

If you are ready to start the journey of getting a VAT refund in the UAE with us, our team is waiting for your call. Contact us and discover all the ways in which we help you; +971 43 316 688 or email us at contact@connectzone.ae.

Are you in search for jobs? The Talent Point is the ideal place for you. Get ready to meet and connect with the best companies in the Middle East. If you are interested, send your CV to thetalentpoint.com or via contact@thetalentpoint.com.

How to apply for a virtual company license in Dubai?

virtual company license in Dubai

It is no secret that over the years, the emirate of Dubai has offered various opportunities for different types of businesses. Thus attracting a large number of investors. However, to start a company, it was necessary for entrepreneurs to establish themselves in the country. This changed when the government introduced the virtual company license in Dubai, a license that would allow the entrepreneur to establish and operate virtually outside the country.

In this article, you will find information about the process to acquire a virtual company license in Dubai, the requirements, the cost of this license, the eligibility criteria, and also how we can help you obtain this type of license.

  1. What is a virtual company license in Dubai?
  2. Who is this license for?
  3. Requirements for obtaining a virtual company license
  4. Criteria to start virtual companies in Dubai
  5. Process to obtain a virtual company license in Dubai
  6. Cost of a virtual company license in Dubai
  7. Virtual office space in Dubai
  8. What benefits can you obtain by getting a virtual company license?
  9. How can Connect Zone help you get a virtual company license in Dubai?

1. What is a virtual company license in Dubai?

The virtual company license in Dubai is a program that allows entrepreneurs from anywhere in the world to carry out business-related activities online. Including document signing and digital submission and having them be legally binding in the UAE. In other words, it is a new guideline that allows foreign investors to start a firm in Dubai without the need to settle in the emirate.

This new system is available to foreign companies in more than 101 countries. And it covers a wide variety of industries, for example, technology, creative industries, and services. The UAE government sees in this initiative an opportunity to ensure the progress, growth, sustainability, and also the prosperity of Dubai.

This license will give investors access to a regulated e-commerce ecosystem, allowing them to effortlessly collaborate with established businesses in Dubai while exploring new markets and investment opportunities digitally.

This project, which will allow entrepreneurs from any corner of the world to operate digitally in Dubai without the need to physically visit the emirate, will boost business confidence and also open new frontiers for the UAE’s and Dubai’s growth and competitiveness.

2. Who is this license for?

This license is an initiative of some gubernamental entities, like Dubai International Financial Center (DIFC), the General Directorate of Residency and Foreigners’ Affairs (GDRFA), the Supreme Legislation Committee, Dubai Economy, and also Smart Dubai. And it focuses on the following main sectors:

  • Creative industries
  • Service industries
  • Technology industries

This initiative, which offers a wide variety of opportunities for entrepreneurs to work digitally in Dubai without having to be in the Emirate, will increase trust between businesses and investors. At Connect Zone, we can help you obtain an ecommerce license.

3. Requirements for obtaining a virtual company license

Some of the necessary requirements to acquire this license are the following:

  • Residents of the United Arab Emirates are not eligible to acquire a virtual company license in Dubai.
  • Owners of virtual firms in Dubai must be tax residents or citizens of one of the 101 countries that have been approved.
  • Only predefined productive activities can establish a virtual firm in Dubai. Some accepted pre-defined business activities are the following: consultancy, advertising, computer programming, printing, and design activities in jewelry, fashion, and interiors.

The owners of this type of company must be aware that their business will be subject to personal, corporate, and also social taxes of the country in which they are located. If the revenue from virtual businesses in the UAE exceeds AED 100,000 per year, the business will be subject to 5% value-added tax (VAT). Therefore, entrepreneurs holding the virtual company license in Dubai must register the company with the UAE federal tax authority.

Another key point of the virtual business license is that it does not automatically provide physical access to the UAE through a visitor, business, or resident visa to any member of the company. The same applies when opening a bank account in the UAE. This process will be left to the discretion of the commercial banks.

4. Criteria to start virtual companies in Dubai

Before making your application for a virtual company license in Dubai, you need to know if you are eligible.

Some of the countries that can apply for this license are the following:

  • Brazilian
  • China
  • India
  • Canada
  • Pakistan
  • Nigeria
  • Cameroon
  • Saudi Arabia
  • Russia
  • Uganda
  • UK
  • South Africa
  • USES

Some of the non-eligible countries are the following:

  • Afghanistan
  • Serbian
  • Oman
  • Iran
  • Egypt
  • Belarus
  • Thailand
  • Sri Lanka
  • Venezuela

You must also comply with all the checks and processes of a standard UAE company license. If you think that this type of license is the right for you and your business, it is recommended that you hire a business setup agency, such as Connect Zone, to make this process even easier.

5. Process to obtain a virtual company license in Dubai

The procedure to establish a virtual company in Dubai is the following:

5.1 Select a business activity

The first step you must take to obtain this license is to decide on your business activity. Some of the activities you can do are the following:

  • Web-design
  • Electronic chips programming
  • Cyber security architecture
  • Fashion design
  • Public networking services
  • Marketing services via social media
  • Product design
  • Typesetting services
  • Greeting cards production and distribution services
  • Book-binding
  • Auditing, reviewing, and also testing cyber risks.

5.2 Select a company name

The next thing you must do is to choose your company name. At this point, you must follow a strict yet easy set of naming conventions. In short, you must avoid any offensive language, you cannot use names that bear any resemblance to the names of well-known organizations, and you must avoid abbreviations if you are naming your company after yourself. For example, it should be Tom Smith consulting, instead of T. Smith consulting. You must also check that the name you want is available.

5.3 Register the company

To start the process of registering your virtual company, you need to go to the official website of Dubai Virtual Company City. There, you will need to complete the online company registration. That record must contain the following information: name, date of birth, contact information, passport information, and any past experience with Dubai (if any). The entrepreneur must also deliver the company’s trade license name and the productive activity to which they are going to dedicate themselves.

5.4 Submit the required documents

The next thing you must do is submit the following documents. This list shows all the information you must upload online to obtain this license.

  • Evidence of address (any utility bill or official letter, no more than 3 months old)
  • Photocopy of passports
  • Evidence of tax residency
  • A recent photograph of the company’s owner with a white background
  • Completed application with your name in Arabic (if your past or current nationality is that of an Arab country)
  • Information on your experience with Dubai (Have you owned a UAE company? Or acted as a director at a UAE company? Have you visited or lived in the UAE before?)

Important to realize: The documents you submit cannot be older than 3 months and the passport must be older than 3 months to expire.

5.5 Tracking the application

The Dubai government will be the entity in charge of verifying and authenticating the information you provide in the registry through a background check. The phase of verification of a virtual license company can take a month, so make sure the information you give is correct.

Once that time has passed, the entrepreneur will receive an email following the screening procedure, informing him of their rejection or approval.

5.6 Identify verification

After receiving approval, the entrepreneur must go to the appropriate government entities in person for passport verification and identification. Visits to these entities must be scheduled through their website or their mail. For this step, you must pay a service fee plus relevant taxes in the selected country.

5.7 Payment of the license

The entrepreneur must pay the Dubai Virtual Company License fee after properly authenticating their identities. Payment must be made through the official Virtual Commercial City portal, ePay, which is offered by the Dubai Government’s. The charge for this license is determined by the license validity in the online company registration process.

6. Cost of a virtual company license in Dubai

Applying for this license is one of the cheapest ways to do business in the UAE. The cost of this license can be structured the following way:

  • AED 200 for trade name reservation
  • The fee for the virtual license is AED 680 per year 
  • AED 300 for identification and validation

7. Virtual office space in Dubai

Those entrepreneurs who decide to start the business process in Dubai virtually can easily set up a virtual office since most of these services are carried out by a third-party service provider and not by the investor himself.

Selecting a virtual office is a process that helps maintain the business on behalf of the owner. Generally, the services that these offices include are phone and mail management. Note that these calls will be answered by the service provider on behalf of the owner.

Some advantages of establishing a virtual office space are the following:

  • No overhead of having to pay the lease
  • No utility payments
  • None of the costs that come with having to set up an office physically in Dubai
  • Not hardware

Compared to the traditional way of setting up an office, a virtual office saves you a lot of time and money. This type of office will allow the entrepreneur to pass on the savings to different clients. In addition, at the same time it will have a positive effect on the profit margin. As a result, you will be able to invest more into your business setup as well as the people who are connected to your company. 

Connect Zone can help you find the best business center for you to set up your virtual office.

8. What benefits can you obtain by getting a virtual company license?

Virtual companies can improve the lives of entrepreneurs in many ways. Some of the advantages you can obtain are the following:

  • Manager your business operations online
  • It reduces the operational and administrative costs of the business. This helps the business to focus on investing in its products and services
  • It also provides the opportunity and access to new markets, investments, and clients.
  • It is a good option for freelancers, as it offers them access to companies in Dubai without the need to apply for a freelance visa.

9. How can Connect Zone help you get a virtual company license in Dubai?

If you have the necessary knowledge, applying for a virtual business license should not be a complicated process. However, it does require a level of expertise to complete the procedure. For the application process to be straightforward, your license application must be complete at the time of submission and free from errors.

To ensure this is the case, it is always advisable to work with a company formation specialist, such as Connect Zone. We are a team of company registration professionals with more than 20 years of experience in the area and more than a thousand satisfied customers.

As well as handling your virtual company license application, we can also assist you with the formation of Mainland and free zone companies. As it is not enough we can help you find the best business center, open a corporate bank account and also offer you a wide range of PRO services!

Let us take your company to success with our solutions. For a better insight into how our services work, you can call us at the following number +971 43 316 688. If you still have any doubts about our services you can write to us at contact@connectzone.ae. Our specialists will answer all your questions.

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