Last week, a document, more than 100 pages long, was published by the Federal Tax Authority (FTA) on free zones and corporate tax.
We will take a look at what was clarified and anything new that can be gleaned. There are practical examples sprinkled throughout to guide readers.
This article will focus on small and medium enterprises. I want to start with what they should be doing collectively. None of us are as good as all of us.
As always, these large releases have constraints on what might be interpreted. When you consider the potential permutations and perspectives not yet understood, it’s reasonable to allow some latitude.
However, for fairness, the regulatory authorities, the courts and appeals mechanisms will over time formally clarify misunderstandings or gaps in our knowledge. It should be possible for those reporting under the corporate tax regime to give feedback to its questions.
It would be ideal if we had a matrix solution – one set of panels representing various industries and a similar structure by area of effect of law. Yes, there would be an element of duplication but it would ensure a more complete feedback solution.
This would be a forum to ask grounded questions. Uncertainty is the enemy of a smooth and efficiently operating economy.
Critically, it must be understood that these forums are not going to produce instant answers. Their purpose is that serious businesspeople get to ask difficult questions and know that these are being received, reviewed and potentially addressed. Experienced people understand that some things take time and many elements need to be brought together to move forward.
There is an existing process within the VAT framework that allows for feedback and clarifications. However, it’s unwieldy and effectively driven by individual approaches. It potentially suffers from the inefficiency of each new engaging party understanding the process.
Overtly legalistic language is the minimum issue you face with utilising this channel. I have heard some say they feel like they are being asked to make a first draft of a formal piece of tax legislation to the issue they are facing. Imagine going to hospital and prepping yourself for surgery.
New guide
On picking up the newly released Free Zone Persons Corporate Tax Guide, I would advise starting with the legislative references. This gives you guidance on the document's starting position. It might even inspire you to find, print and review one or two of them.
In some cases, these are the smaller three or four-page releases that in themselves might not have made sense when published. Remember that corporate tax law is a highly complex jigsaw puzzle.
Free zone entities have to elect not to pay corporate tax and having done so, are excused for that annual reporting period and the following four periods.
If the same entity is found to be in breach of the conditions that permit this, it becomes taxable in the period of failure and the subsequent four periods.
A penalty that locks an entity into paying tax for a number of years might seem appropriate, but why lock an entity into not paying for the same period? Surely we are likely to see entities being reset, closed and reopened, to mitigate such sanctions? There can be very good reasons to choose to pay taxes.
Let’s unpack transactions with natural persons. That’s you, the human being, reading this article. If you purchase something in a qualifying free zone that is delivered by a qualifying free zone entity, the revenue is deemed to be an excluded activity.
This means tax is not payable by the supplier on its sale price.
The rules for juridical entities are different. Juridical means any entity that exists because a licence says it does. Juridical entities cannot and do not read newspapers.
For businesses that operate single physical standing businesses in free zones, this is important. Substance is reasonably easy to prove. You have a shop that's been fitted out. It has the personnel required to operate it. Customers walk in your business’ front door to purchase your goods or services. It’s likely that the ultimate owner is present, therefore all strategic decisions can be said to be made there.
Does marketing outside the free zone invalidate your ability to elect not to pay tax? No. Can you sell a certain amount of product outside the boundary? Yes, up to 5 per cent of total sales. Keep in mind you will need to bifurcate your turnover. How good are you at keeping accounts currently? Be honest.
It will be your decision to opt in or out of tax. Be certain of what ground you’re standing on.
More from Rashmee Roshan Lall
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
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MATCH INFO
Barcelona 2
Suarez (10'), Messi (52')
Real Madrid 2
Ronaldo (14'), Bale (72')
UAE%20SQUAD
%3Cp%3EMuhammad%20Waseem%20(captain)%2C%20Aayan%20Khan%2C%20Aryan%20Lakra%2C%20Ashwanth%20Valthapa%2C%20Asif%20Khan%2C%20Aryansh%20Sharma%2C%20CP%20Rizwaan%2C%20Hazrat%20Billal%2C%20Junaid%20Siddique%2C%20Karthik%20Meiyappan%2C%20Rohan%20Mustafa%2C%20Vriitya%20Aravind%2C%20Zahoor%20Khan%20and%20Zawar%20Farid.%3C%2Fp%3E%0A
Various Artists
Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
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UAE currency: the story behind the money in your pockets
RESULTS
Mumbai Indians 181-4 (20 ovs)
Kolkata Knight Riders 168-6 (20ovs)
Mumbai won by 13 runs
Rajasthan Royals 152-9 (20 ovs)
Kings XI Punjab 155-4 (18.4 ovs)
Kings XI Punjab won by 6 wickets
Profile of Udrive
Date started: March 2016
Founder: Hasib Khan
Based: Dubai
Employees: 40
Amount raised (to date): $3.25m – $750,000 seed funding in 2017 and a Seed round of $2.5m last year. Raised $1.3m from Eureeca investors in January 2021 as part of a Series A round with a $5m target.
If you go
Flights
Emirates flies from Dubai to Phnom Penh with a stop in Yangon from Dh3,075, and Etihad flies from Abu Dhabi to Phnom Penh with its partner Bangkok Airlines from Dh2,763. These trips take about nine hours each and both include taxes. From there, a road transfer takes at least four hours; airlines including KC Airlines (www.kcairlines.com) offer quick connecting flights from Phnom Penh to Sihanoukville from about $100 (Dh367) return including taxes. Air Asia, Malindo Air and Malaysian Airlines fly direct from Kuala Lumpur to Sihanoukville from $54 each way. Next year, direct flights are due to launch between Bangkok and Sihanoukville, which will cut the journey time by a third.
The stay
Rooms at Alila Villas Koh Russey (www.alilahotels.com/ kohrussey) cost from $385 per night including taxes.
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
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The biog
Hometown: Birchgrove, Sydney Australia
Age: 59
Favourite TV series: Outlander Netflix series
Favourite place in the UAE: Sheikh Zayed Grand Mosque / desert / Louvre Abu Dhabi
Favourite book: Father of our Nation: Collected Quotes of Sheikh Zayed bin Sultan Al Nahyan
Thing you will miss most about the UAE: My friends and family, Formula 1, having Friday's off, desert adventures, and Arabic culture and people
A little about CVRL
Founded in 1985 by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, the Central Veterinary Research Laboratory (CVRL) is a government diagnostic centre that provides testing and research facilities to the UAE and neighbouring countries.
One of its main goals is to provide permanent treatment solutions for veterinary related diseases.
The taxidermy centre was established 12 years ago and is headed by Dr Ulrich Wernery.
more from Janine di Giovanni
Fund-raising tips for start-ups
Develop an innovative business concept
Have the ability to differentiate yourself from competitors
Put in place a business continuity plan after Covid-19
Prepare for the worst-case scenario (further lockdowns, long wait for a vaccine, etc.)
Have enough cash to stay afloat for the next 12 to 18 months
Be creative and innovative to reduce expenses
Be prepared to use Covid-19 as an opportunity for your business
* Tips from Jassim Al Marzooqi and Walid Hanna
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
SCHEDULE
Thursday, December 6
08.00-15.00 Technical scrutineering
15.00-17.00 Extra free practice
Friday, December 7
09.10-09.30 F4 free practice
09.40-10.00 F4 time trials
10.15-11.15 F1 free practice
14.00 F4 race 1
15.30 BRM F1 qualifying
Saturday, December 8
09.10-09.30 F4 free practice
09.40-10.00 F4 time trials
10.15-11.15 F1 free practice
14.00 F4 race 2
15.30 Grand Prix of Abu Dhabi
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
NYBL PROFILE
Company name: Nybl
Date started: November 2018
Founder: Noor Alnahhas, Michael LeTan, Hafsa Yazdni, Sufyaan Abdul Haseeb, Waleed Rifaat, Mohammed Shono
Based: Dubai, UAE
Sector: Software Technology / Artificial Intelligence
Initial investment: $500,000
Funding round: Series B (raising $5m)
Partners/Incubators: Dubai Future Accelerators Cohort 4, Dubai Future Accelerators Cohort 6, AI Venture Labs Cohort 1, Microsoft Scale-up
Disability on screen
Empire — neuromuscular disease myasthenia gravis; bipolar disorder; post-traumatic stress disorder (PTSD)
Rosewood and Transparent — heart issues
24: Legacy — PTSD;
Superstore and NCIS: New Orleans — wheelchair-bound
Taken and This Is Us — cancer
Trial & Error — cognitive disorder prosopagnosia (facial blindness and dyslexia)
Grey’s Anatomy — prosthetic leg
Scorpion — obsessive compulsive disorder and anxiety
Switched at Birth — deafness
One Mississippi, Wentworth and Transparent — double mastectomy
Dragons — double amputee
Premier League results
Saturday
Crystal Palace 1 Brighton & Hove Albion 2
Cardiff City 2 West Ham United 0
Huddersfield Town 0 Bournemouth 2
Leicester City 3 Fulham 1
Newcastle United 3 Everton 2
Southampton 2 Tottenham Hotspur 1
Manchester City 3 Watford 1
Sunday
Liverpool 4 Burnley 2
Chelsea 1 Wolverhampton Wanderers 1
Arsenal 2 Manchester United 0
The biog
Marital status: Separated with two young daughters
Education: Master's degree from American Univeristy of Cairo
Favourite book: That Is How They Defeat Despair by Salwa Aladian
Favourite Motto: Their happiness is your happiness
Goal: For Nefsy to become his legacy long after he is gon
