The Ministry of Human Resources and Emiratisation has issued a directive outlining the details. Under the new regulations, companies with a workforce ranging from 20 to 49 employees must hire at least one UAE citizen by 2024, and an additional one by 2025. This requirement applies to private companies operating in 14 sectors of the economy, including real estate, education, construction, and healthcare. Previously, only companies with a minimum of 50 employees were obligated to employ UAE citizens. Any company within the 20-49 employee range that fails to hire at least one Emirati citizen in 2024 will be subject to a fine of AED 96,000. Furthermore, enterprises that do not have two UAE citizen employees by 2025 will face an increased fine of AED 108,000. Currently, companies with a workforce of 50 or more employees are already mandated to hire UAE citizens.

The per capita income in the UAE, based on purchasing power parity (PPP), reached up to 87,729 international dollars. This places the country at the seventh position globally in this regard. It is noted that the per capita income increased by 10,781 international dollars over the course of the year.

The international dollar is a virtual currency used for comparing the purchasing power of different countries. It is based on the US dollar but holds the same purchasing power as the local currency in each country. As for US dollars, the per capita income in the UAE also increased, from 43,460 dollars in 2021 to 48,950 dollars. Moreover, in 2022, this figure surpassed the pre-pandemic level of 2019.

According to the latest classification by the World Bank, countries are categorized into four groups based on per capita income using purchasing power parity (PPP):

• Low-income: less than $1,135
• Lower-middle-income: $1,136 to $4,465
• Upper-middle-income: $4,466 to $13,845
• High-income: above $13,845.

The Ministry of Finance of the UAE has issued two new ministerial resolutions that specify the tax regime for legal entities operating in the UAE’s free economic zones. These resolutions are Resolution No. 55 of 2023 “On the determination of relevant income” and Resolution No. 139 of 2023 “On relevant activities and excluded types of activities.”

Who can benefit from the tax regime for Free Zones?

The corporate tax regime for free economic zones is available to companies registered within the free economic zone. Such a corporate tax regime is applicable only within the designated boundaries of the free economic zones. The profit tax regime for Free Zone enterprises is applicable only to income derived from activities carried out within or from the free economic zone.

What income is considered “qualifying” for the application of the tax regime in Free Zones (at a 0% tax rate)?

The resolution provides a definition of the term “qualifying income,” to which the special tax regime for companies in Free Zones (tax rate of 0%) will apply.

qualifying income includes:

• Income derived from transactions with other entities within the free economic zone.

• Income derived from domestic and international activities related to any of the “qualifying activities.”

What are “qualifying activities”?

“Qualifying activities” include:

• Production of goods or materials.

• Processing of goods or materials.

• Ownership of shares and other securities.

• Ownership, management, and operation of vessels.

• Reinsurance services.

• Fund management services subject to regulation by a competent authority in the UAE.

• Capital and investment management services subject to regulation by a competent authority in the UAE.

• Headquarter services for related parties.

• Financing services for related parties.

• Financing and leasing of aircraft, including engines and spare parts.

• Logistics services.

• Distribution from a designated zone that meets the required conditions.

• Any ancillary activities related to the aforementioned activities.

Excluded Activities

Income derived from engaging in “excluded activities” will not be considered as “qualifying income,” regardless of whether it is obtained by a person registered in a Free Zone or even if it is obtained as a result of “qualifying activities.”

Excluded activities include:

• Income from transactions with individuals.

• Income derived from certain regulated financial services.

• Income derived from intangible assets.

• Income derived from real estate, excluding transactions with entities in the Free Zone concerning commercial real estate located within the free economic zone.

A person registered in a Free Zone but receiving income from “excluded activities” or income that is not “qualifying” will not be able to benefit from the special tax regime for Free Zones, even if such person meets the minimum income threshold requirements (de minimis).

What should be the “minimum income” of a company to qualify for the Free Zone tax regime?

To meet the requirements, the income earned by a resident entity in a Free Zone must not exceed the lesser of two amounts: either 5% of the total income or AED 5,000,000.

Income related to the internal or overseas permanent establishment of a Free Zone company and income derived from real estate located within the free economic zone, which is not subject to the Free Zone tax regime, are not considered when determining the minimum income. Instead, the associated taxable income will be subject to the regular corporate tax regime of the UAE, at a rate of 9%.

If the minimum income requirements are not met or if a Free Zone resident entity fails to meet other conditions for the application of the special tax regime, such entity will not be able to benefit from the special tax regime in the Free Zone for a period of five (5) years. During this period, the entity registered in the Free Zone will be considered a regular taxpayer, subject to a tax rate of 9% on all income exceeding AED 375,000.

According to a study by the consulting company Henley and Partners, in 2022, 5200 dollar millionaires relocated to the UAE. Australia (+3800), Singapore (+2900), Switzerland (+2200), and the USA (+1500) were also among the top five most popular jurisdictions for the migration of affluent individuals.

As for the “outflow” of millionaires, the leaders in 2022 were China (-10800 millionaires) and Russia (-8500). Moreover, as noted by the company, Russia’s figures were approximately half of the projected numbers, as the departure of millionaires was hindered by sanctions – issues with opening accounts for Russian citizens and the scaling back of investment citizenship programs.

India (-7500 millionaires), Hong Kong (-2800 millionaires), Brazil (-1800 millionaires), and the United Kingdom (-1600) are also among the top five in terms of “outflow.”

On June 5th, the Ministry of Finance of the UAE announced Cabinet Decision No. 56 of 2023 “On the Taxation of Non-Residents in the UAE” regarding the corporate tax law.

According to the decision, foreign non-resident companies will be subject to corporate tax on income derived from real estate and other immovable property located in the UAE. Additionally, such companies will be required to register in the UAE as corporate tax payers. These requirements apply to both commercial and investment properties.

Non-resident legal entities that own property in the UAE will be subject to corporate tax based on “net income,” which is calculated after deducting relevant expenses.

Income from real estate investments derived from immovable property in the UAE, owned directly or through a trust, fund, or other structure that is considered fiscally transparent for the purposes of UAE corporate tax, is generally not subject to corporate tax. However, this applies only if it is not a licensed entrepreneurial activity.

Furthermore, real estate investment trusts and other qualified investment funds may qualify for an exemption from corporate tax on income derived from investments in real estate in the UAE, subject to compliance with relevant conditions.

The Ministry of Finance of the Arab countries has announced the launch of three new ministerial decisions on the law “On the taxation of corporations and enterprises”.

The discussion is about three solutions:

Ministerial Decision No. 116 of 2023 on exclusion from participation.

Ministerial Decision No. 114 of 2023 regarding imagery and accounting methods;

Ministerial Decision No. 115 of 2023 on Pension and Social Security Funds;

Exclusion decision

The “participation exemption” decision means that a UAE company that owns shares in foreign companies can be exempt from paying taxes on dividends. For this company, it is necessary to own a share of at least 5% in a foreign company and to be the holder of such a share for at least 12 months. Participation exemption if the subsidiary is located in a country with a tax rate of at least 9% or shows that it pays an effective tax rate of at least 9% on its profits, income or equity. This decision also clarifies that the exemption is granted to one-time types of rights holders, such as preferred shares, ordinary shares and others. But to receive this benefit, the total value of the right must be at least 4,000,000 dirhams.

Solutions for a wide range of accounting methods

The Accounting Standard and Method Decision provides guidance to businesses on the preparation of Financial Statements that will form the basis for calculating taxable income. According to the decision, International Financial Reporting Standards (IFRS) are the applicable accounting standards in the UAE and must be adopted in accordance with international accounting standards for more than AED 50,000,000. The solution also allows small and adult businesses with revenues of less than AED 50,000,000 to use IFRS. Assumptions, samples do not exceed 3,000,000 dirhams, can calculate the tax base on the basis of cash accounting.

Pension Fund Solutions

The Pension and Social Insurance Fund (SIF) decision sets out additional conditions to exclude pension funds and SIFs in the UAE from corporate court. The decision to consider this RIAC case is tax practice and the legality of such a decision from the point of view of other countries, which is probably the basis for considering the case for the avoidance of double taxation. In addition, the decision clarifies the maximum disbursements per beneficiary and the requirements for annual confirmation of compliance with the statutory auditor.

The financial regulators of the UAE have taken official permission to support cryptocurrency trading in the free economic zones of the Dubai World Trade Center, Dubai Multi Commodities Center.

This permission allows Free Zones to issue the necessary licenses for cryptocurrency-related financial activities, such as issuance, listing, trading, and licensing processes.

Subsequently, a public bitcoin fund (BTC) was listed on the local Nasdaq Dubai stock exchange by Canadian digital asset fund manager 3iQ.

For questions about obtaining licenses and introducing activities with cryptocurrency, you can contact Parus Management Consultancies, Dubai, UAE.

On September 11, as part of the UAE 50 Projects program, new types of Green Visa and Freelancer Visa were accepted.

Obtaining a Green Visa makes it possible to officially work without concluding an employment contract with an employer, obtain residency in the UAE and be a visa sponsor for your family

Green Visa can be obtained by real estate investors, entrepreneurs, highly qualified doctors, teachers, athletes, the best students and graduates of world famous universities, as well as heads of small and medium-sized enterprises, scientists and others.

Freelance Visa is available to self-employed workers from the UAE and abroad, specializing in areas such as artificial intelligence, blockchain and digital currencies.