General information

Except for VAT and corporate tax on oil and gas companies and branches of foreign banks, the UAE does not impose corporate tax on businesses registered onshore. However, several recently implemented transparency initiatives, related to the OECD’s BEPS project and international exchange of information, could have material impact on business operations (i.e. economic substance rules).

United Arab Emirates

Notable tax developments – Direct and indirect

(e.g. payment deferrals, rate reductions)

  • On 26 August 2020, Cabinet Resolution No. 44 of 2020 amended country-by-country (CbC) reporting rules in the United Arab Emirates (UAE), specifically the definition of “reporting entity”, to identify the ultimate parent entity of an MNE group (tax resident in the UAE) as the only entity of the MNE group required to comply with CbC reporting obligations. 
  • Additionally, on 28 August 2020, the UAE Ministry of Economy published Cabinet Resolution No. 58 of 2020 (the Decision) on the “Regulation of Procedures Related to Real Beneficiaries”. The Decision requires entities licensed in the UAE—except entities in financial freezones and entities directly or indirectly wholly owned by the federal or emirate government—to maintain registers of their beneficial owners and shareholders. Further, the decision also requires companies to file their registers with the relevant registrar and licensing authorities.
  • The Federal Tax Authority (FTA) released Public Clarification VATP020 “VAT-free special offers” to remind taxpayers of their obligations under the UAE’s VAT legislation, where goods or services are sold under certain promotional schemes. Retailers may often advertise promotions where the price for goods or services is discounted by the equivalent of the amount of VAT that would ordinarily be charged as offers that are “VAT free” or “the VAT is on us”.
  • Further, Public Clarification VATP021 “VAT registration of sole establishments” provides clarity on the VAT registration obligations of natural persons operating a number of sole establishments. Sole establishments are businesses owned and operated by natural persons and are not legally distinct from their owners. Where a natural person owns a number of sole establishments, the sole establishments are not required to be registered separately for VAT. The FTA has clarified that a single VAT registration in the name of the owner should be obtained.
  • As part of the UAE’s commitment as a member of the OECD’s Inclusive Framework on BEPS, Economic Substance Regulations (ESR) were introduced effective from 1 January 2019. With the first year of ESR compliance completed for most businesses, UAE authorities have started reviewing ESR filings and have commenced information exchange procedures. Businesses that have conducted Relevant Activities must file a Notification within six months of the end of the financial year (e.g. for FY 31 December 2020, the Notification is due by 30 June 2021). Businesses that have derived income from Relevant Activities must meet the economic substance tests and file a report within 12 months of the end of the financial year (e.g. for FY 31 December 2020, the report is due by 31 December 2021).
  • In determining whether businesses have met the substance requirements, the Ministry of Finance (MOF) advised that UAE authorities will consider the impact of Covid-19 on the usual operations of businesses. These considerations only apply to the substance requirements directly affected by Covid-19 measures (e.g. travel restrictions, self-isolation situations or quarantine requirements). Particular consideration will be given to the impact of restrictions on the ability to meet the ‘directed and managed’ test. As a prudent measure, businesses should consider alternative arrangements to address issues in meeting substance requirements due to Covid-19 restrictions. 
  • To further enhance its reputation as an investment-friendly jurisdiction, the UAE has recently enacted several landmark changes. The most notable one is the amendment to the Commercial Companies Law, which has abolished the required minimum UAE ownership percentage (i.e. 51 percent) in mainland companies (in certain approved sectors) effective 1 June 2021. This will allow mainland companies (existing and new) to be 100 percent foreign owned upon obtaining approval from the relevant authorities in each emirate. Further details, such as the list of approved sectors and the application process, are yet to be released. 

Employment-related measures

(e.g. state compensation schemes, training)

  • The Federal Authority for Government Human Resources has asked all federal government employees to report to work in person from 16 May 2021.
    • All previous exceptions granted to employees, including their exclusion from returning to workplaces, due to emergency conditions and the response to the Covid-19 pandemic, has been cancelled
    • For female employees who oversee their children's distance education, the exception will continue until the end of the current academic year
    • Non-vaccinated employees must commit to conducting a nasal swab examination (PCR) every week at the employee’s own expense
  • The UAE Cabinet has adopted a Strategy for Talent Attraction and Retention to contribute to strengthening the country's leading position as a preferred destination for living, working and investing.
    • The strategy for talent attraction and retention has three main targets: positioning the UAE among the top 10 countries in global talent competitiveness indices, ensuring of availability talent across all strategic sectors, to cement the UAE’s image as an ideal destination for living and working

Economic stimulus measures

(e.g. loans, moratorium on debt repayments)

  • The total economic support packages and initiatives provided by the federal and local governments since the beginning of the pandemic to date is AED 395 billion.
  • Dubai announced additional stimulus for January – June 2021, in the amount of AED 315 million. Other emirates employed similar measures to support trade and businesses and to provide advantages to sectors that suffered the most from the current pandemic.
  • FDI into the UAE grew by 44.2 percent to USD 19.88 billion in 2020 despite pandemic-related economic challenges. The cumulative value of foreign direct investments inflows amounted to USD 174 billion, a growth of 12.9 percent during the same period.
    • FDI was recorded across sectors, primarily oil and gas, considering several investment partnerships struck by the Abu Dhabi National Oil Company (ADNOC) with a number of foreign companies
    • The UAE has drawn FDI for the digital economy, including Artificial Intelligence, Internet of Things, blockchain, medical knowhow, augmented and virtual reality (AR and VR), robotics, self-drive automobiles, renewable energy, innovation and agritech, among others

Measures to ease the lockdown

Vaccination

  • The UAE had administered over 12 million doses of vaccine.
  • According to the Ministry of Health and Prevention (MoHAP), The rate of doses stands at 122.39 per 100 people (as of 23 May 2021).
  • The UAE has started distributing its locally-made Covid-19 vaccine called Hayat-Vax. 
    • Hayat—which means 'life' in Arabic—is the first Covid-19 vaccine developed in the region, manufactured by a joint venture between Abu Dhabi's G42 and Sinopharm
    • It is the same Sinopharm vaccine that was registered by the UAE Ministry of Health and Prevention in December 2020
    • The vaccine is also being approved in other countries
  • The UAE has approved the Pfizer and BioNTech Covid-19 vaccine for emergency use in children aged 12-15, having already permitted its use for 16 years and above.
    • MoHAP has approved its use based on the US Food and Drug Administration’s approved use of the vaccine in children as young as 12.

Other measures

Entertainment and tourism

  • Abu Dhabi will end quarantine for all international arrivals starting from 1 July. Abu Dhabi currently requires travelers to quarantine for 10 days unless they are from a 'green-list' country.
  • Dubai has eased Covid-19 restrictions, allowing hotels to operate at full capacity and permitting concerts and sports events where all attendees and participants have been vaccinated.
    • All entertainment facilities and venues are allowed to operate at 70 percent capacity, while hotels can raise their occupancy ceiling to 100 percent
    • Dubai will also now allow 10 diners at restaurant tables and six at café tables, upping the previous limits of seven and four as coronavirus restrictions continue to ease
    • Wedding events are allowed, but attendance is capped at 100; for wedding events in homes, the capacity is 30

Oman

Employment-related measures

(e.g. state compensation schemes, training)

  • The Supreme Committee has urged all businesses to reduce staff at the workplace as Covid-19 cases rise.
    • All previous exceptions granted to employees, including their exclusion from returning to workplaces, due to emergency conditions and the response to the Covid-19 pandemic still stand
    • The Committee has urged establishments to implement plans that guarantee the accomplishment of tasks through online work and to downsize the number of employees necessary at the workplace
  • The Ministry of Manpower announced implementation of a labor law in 2021. 
    • 32,000 jobs would be provided to job seekers, as per the implementation of the plan
    • As of the first quarter of the year, 10,000 new jobs have been provided to Omanis. Twenty percent of which have been coupled with training
    • The Ministry has appealed to all workers in the private sector to adhere to health procedures and follow instructions issued by their employer to protect them and to prevent the spread of Covid-19

 

Economic stimulus measures

(e.g. loans, moratorium on debt repayments)

  • Oman’s Medium-Term Fiscal Plan (2020-2024) aims to strengthen and support economic growth and offset the impact of Covid-19. A set of initiatives has been implemented, following an estimated total revenue at OMR 8.64 billion in 2021, according to the FY2021 budget.
    • Oman introduced five percent value added tax on 14 April 2021 as economic stimulus to support the country’s economic recovery. It is forecasting an estimated collection of OMR 300 million this year
  • The Central Bank Oman announced a raft of policy measures and financial incentives designed to unlock an estimated OMR 8 billion (USD 20.78 billion) in additional liquidity for the benefit of businesses impacted by the economic downturn during the Covid-19 pandemic. 
    • The Central Bank of Oman issued government treasury bills worth OMR 216.4 million during the month of Ma 2021, to promote the local money market by creating a benchmark yield curve for short-term interest rates
  • Total FDI in Oman stood at OMR 15.4 billion by the end of 2020, and is expected to grow as new regulations and rules on foreign investments have been released in 2020.

Measures to ease the lockdown

Vaccination

  • According to Oman’s Ministry of Health, schools, stadiums and exhibition halls will be used as vaccination centers, as Oman enters the next phase of immunization.
  • 4.3 million doses of Pfizer-BioNTech have been reserved in addition to 1.5 million doses from various other global companies.
  • One million doses of Pfizer-BioNTech and 100,000 from other pharma collaborations are set to arrive in June. 
    • Distribution plans will ensure vaccines reach regions throughout the Sultanate
    • Distribution will be based on population density in these governorates, with focus on the next target group - aged 45 and up
    • The new vaccine target group of people aged 60 and up is nearly complete, with over 95 percent having received their vaccines
  • As part of the vaccination program, mobile vaccination initiatives will be implemented to ensure that more than 70 percent of Oman's population is vaccinated by the end of the year.

Other measures

Entertainment and tourism

  • Oman has recently eased restrictions to limit the spread of the coronavirus.
    • Currently, all travelers arriving in Oman from any country are required to quarantine for seven days. Children below 15 years old are exempt from PCR tests and bracelet requirements
    • All commercial activities such as shopping malls, hotels, shops and restaurants are allowed to resume activities at 50 percent capacity until 8 pm, and can continue to operate for home delivery or pickup outside the premises after 8pm
    • Outdoor activities, domestic tourism and beaches are opened for individual activities
       

Sources

Khaleej Times: Coronavirus news bulletin from UAE
https://www.khaleejtimes.com/coronavirus-pandemic/covid-uae-expats-rush-to-vaccinate-kids-between-12-and-15-years-before-summer-break
https://www.khaleejtimes.com/coronavirus-pandemic/uae-38706-covid-vaccine-doses-administered-in-24-hours
https://www.arabianbusiness.com/culture-society/463411-dubai-loosens-covid-19-restrictions-allows-10-diners-per-table
https://www.khaleejtimes.com/news/government/uae-cabinet-okays-plan-to-make-the-country-a-talent-hub
https://www.khaleejtimes.com/coronavirus-pandemic/covid-uaes-stimulus-packages-total-dh395-billion
https://www.khaleejtimes.com/coronavirus-pandemic/hayat-vax-made-in-uae-covid-vaccine-distribution-begins

Gulf Business
https://gulfbusiness.com/uae-fdi-inflows-climbs-over-44-to-19-88-bn-in-2020/

Gulf News
https://gulfnews.com/uae/covid-19-all-uae-federal-government-employees-must-return-to-work-from-may-16-1.1620635851444
https://gulfnews.com/business/tourism/abu-dhabi-to-end-quarantine-for-all-international-visitors-starting-from-july-1-1.1621159916174

Arabian Business
https://www.arabianbusiness.com/politics-economics/462150-uae-cabinet-approves-development-policy-to-increase-exports
https://www.arabnews.com/node/1858311/middle-east
https://www.arabianbusiness.com/politics-economics/463522-june-1-is-when-uae-will-allow-100-foreign-ownership-of-companies
https://www.arabianbusiness.com/politics-economics/456665-oman-expected-to-add-779m-in-revenue-from-vat-this-year
https://www.arabianbusiness.com/healthcare/463184-oman-to-vaccinate-15m-against-covid-19-by-the-end-of-june

UAE Ministry of Finance
https://www.mof.gov.ae/en/StrategicPartnerships/Pages/ESR.aspx
https://www.mof.gov.ae/en/StrategicPartnerships/Documents/ESR%20COVID%20Communication%20-September%202020.pdf

The National
https://www.thenationalnews.com/business/economy/new-law-allowing-full-foreign-ownership-of-onshore-companies-takes-effect-on-june-1-1.1225625
https://www.thenationalnews.com/business/seven-key-takeaways-from-uae-s-new-commercial-company-ownership-laws-1.1116534

Central Bank Oman
https://cbo.gov.om/news/175
https://cbo.gov.om/news/175
https://cbo.gov.om/news/203

Oman Observer
https://www.omanobserver.om/article/10669/Front%20Stories/oman-announces-second-stimulus-package-for-economic-revival
https://www.omanobserver.om/article/3552/Front%20Stories/foreign-direct-investment-in-sultanate-at-ro-154-billion

U.S. Embassy Oman
https://om.usembassy.gov/covid-19-information/

Times of Oman
https://timesofoman.com/article/100696-around-10000-jobs-provided-for-job-seekers-in-oman-in-q1-2021