Expo boosts UAE private sector growth to fastest since June 2019
The UAE non-oil sector posted a marked increase in new business during October, driven by rising spending and tourism amid the opening of Expo 2020.
According to IHS Markit UAE Purchasing Managers’ Index (PMI), economic indicators derived from monthly surveys of private sector companies, confidence regarding future activity also improved significantly.
The PMI surged to 55.7 in October, from 53.3 in September. This was the highest reading since June 2019.
An economist at IHS Markit, David Owen said that the Expo 2020 brought a highly welcome upsurge in growth across the non-oil private sector.
“The increases in both output and new business were sharp and the most marked since July 2019. In addition, the boost to sales led more companies to predict a rise in activity over the next 12 months, as optimism jumped to the highest level since the beginning of the pandemic,” he said.
“The key test for the UAE economy will be whether this initial uplift in demand from the Expo can be sustained over the coming months. We also wait to see whether this will strengthen employment growth, as latest data showed a subdued rate of hiring despite growing pressure on business capacity.”
According to panellists, Expo drove increased sales in several sectors as tourism strengthened and investment spending rose. In contrast to domestic sales, export orders ticked up only marginally at the start of the fourth quarter.
In addition to Expo, firms noted that the loosening of pandemic restrictions also helped to boost activity.
Dubai Silicon Oasis Authority launches Sandbox programme to support early-stage tech startups
The programme operated by the Dubai Technology Entrepreneur Campus will offer services worth over Dhs550,000
The Dubai Silicon Oasis Authority (DSOA) has launched Sandbox, a startup programme that supports early-stage technology startups to scale and raise funds.
The 12-month programme run by the Dubai Technology Entrepreneur Campus (Dtec), DSOA’s wholly owned tech hub and coworking space, is open to early-stage startups from MVP to seed stage, with a rolling application process.
Enrolled entrepreneurs will follow a structured curriculum which includes theoretical and practical workshops, mentorship sessions and networking opportunities that will help them grow their startups.
Dtec has dedicated a funding purse to be invested in promising startups of the programme. Dtec is offering Sandbox participants exclusive company setup rates, equivalent to Dhs9,500. The programme will provide each participant access to leading venture capital funds, and broad services provided by DSOA’s partners worth more than Dhs550,000, according to the Dubai Media Office.
Sandbox is built on six key pillars: product development, traction, scaling, financial diagnostics, wellbeing and legal support.
Startups enrolled in the programme will benefit from over 200 hours of practical workshops and more than 100 hours of one-on-one mentorship from practitioners and field-experts.
Entrepreneurs will also have access to a full suite of diagnostic tools for financial efficiency and legal compliance.
Dtec offers coworking spaces, business accelerators, R&D facilities, event spaces and digital business setup support including licensing. It houses more than 1,000 startups from 75 countries. Through the centre, DSOA supports entrepreneurs, startups and innovators, especially those that operate in the technology, Ai and digitalisation spaces.
“The launch of the Sandbox startup programme coincides with the Projects of the 50, a strategic set of initiatives that will lay the foundations for a new development cycle in various economic sectors. All these projects position the nation as a destination for talents, skilled individuals, entrepreneurs, startup founders, innovators and investors,” said Dr. Mohammed Al Zarooni, vice chairman and CEO of DSOA.
“Dubai Silicon Oasis, and its wholly owned Dtec, have extensive experience as a tech hub and an incubator for entrepreneurs and startups, supporting them in transforming their innovative ideas into reality and empowering them in securing financing. The programme is the first of its kind in the region, founder-centric, addressing a gap in early-stage initiatives.”
UAE’s sole establishments and family business owners have a VAT status to tackle
A number of family business owners in the UAE have multiple business interests out of which some are structured under a holding company format while others could be sole proprietorships/establishments of the family members.
Such non-company establishments are kept when the family members have businesses that are independent of the overall family business, leading to alienation of their personal interests. We look at two issues that have emerged for sole establishments in the last three plus years since VAT was introduced.
First, the separate VAT registration granted to independent sole establishments and, second, the issue of VAT grouping of such sole establishments with the llc entities of family business. At the time of the introduction of VAT, the UAE Federal Tax Authority allowed a large number of individual owners to VAT register each of their sole establishments as separate entities and given separate Tax Registration Numbers (TRNs).
Do way with multiple TRNs
The FTA later clarified that sole establishments are not independent of their owners and, consequently, there shouldn’t be separate TRNs issued to them. As part of one ownership, they are supposed to be given one TRN.
The FTA clearly mentioned that where separate TRNs have been issued to different sole establishments, the owner need not do anything on his own. Rather, the FTA will itself pick up such cases and instruct the owner to carry out the needed amendments.
It has been observed that the FTA advises owners having multiple sole establishments to retain a single TRN for all entities and de-register the rest. This is specifically seen in VAT registration amendment applications where the FTA has sought a declaration from the owner to confirm if he or she has other sole establishments.
A cumbersome process
Two points emerge from this issue. First, should owners wait for the FTA to come back and instruct them to make amendments to their VAT registrations, specifically when they know that such request would anyways come when any application for TRN amendment is filed with the FTA?
The second – and bigger – issue that would arise from getting one TRN for all the entities and de-register the rest is the hassle of informing vendors and customers of the new TRN (for all sole establishments), making amendments in the banking channels, potential non-recovery of VAT on invoices the vendors may issue using the old TRN. An elaborate way would have to be entered into to ensure no disruption of work.
The FTA in 2018 had also allowed the sole establishments to become part of the VAT group. Technically – and as clarified by the FTA in the VAT Guide – individual owners are natural persons and not legal persons, and natural persons are not allowed to be VAT grouped.
Legal vs. natural
So effectively, some of the sole establishments that are owned by individuals – and therefore to be treated as natural persons – have inadvertently become a part of the VAT group with other llc entities. It is possible that some of the sole establishments that are part of the VAT group could be non-functional and may not have any business activity.
In that case, there is a strong probability of the FTA imposing a penalty for continuing to have a non-functional entity registered for VAT. The imminent need for family business groups is to assess if any sole establishments are still part of the VAT group and, if yes, de-register and register it as an independent sole establishment.
While registering it as a sole establishment, it is important to ensure that the owner does not have any other sole establishment that could already be VAT registered. Similarly, the possibility of converting the sole establishments into llcs could also be explored to avoid having all the sole establishments under one TRN.
UAE, South Korea begin talks to boost trade ties
Dubai – The Comprehensive Economic Partnership Agreement (CEPA) between the UAE and South Korea will include deals to reduce greenhouse gas emissions and develop green technology, South Korean Trade Minister Yeo Han-Koo
The UAE and South Korea on Thursday began discussions on further bolstering their trade and investment partnership with a new comprehensive agreement.
Dr. Thani bin Ahmed Al Zeyoudi, UAE Minister of State for Foreign Trade, and Yeo Han-Koo, South Korean Minister for Trade, discussed the prospect of pursuing a Comprehensive Economic Partnership Agreement (CEPA) to strengthen economic ties, enhance investment opportunities and mark a new era of bilateral cooperation with one of Asia’s most important markets.
The UAE-South Korea’s largest trading partner in the Arab world with a bilateral trade value of $9.4 billion in 2020 — has already started negotiations on two such deals, following the launch of talks with India and Indonesia in September. CEPA talks underscore the UAE’s ambition to move fast by striking new trade agreements with high-growth markets in Africa and Asia under a clear social and economic strategy for the next 50 years.
“We are working around the clock to consolidate the UAE’s position as a global trade and logistics hub that connects the world to the broader region and beyond,” Dr. Al Zeyoudi said.
“South Korea and the UAE are natural trade and investment partners with shared goals to deliver sustainable economic growth. Today’s intention to launch CEPA is a step forward in our vision for a mutually beneficial partnership that creates new jobs and investment opportunities. It reinforces our position as a gateway for goods and services that can flow through Africa, Asia and Europe under an economic blueprint for the next 50 years,” Dr. Al Zeyoudi said.
Yeo Han-Koo said the UAE is Korea’s Special Strategic Partner in the Middle East and the bilateral pursuit of a Comprehensive Economic Partnership Agreement will upgrade the thriving bilateral partnership to the next level. “The CEPA would serve as a leverage to further expand bilateral trade and investment. And it would intensify future-oriented cooperation between two countries and serve as a framework for achieving more concrete outcomes from our bilateral collaboration.”
The UAE is South Korea’s largest trading partner in the Arab world, with a bilateral trade exchange valued at $9.4 billion in 2020. Non-oil trade in the first six months of 2021 has grown to $2.1 billion.
In recent years, foreign direct investment has focused on strategically important national industries, such as renewable and nuclear energy, hydrocarbons, healthcare and logistics.
Prominent joint venture projects include the $20 billion Barakah Nuclear Power Plant in Abu Dhabi, with construction led by Korea Electric Power Corporation in a consortium that also includes Hyundai, Samsung, Korea Hydro & Nuclear Power and Doosan Heavy Industries and Construction.
Earlier this year, Mubadala was part of a consortium that acquired a majority stake in South Korean cosmetic pharmaceutical company Hugel for $1.5 billion. While in 2020, South Korea’s NH Investment & Securities joined a group of asset management and sovereign wealth funds to invest $20.7 billion in Abu Dhabi National Oil Company’s midstream assets.