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Businesses, their owners, and auditors in the UAE are awaiting the next big update on the corporate tax – the one related to ‘qualifying income’ for free zone entities and on which they get the 0 per cent tax benefit. A decision on this is ‘imminent’, according to multiple audit industry sources.

Any income that these free zone-based businesses generate outside of that qualifying income will come under the 9 per cent corporate tax coverage. And there lies the crux, which is why these businesses are awaiting the guidelines on QI with such a heightened sense of anticipation.

The confirmation of the qualifying income benchmark will also be of significance to the many UAE free zones, given the clarity it brings in their dealings with existing entities licensed by them and prospective ones they are looking to sign up.

The UAE Corporate Tax comes into effect on June 1.

What could make up the qualifying income?

Raju Menon, Chairman and Group Managing Partner at Kreston Menon, says : “Income that conforms to business ‘restrictions’ of each free zone authority should be regarded as QI.

“Accordingly, export of goods from a free zone, the trade in goods within a free zone or between free zones – and without any ‘contamination’ in the UAE mainland – may be regarded as qualifying income for the ‘qualifying free zone person’.”

“So would any ‘passive income’ earned by free zone companies.”

These are the confirmations that all stakeholders are looking to from the Ministry of Finance. In recent weeks, debates have intensified over whether businesses should retain their free zone status or go for a full license from the mainland. Particularly among those businesses with a heavy chunk of their income derived direct from operations or services rendered on the mainland.

Deepak Bansal of Ask Pankaj Tax Advisors says, “The scope of qualifying income is an evolving issue. The crucial point is to understand the subtle difference between honoring the promised tax incentives (given to free zone licensed companies) and offering a new set of tax incentives.”

What makes up a ‘Qualifying Free Zone Person’?

The entity must maintain ‘adequate substance’ in the UAE, or in other words have a definable direct exposure in the local market.

Derive qualifying income as specified in a Cabinet Decision.

Comply with ‘transfer pricing’ rules and maintain relevant transfer pricing documentation.

Not have made an election to be subject to corporate tax in full.

‘Proportionate’ or ‘activity’ based incentives?

“The concept of proportionate taxation is prevalent in India for tax incentives to companies based in Special Economic Zones (SEZs) and certain other countries,” said Bansal. Singapore offers ‘activity-based’ tax incentives as compared to ‘entity-based’ incentives, requiring a proportionate determination of eligible/ineligible taxable income.”

The UAE model on qualifying income – and subsequent free zone incentives – would be based on best-of-breed regulations from other jurisdictions on how they treat income generated by such entities.

“Free zones were conceptualized as international trading/manufacturing hubs,” said Bansal. “The income from exports (goods and services), and trading within free zones, is likely to be treated as QI. “The fenced areas of free zones (connected to ports) are treated as outside UAE for VAT/custom purposes. Import of goods from such areas to the mainland may also be categorized as QI, i.e., at par with non-resident suppliers’ income from goods imported into mainland UAE.

“Certain passive incomes may also qualify as QI. Any other income may be taxed at 9 per cent resulting in proportionate taxation principles. The concept of ‘disqualifying income’, if introduced, could, however, have ramifications on business operations.”

Read more from our Taxation Services.

Source: “UAE’s free zone businesses await 0% ‘qualifying income’ ’” by Manoj Nair, Business Editor, Business Section, Gulf News newspaper, 9 May 2023 and online article here.

During these immediate past two years UAE witnessed a wide range of reforms, modifications, amendments in the country’s legal and regulatory framework aiming to bolster economic, investment and commercial prospects. The reforms intend to keep the momentum of the developmental achievements of the country and to reflect its impending aspirations. Over 40 laws are included in the changes, which together represent the largest legal reform in the young nation’s 50-year history. The repealing/amendments aim to develop the legislative and regulatory structure in various sectors, including investment, trade, industry, as well as commercial company, regulation and protection of industrial property, copyright, trademarks, commercial register, electronic transactions, trust services, factoring and residency. The new legislative changes came after intensive coordination at both the local and federal levels and adopting global best practices in the global legal system.

Here are some of the earlier laws and their revised versions:

The UK and the UAE have long and deep ties that extend back 50 years. Those ties are built on friendship, cultural and economic relationships. At the heart of the current relationship is the initiative, known as the Partnership for the Future, announced earlier this year by the Prime Minister Boris Johnson and HH Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. It is a partnership that embraces 10bn of investment in innovation-led sectors over the next five years that are of strategic importance to both countries.

Open for business

The UK boasts the world’s fifth largest economy and is predicted to continue to grow throughout 2022 and 2023. It is home to over 66 million people, to one of the world’s leading financial centres and Europe’s largest venture capital community, so it is perhaps not surprising that, on average, more than 600,000 new businesses are started in or relocate to the UK every year. Over  2bn has been invested in UK businesses to date, with the UAE accessing world-leading R&D. Companies in the UAE can look to the UK for opportunities to grow where we understand one another business culture. The UK, redefining its position on the world stage following its exit from the European Union and rebuilding post-Covid economy, is open for business.

Why should international businesses choose the UK?

The UAE and the UK has long enjoyed a flow of bilateral business relationships. Many of the cities in the UAE have a large UK expat community, and in turn many UAE citizens come to the UK to live, work and do business. The UK remains the most popular European country for foreign direct investment, attracting some  56.9bn of investment in 2018. Whilst that will have understandably fallen in 2020 due to the global pandemic, the post Covid picture is encouraging and for good reason. The UK offers UAE businesses a world-class legal and regulatory system and a leading financial services environment needed to support growth. It is also home to a strong and forward-thinking advisory community. It is easy to establish a business in the UK, taking on average, just four days yet can be achieved in as little as 24 hours. Businesses are attracted by the flexibility of company structures, low regulatory burdens and the UK’s competitive tax regime.

For many founders, the quality of the UK’s education system, its universities and its cultural pull, together with a highly educated workforce, a time zone that reaches across the globe and its proximity to Europe are all important factors. The UK government works hard to ensure the UK remains competitive on the world stage, offering incentives and grants for businesses looking to grow and expand internationally. Our dedicated grants and funding team at Kreston Reeves is on hand to help. A new visa programme is in place designed to encourage exceptional talent to relocate to the UK, with visa decisions often given in as little as 15 days. Visa routes are also available for business leaders in certain industry sectors, technology being one example, making it easier for founders and their families to establish a UK footprint.

London and the South East

The UK government is proactively encouraging international businesses to relocate across the UK regions, yet it is London and the South East that continue to have the strongest pull. Alongside its renowned financial centre, London is home to Europe’s largest tech hub, TechCity, with a mix of global technology giants and a community of more than 375,000 developers. Venture capital investment into the technology sector reached  7.9bn in 2018, with IPOs and mergers raising over  49bn. The South East is home to thriving life sciences, high value manufacturers, aerospace and IT clusters, naming just a few, attracted by first class infrastructure, a high quality of living and a ready pool of 21m people. Kreston Reeves, with a footprint across London and the South East, is perfectly placed to help relocating businesses find the ideal location.

Competitive tax and regulatory environment

While the UK does not have the same low tax levels as the UAE there is still a good story to tell. The UK Government has announced its intention to increase Corporation Tax rates from the current 19% to 25% from April 2023. Despite this increase, the UK continues to offer businesses a competitive and relatively low rate when compared to other G20 nations. There are generous tax reliefs on research and development (R&D), with Patent Box effectively lowering corporate tax to just 10% on qualifying patented innovations. R&D tax credits can offer up to 230% on allowable research and development for small businesses, and the research and development expenditure credit offers 13% on allowable costs for large businesses. Individuals looking to relocate to the UK can also benefit from significant tax reliefs through the non-domicile regime and with additional reliefs available for those seconded to the UK and apportionment of taxable income if their work is outside of the UK.

Sector strengths

London and the South East offers real strength and depth across many industry sectors that reflect the expertise at Kreston Reeves. London is home to world class financial services and technology businesses, with the city ranked as the most connected place for tech after Silicon Valley. It also boasts a creative industries sector that is valued over 101bn, with TV and film production companies attracted to the expertise offered. The gaming sector is recognised as a global leader. UK Healthcare and life sciences continue to lead the world. London and the South East home to both the largest pharmaceutical businesses and to entrepreneurial biotechnology businesses. The opportunity to partner with the NHS continues to remain a strong pull. The UK and the UAE are aligned in many ways and across many industry sectors. Both countries continue to define business on the world stage and increasingly in partnership.

Why choose Kreston Reeves and the UK

Kreston Reeves is the perfect partner for individuals and businesses in the UAE looking to invest or with business interests in the UK. Our team of highly experienced financial, tax and accounting specialists offer:

1. International tax planning advice to avoid and resolve complex cross-border tax issues.
2. Indirect tax and duty expertise, whether supplying services between countries or importing or exporting goods.
3. Outsourcing all financial functions, offering a virtual office in the UK.
4. Corporate finance expertise to help buyers and sellers with cross border deals.

We are proud to be appointed by the Department of International Trade, the government body that promotes trade overseas, as one of its champions to help overseas businesses grow. We have been included in the government’s UK Investment Support Directory as one of its chosen experts, in supporting the government’s aim to ensure the UK remains the number one destination for foreign direct investment in Europe.

Background

According to the UAE Federal Decree-Law No. 47 of 2022 on taxation of corporations and businesses (UAE CT Law), businesses will become subject to Corporate Tax UAE (CT) from the beginning of their first financial year which starts on or after 1 June 2023. Executive Regulations of the Decree Law containing interpretations and implementation guidelines of the Articles are forthcoming from the Ministry in the form of various Cabinet Decisions.

A few key areas have been reproduced below.

Registration of Taxable Persons

Who is liable to register for UAE CT Law?

All Taxable Persons (Persons subject to CT), including Free Zone Persons and Taxable Persons eligible for Small Business Relief are liable to register for UAE CT Law. It has been clarified by way of various Decisions that the following Persons need not register under UAE CT Law:

• A Government Entity

• A Government Controlled Entity

• A Person engaged in Extractive Business

• A Person engaged in Non-Extractive Natural Resources Business

• A Non-Resident Person that derives only State Sourced Income and has no Permanent Establishment in the UAE

• A Natural Person deriving income less than AED 1 million from Business or Business Activities

When can one register for UAE CT?

The Federal Tax Authority (FTA) is adopting a staggered approach with respect to registration. In early January, the FTA launched an early bird registration drive for CT through the EmaraTax platform. Subsequently, The FTA vide a press release on 14 May 2023 has announced the launch of registration for CT for Public Joint Stock Companies and Private Companies from 15 May 2023.

It should be noted that the Frequently Asked Questions (FAQs) published on the website have clarified that taxpayers are required to register before the prescribed due date of the first CT return without any penalties.

Tax Period

What is my first Tax Period?

For the purposes of the UAE CT Law, the Tax Period is the Financial Year of a Person which shall be the calendar year or the 12-month period for which the Taxable Person prepares financial statements.

The Decree Law applies to all financial years commencing on or after 1 June 2023. For most businesses, the financial year commences either on 1 January or 1 April. Accordingly, a bulk of the first tax years would either be

1 January 2024 to 31 December 2024, or 1 April 2024 to 31 March 2025, respectively. Further, the due date of filing returns is within 9 months from the end of the tax period i.e., 30 September 2025 and 31 December 2025, respectively.

Can a Taxable Person change their Tax Period?

It has been clarified by a recent decision that the Taxable Persons are eligible to change their Tax Periods for extending the same to up to 18 months or shortening the same to 6 to 12 months subject to meeting specified conditions.

Qualifying Free Zone Persons (QFZPs)

What are the conditions under which a Free Zone Person qualifies to be a Qualifying Free Zone Person (QFZP)?

A Free Zone Person who meets the pre-conditions for availing of the incentive mentioned under the law is termed QFZPs.

The pre-conditions to be regarded as a QFZP include:

• maintaining adequate substance in the UAE.

• complying with the transfer pricing requirements

• electing not to be taxed under the normal UAE CT regime i.e., at 9%.

The QFZPs would incur 0% UAE CT on ‘Qualifying Income’ and 9% on ‘Non-Qualifying Income’.

What is Qualifying Income?

While the term ‘Qualifying Income’ is expected to be clarified in specific regulations, the overview of the Decree published in the UAE Government Portal indicates that all income earned by the Free Zone Person which is in compliance with the restrictions on business by the Free Zone Authority particularly on transactions with the Mainland could constitute ‘Qualifying Income’.

Are there special considerations that are likely to apply to QFZPs?

It may also be noted that since the QFZPs are eligible for a tax incentive, the FTA is likely to monitor the returns and documents of such taxpayers closely. Accordingly, despite payment of Nil tax, there would be a need to maintain adequate documentation. Further, it has also been clarified that all QFZPs, irrespective of turnover, must maintain audited financial statements.

Small Business Reliefs

Are there special measures that have been introduced for small businesses including startups?

Resident small businesses having an annual revenue of less than AED 3 million in the relevant tax period or any preceding tax periods can avail themselves of Small Business Relief (SBR). Under this relief, such Taxable Person can elect to be treated as not having any Taxable Income. It may be noted that this relief is available for financial years commencing from 1 June 2023 and continues for subsequent tax periods ending up to 31 December 2026. Further, it may be noted that such relief is not available for a QFZP or a component of a Multinational Enterprises Group i.e a group with a consolidated revenue of more than AED 3.15 billion.

Are there any disadvantages of claiming such relief?

The Taxable Person claiming SBR would not be eligible to carry forward unclaimed interest costs or taxable losses in such tax periods where SBR is availed. Accordingly, it is pertinent to evaluate the claiming of this relief holistically and not in isolation.

Are there reliefs provided for small businesses with respect to Transfer Pricing (TP)?

By way of a recent Ministerial Decision, the requirement for maintaining a Master file and a Local file has been restricted to the following category of Persons:

• Component of a Multinational Enterprises Group that has a total consolidated revenue of AED 3.15 billion or more in the relevant tax period; or

• A Taxable Person whose revenue in the relevant Tax Period is AED 200 million or more.

This provides significant relief to small businesses with regard to the maintenance of extensive TP documentation. However, it may be noted that the requirement for application of the Arm’s Length Principle would continue to be applicable to international as well as local controlled transactions for all Taxable Persons.

Are there reliefs provided to small businesses pertaining to Accounting Standards and methods of accounting?

In a recent decision, relaxations have been granted to small businesses with regard to the Accounting Standards and method of accounting wherein a taxable person whose revenue does not exceed AED 3 million is allowed to maintain accounts on a cash basis and a taxable person whose revenue does not exceed AED 50 million may apply IFRS for SMEs.

Tax Grouping

What is a Tax Group?

A UAE CT Tax Group, in short, can be constituted by two or more resident juridical persons (other than a QFZP or an Exempt Person) having a parent-subsidiary relationship with at least 95% shareholding and control among other criteria. The conditions for UAE CT Tax Grouping are very different from tax grouping provisions available under UAE VAT Law wherein entities under common ownership, even if the shareholders are natural persons, are eligible to be grouped.

Is a Tax Group the same as a Qualifying Group?

The CT Law introduced two distinct grouping structures – ‘Qualifying Group’ and ‘Tax Group’. A fine reading of the relevant provisions identifies the following differences:

• While a ‘Qualifying Group’ is a de-facto status i.e., requires no application or election, a ‘Tax Group’ can be formed only through an application to the FTA.

• A qualifying group may also be constituted even if the common shareholder is an individual. The Tax Group can only be constituted of Juridical Persons.

• The constituents of the qualifying group will continue to be different taxpayers and file separate returns which will be assessed separately. In the case of a tax group, the ‘Parent company’ files one return on behalf of the group i.e., the group is assessed as a single entity basis consolidated financial statements.

• The basic exemption of AED 375,000 will apply to the tax group as an entity and not to each of its components.

Key Business Considerations

What are the key areas of the UAE CT Law that businesses will have to consider in their day-to-day operations and for making long-term strategic decisions?

CT, unlike VAT, would have a direct effect on the profits of the businesses and requires due consideration. Further, being a new introduction, the Decree Law also would introduce new concepts which would mandate businesses to recalibrate their traditional business practices.

The businesses should take due cognizance of the following major aspects introduced by the Decree and closely monitor the developments in these areas:

• Conformity to OECD Transfer Pricing (TP) guidelines for transactions with related parties and connected parties, including capturing the same in the opening balance.

• Maintenance of records supporting the information provided in the returns.

• Evaluation of any arrangement or agreement in the light of the General Anti-Abuse Rules (GAAR) prescribed by the Decree.

• The provisions relating to Place of Effective Management, Permanent Establishment or State Sourced Income may result in a business falling within the purview of this Decree, even if registered outside the UAE.

• Careful evaluation of various elections or applications prescribed under various provisions.

Are further decisions awaited from the Ministry and/or the Authority?

While a large trench of clarifications has been received over the last few weeks, the impending Cabinet Decision and regulations can add new requirements and provisions leading to multiple new interpretations and discussions.

A few key clarifications that are expected from the Ministry include:

• Specific requirements and format of documentation for transfer pricing.

• Definitions and procedures associated with QFZPs.

• Penal provisions and quantum of such penalty.

• Formats for annual returns, applications, and other statements.

Conclusion

UAE has always been known for its ease of doing business and business friendly ecosystem. The introduction of CT is a radical change, albeit essential. Apart from the effect of the additional expenditure in the Income Statement, the businesses are also concerned about the burden of compliance that they would be expected to bear.

The inclusion of provisions facilitating seeking clarifications from the FTA indicates the commitment of the Ministry and the Authority in undertaking this radical change in partnership with all the stakeholders, including all the taxpayers. This is a source of massive reassurance to the taxpayers

ASSALAMU ALAIKUM

My African heritage obliges me to first extend my respect to His Highness Sheikh Mohammed Bin Rashid Al-Maktoum, UAE Vice President, Prime Minister, Ruler of Dubai and his fellow Members of The Supreme Council, Rulers of The Northern Emirates.

I am honoured to be the Consul-General of the Republic of South Africa to Dubai and The Northern Emirates. This is my first diplomatic posting and I suppose seasoned colleagues in the government and diplomatic communities would consider me a ‘newbie’. Thank you all for your warm welcome and kindness.

It has been a whirlwind four months since my arrival and I am enjoying finding my feet and experiencing the vibrancy of Dubai and this interesting and extraordinary part of the world. My first impressions are a kaleidkresoscope of sound and light, diverse nationalities and cultures, amazing architecture, and an abundance of commercial opportunities. It is my great pleasure to kick-off 2023 as Kreston Menon’s first guest article contributor. My aim is to outline South Africa’s economic relations with the UAE, what we can learn from Dubai and my vision for the next four years.

Trade and Investment Partnerships

Economic Diplomacy is a cornerstone of South Africa’s foreign policy as it aims to address the triple challenges of Poverty, Unemployment and Inequality, all a legacy of our apartheid and colonial past. South Africa’s national interests and foreign policy objectives are cushioned in promoting peace, security and economic development on the African continent. South Africa and the UAE have maintained a strong bilateral relationship with a strong economic focus since formal diplomatic ties were first established in 1994.

Trade and Investment are integral parts of our Economic Diplomacy. South Africa occupies a strategic position as Africa’s most industrialised country with its advanced financial systems, modern infrastructure, world class educational institutions and a vibrant Stock Exchange. It provides a valuable springboard for UAE enterprises to invest in the country, the region and the continent within the ambit of the newly-established African Continental Free Trade Area (AfCFTA) flagship project. AfCTA can enhance UAE companies to invest and trade with Africa’s vast sectors in mining, telecommunication, agriculture and financial services with Dubai at the helm.

The UAE is South Africa’s main trading partner within the Gulf Cooperation Council (GCC) countries since both countries agreed in 2016 to work towards considering South Africa as a strategic partner on the African continent and a preferred investment destination.

Further cementing of this relationship was made during President Cyril Ramaphosa’s visits to the UAE, first during his State Visit in 2018 during which numerous Memoranda of Understanding (MOUs) were signed; second was his Working Visit last year during Expo 2020. Great emphasis was placed on bolstering bi-lateral relations particularly in the areas of Tourism, Trade and Investment, High Tech, Renewable Energy, Agriculture and Infrastructure Development.

May I congratulate the Government and people of the Emirate of Dubai for hosting an exceptionally successful Expo 2020. The Official Motto “Connecting Minds, Creating the Future via Sustainability, Mobility and Opportunity” cemented Dubai’s vision of being the global centre of Innovation, Digitalisation, Robotics and Artificial Intelligence. South Africa’s participation provided a significant opportunity to further solidify our economic relationship with the UAE and further develop South Africa’s trade and investment partnerships.

From our Mission in Dubai, one of my responsibilities is to provide leadership to bring substance to our economic relationship on the ground in the areas of Trade Investments and Tourism. This includes renewed engagement with the Northern Emirates, namely Sharjah, Ajman, Umm Al Quwain, Fujairah and Ras Al Khaimah and expanding our ties with them. Although the limelight generally shines on Dubai and Abu Dhabi Emirates, they also present extensive business opportunities for South African enterprises.

According to the South African Business Council (SABCO), there are over 2,400 SA affiliated or registered companies with the Dubai Chambers of Commerce. South Africa has invested ZAR 10 billion in the UAE creating more than 2000 jobs in the petroleum, healthcare and financial services. In turn, the UAE has invested ZAR 1 billion in South Africa creating in excess of 1,500 jobs in the petroleum and new energy sectors.

South Africa will assume the 15th BRICS presidency this year and host the BRICS Summit in the second half of the year. BRICS countries (Brazil, Russia, India, China and South Africa) account for 17% of global trade and 33% of global GDP. South Africa joined this important bloc in December 2010, in line with the country’s foreign policy to strengthen South-South relations. South Africa is also keen to expand membership to include other progressive countries. UAE would be a prime candidate.

Post-Covid19 Economic Reconstruction and Recovery

Our Mission will continue to play a key role in South Africa-UAE relations as part of the South African Government’s implementation of the Economic Reconstruction and Recovery Plan to provide capable and effective public infrastructure development, secure and affordable energy supply and a significant employment stimulus to recover job losses in the aftermath of Covid-19 by creating jobs and supporting livelihoods.

Tourism: Dubai Airport tops the global list for international passenger figures, 25 million in 2022 and the highest aircraft movements exceeding 400,000. As a result of bilateral agreements with Emirates and Etihad to give them access to South Africa’s domestic routes while they promote South Africa abroad, South Africa is well-placed to tap into this hub with Emirates offering direct daily flights to Johannesburg (flagship Airbus A380) and Cape Town and Durban (Boeing 777). Dubai and the Gulf region is an untapped market with huge potential for the high-end income category, corporates and the general population. This partnership is expected to boost visitor arrivals and promote tourism and inbound traffic to South Africa from key markets across the Emirates network.

Agriculture: Dubai, the UAE and the Gulf states are lucrative export markets for South Africa’s agricultural and agro-processing produce. Food security in the UAE is a strategic national priority and that is a great opportunity for South African produce as the country imports 95% of demand.

The Blue Economy: South Africa is the only country on the continent to have two coastal water masses – the Atlantic Ocean on the West and the Indian Ocean on the East. With the importance of Biodiversity and Climate Change and the UAE’s remarkable knowledge base and Future Science pedigree, South Africa can enhance its Maritime Science.

Public service: The embodiment of South Africa’s public service motto “Batho Pele” (The People First), can forge ties with the UAE’s Department of Happiness and Tolerance in promoting a just and functioning society.

Healthcare: With its ailing healthcare system and tremendous challenges especially post-Covid19 pandemic, South Africa can benefit immensely from the example of Dubai’s many state-of-the-art institutions.

Global participation: Dubai will host two strategic global conferences this year – the World Police Summit in March and COP 28 in November. Through our Mission, South Africa’s participation will enhance the country’s activities in combating crime and corruption, and continuing to address the challenges of climate change.

Cultural Diplomacy

Cultural Diplomacy or ‘Soft Power’ brings warmth to bilateral relations. “La Cultura e come l’aria, non ha confine” (Culture is like air, it has no borders). There are 114,000 South African expatriates in the UAE, the majority of them resident in Dubai and operating in the healthcare, hospitality, petroleum and financial sectors. Properly supported, this group can be Goodwill Ambassadors spreading positive stories of our Rainbow nation.

Hosting our very own sensational swimmer Tatjana Schoenmaker, Olympic Gold and World Record Holder would allow her to inspire young Emiratis to excel in swimming.

South African authors have frequently participated in the Emirates Literary Awards with much success. Improving contacts with UAE institutions especially those in Future Science such as Artificial Intelligence, Robotics, Digitalisation, Innovation and Space exploration is top on my list.

In conclusion, it is my fervent desire to see South Africa-UAE relations elevated to a High Level Strategic Partnership focusing on New Energy, Innovation and Future Technology as Dubai remains an unrivalled leader in this domain. Dubai has an immense global stature and a track record that includes its vibrant people and lifestyle. Iconic landmarks that ensure Dubai remains a premium destination are Burj Khalifa, Dubai Fountain, Burj Al Arab, Dubai Mall, The Palm Jumeirah, Museum of the Future, Emirates Airline, Expo City, DWTC, DMCC to name a few. His Highness Sheikh Mohammed Bin Rashid Al-Maktoum has set ambitious goals to make it the most important global business centre. Our Mission in Dubai will continue to play its part in fostering and enhancing South Africa-UAE relations in myriad spheres.

As we move forward in strengthening bi-lateral relations, we are guided by Doctrines of The Founding Fathers of our two nations – elder statesmen His Highness Sheikh Zayed Bin Sultan Al Nahyan and His Excellency President Nelson Mandela.

“Nkosi sikelel’ iAfrika” (God Bless Africa)

I am delighted that Kreston Global is having their Annual conference in Spain. While the UAE-Spain trade and business corridor is quite active, I would like to talk here a bit about the India-Spain economic & commercial relationship.

India and Spain share a very close relationship, both being strong democracies and without any bilateral, geopolitical irritants. Relations between India and Spain go back to the 20th century and Christopher Colombus, who discovered America, was actually sent by the Spanish Queen to look for a route to India. In 1937, Rabindranath Tagore wrote a Pamphlet titled “Conscience of Humanity”, which appealed to Indians to help in the fight for democracy during the Spanish civil war. In modern times, we established democratic relations in 1956 and today we have a vibrant political and economic relationship, which also encompasses considerable interaction in the field of Education, Science & Technology, Culture and other fields.

Economic & Trade relations have been extremely vibrant and Spain is India´s 6th largest trading partner in the EU. Bilateral trade, which registered a drop of 19 per cent during the pandemic, has rebounded and crossed 2019 figure of US$ 6.5 billion. India has a surplus of about

US$ 3 billion in its trade balance with Spain, but this is offset to a large extent by the large number of Spanish companies present in India who are doing very good business.

There are about 250 Spanish companies in India, with multi-sector presence across infrastructure & construction, auxiliary products and industrial engineering, renewable energy and environmentally sustainable products, EICT (electronic information and communication technologies), automotive components and automotive accessories. Spain has also invested more than US$ 3.56 billion as cumulative FDI in India. Recently, the Ferrovial Group of Spain invested US$ 425 million in the infrastructure sector through Prime Minister’s Gati Shakti Master Plan.

In addition, India has recently signed a major contract with Airbus Spain for procurement of 56 C-295 military transport aircrafts. This is one of the biggest ´Make in India´ contracts signed as 40 of the 56 aircrafts would be completely made in India with almost 13,000 plus parts of the aircrafts to be manufactured and assembled in India. This will see a relocation of the entire supply chain for Aerospace industries, especially for the C-295 aircrafts to India.

As I had mentioned before, India has a surplus in its bilateral trade with Spain with the main items of export being organic chemicals, textiles and garments, steel, fuels & mineral oils, aluminium and other articles, leather and leather goods, marine products, vehicles, auto components, pharmaceutical, pigments, inorganic chemicals, etc.

India has also made considerable investment in Spain of almost US$ 1 billion. There are more than 50 Indian companies in Spain mainly in Software & IT services, automotive parts & automobile industries, pharmaceuticals, chemicals and logistics.

The future looks bright for India-Spain collaboration and there are many sectors in which there is considerable scope for cooperation among entrepreneurs of Spain in India, with a maximum potential being in the start-up business. Spanish entrepreneurship ecosystem increased between 2015 to 2021 from €10 billion to €46 billion. This provides considerable opportunity for start-ups in India to upscale in Spain and Spanish speaking countries as well as for Spanish start-ups to do the same in India. The future is bright for India-Spain relations and companies and organizations active in this corridor, especially in UAE should take advantage of this opportunity.

Raju Menon, founder, chairman, and managing partner of Kreston Menon talks to Pranitha Menon about dreaming big, his management principles, and his autobiography The View from My Perch

Rajagopalan Menon, better known as Raju Menon, was 29 years old when he boarded his first-ever flight– from Mumbai to Dubai in 1991. Armed with a degree in Chartered Accountancy and a year’s work experience, he arrived on a visit visa with hope and courage to seek a life and livelihood in the UAE. ‘I was unsure of what the future held even though I had very clear visions of what it should be. There was no apprehension, just excitement,’ says Raju, who hails from a tiny hamlet called Edavilangu in the southern Indian state of Kerala.

Over three decades in the UAE, he would go on to found and helm the Kreston Menon Group, a leading audit and business consulting firm with operations in UAE, India, Qatar, and Oman; gather a long list honours; be named one of top 100 Indian Leaders in the Arab world, and pen an autobiography that is eliciting rave reviews.

Released late last year at the Sharjah International Book Fair, The View From My Perch chronicles his story of consistency and perseverance. Neatly demarcating his life into different phases, each represents a struggle and a step towards his destination and dream.

What led him to pen this story?

‘I never thought of writing a book and I felt I was too young to be writing an autobiography,’ says Raju, with a smile. However, the seed of a book was first sown by Sudhir Kumar, his senior partner Kreston Menon. A book, Sudhir was sure, could inspire students and young entrepreneurs.

‘Whether that happens or not, the thought convinced me to give it a try,’ recalls Raju.

The pandemic acted as a catalyst. Keen to use the free time that he had productively, he decided to pen his memoir. ‘To compile my experiences, thoughts, and vision into this compendium of life, I remember spending hours and days in the office meeting room, aptly named Maydan, which became my haven for ferreting into the past to dig out nuggets buried in the deep recesses of my mind.’

Once he got going, he wanted to ensure that the book would be perfect in all senses of the term. To that end, he made a few trips to Kerala to relive and experience once again firsthand some elements that had shaped his personality, and meet a few key people who in some way had had a bearing on his life.

Insightful vignettes of all of these feature in his book giving it a deeply personal feel.

‘Like everything else I do, I just gave it my very best,’ says the man who started out life in the UAE as an audit manager in a modest firm in Dubai.

What motivated him to set up Kreston Menon, a company that has bagged the Super Brand status for nine consecutive years? I ask.

‘To excel and never to be content with the ordinary,’ says Raju, with a smile. It is a mantra that pushes him to make his choices. It is a lesson, he says, he learned the hard way.

Need to think big

Forced to pursue higher studies in a privately-owned educational institution after performing poorly in his Grade 10 board examination, Raju watched with envy his friends heading off to vibrant, exciting environs of reputed colleges.

Realizing that his lack of focus at a crucial juncture of his studies had cost him the opportunity to continue education in a well-known college, he resolved ‘never to settle for the mundane again.

‘Even today, I hold that character trait dear. Think big, do big, execute big. You can break beyond the limits by thinking big. Once you think big and set your goals high, it will widen the horizon of your life, and bring you greater opportunities and greater success,’ he asserts.

Pursuing academics with a vengeance of sorts, he cleared his Chartered Accountancy exams in the first attempt, an achievement that made his parents proud.

Encouraged, he decided to set up an entrepreneurial venture in Kozhikode, Kerala. However, it did not take off as planned.

Not one to give up, he decided to look beyond the boundaries of his state to realize his dream of making it big in life. Heading off to Mumbai, he landed a job in a multinational company and earned valuable experience.

However, Raju’s dreams were big.

‘People get comfortable in their little successes and trapped in them for eternity, unable to realize their full potential. To succeed and achieve the maximum, one has to take risks and venture out into the challenging world… outside their safe haven,’ says Raju. Practicing what he preaches, he decided to move out of his safe job and took a flight to Dubai.

Raju was aware that it is a new place where he would have to put in long and hard hours to make a mark in his field. But he was willing to do that and more.

‘Upskill yourself and stay competitive. A successful entrepreneur needs to be a constant learner,’ he advises before adding, ‘Hard work is the cardinal principle for me.’

Is it not – work smart, not hard? I ask.

Hard work is the base. It is that first step that you must take before you work smart.

It was Raju’s mother, Susheela Menon, a midwife, who had a strong influence in shaping him into who he is today. ‘She was hard-working, willing to help people at any hour of the day or night, and was empathetic.’

The first job he got was in a company named Mak&Partners, in Dubai. For close to a decade here, he worked 14 hours every day. ‘I was never a clock watcher but used the flexibility given to me by my boss, Khalid Bhai, as an opportunity to gain knowledge and experience.’

In 1995, he set up the Kreston Menon Group. From a small team of three people, the firm today has grown into an enterprise employing more than 400 Chartered Accountants, internal auditors, and accountancy professionals. Raju’s wife, Girija Menon, is a senior partner at Kreston Menon and a certified internal auditor.

Even today, he believes in working hard… and smart. ‘Now, I head an organization that is structured and runs like a well-oiled machine. All I must do is manage it well.’

Delegation, he believes, is the key to effective management. ‘I have learned that micromanagement of people and business is self-defeating. When given the freedom, people bloom,’ he points out.

Trusting, empowering, incentivizing, and giving employees the freedom to creatively develop the business in their own style could work wonders, he says.

As an entrepreneur, he stands by the management principle of the People First approach and values work-life balance for all employees. ‘If you do not empower your leaders (partners, directors, managers) and give the freedom to operate, you won’t be successful,’ he says. ‘I am supported by a great team that shares the same objectives and strives for a common goal.’

Raju believes that there are no shortcuts to success. ‘My success will definitely be counted on how effectively I am creating a unique experience for each of my clients by providing them with the right and timely business advice.’

He goes on to explain that in an ever-evolving business environment, his success also lies in how effectively he leads his team to stay relevant, updated, and ahead of the competition.

The going– and growing– however, was not easy.

A legal issue in 2011 threatened his firm’s survival but Raju fought the case and won it.

The pandemic too affected them, but that was a great teacher, says Raju. ‘The lesson that it left in its wake that had to be put into practice was to be prepared for unpredictability and rework on short-term and long-term planning and strategies.’

The first break

Over the years, Raju says that he has witnessed and experienced that getting that first break is the most difficult task. He has noticed that once a person gets the right break, they move up very fast, provided they are willing to work hard.

‘Wiser by having undergone such ordeals, I believe in giving the first break to people who are known to me or have been referred even if they may not be up to par in their qualifications but have the fire in them to do well and succeed.’

One initiative that he is extremely proud of is partnering with the Expo 2020 team, as early as 2013, to support their bid to organize the world-renowned, unique, and historic event, the Expo, in Dubai.

A firm believer of women empowerment, the father of three mentions that 45 percent of the total workforce at Kreston Menon are women.

‘Life has been very kind and generous to me. Now, in turn, I try to spread happiness in people around me,’ he says.

To give focus to their philanthropic efforts, Raju and Girija have started the CA Girija & CA Raju Menon Foundation in Kozhikode, Kerala, providing support for education, marriage, and healthcare for individuals who approach them for help.

To empower women, they conduct training courses to enhance their communication and public speaking skills, which will give them the confidence to contribute to society.

‘Both of us wholeheartedly believe that all human beings are equal and equally capable of achieving and contributing to the community, society, and humanity,’ says Raju.

Source: “Think big, do big, execute big”, AuthorSpeak Section, Friday Magazine, Gulf News, 31 March 2023 and online article here.

UAE AND INDIA MARK THE FIRST YEAR UNDER THE LANDMARK AGREEMENT

A year after the UAE-India Cepa deal came into effect, the stage is set for the next big bang in trade and investment flows between the countries – a dirham-rupee payment mechanism.

When that happens, multiple categories – and businesses within them – would benefit from the closing deals in the two currencies and not have to use US dollars to make it happen. What that does is cushion trade between the countries from foreign exchange volatility brought on by the dollar’s movements.

“India is looking to ways that can speed up and smoothen out trade with its biggest economic partners,” said a senior Indian government source. “We have learnt the processes well in using the rupee in financing imports from Russia, and it’s been a major factor in limiting inflationary pressures in the economy.”

“If India and UAE sign a deal confirming rupee-dirham, it will further expand the scope of Cepa.”

Meeting CEPA targets

It was with India that the UAE entered into its first CEPA – or the Comprehensive Economic Partnership Agreement – that immediately brought down import duty across categories and opened up new investment possibilities for entities in these countries.

What UAE and India are looking for are to go in for immediate benefits from CEPA where possible and then work on those areas where they can make steady progress.

“I’m not aware of any UAE imports that are subject to 0 per cent import duty in India,” said Raju Menon, Chairman and Managing Partner at Kreston Menon, the audit consultancy.

“However, under CEPA, India has agreed to reduce or eliminate tariffs on a range of products imported from the UAE.”

“The UAE has agreed to provide tariff concessions to India on 60 per cent of items traded between the two, including on basmati rice, textiles, and pharmaceuticals.” (India last week reworked the processes involved for the country’s gold trade to source bullion from the UAE under CEPA. This could in the coming months see UAE provide up to 140 tonnes of bullion to India, and which will consolidate its status as the second biggest supplier of gold to that market after Switzerland.)

Trade is on the up

Trade gains have been there from the start of the CEPA becoming effective from May 1. Between April to November 2022, two-way movements totalled $57.8 billion from $45.3 billion a year prior to that. That’s a rise of $12.5 billion in value terms and 27.5 per cent in percentage terms.

India’s exports to the UAE went past $20 billion during this period, leveraging a 19.32 per cent increase.

“As per the CEPA agreement, there would be periodic reviews to assess progress and identify areas for further cooperation,” said Menon. “The UAE has set up a dedicated task force to ensure the smooth implementation of the agreement, while India has created a website to provide information about the CEPA and facilitate trade between the countries.”

Beyond $100b in trade

Boosting two-way trade to $100 billion is the stated aim before the end of this decade, but there is also the greater emphasis on generating more from trade in services, with a target of $15 billion.

The cable-maker Ducab Group recently opened an office in the south Indian metropolis of Bengaluru, and its CEO Mohammed Abdul Rahman Al Mutawa was there on the ground. And he’s liking what’s showing up as possibilities post-CEPA.

“India is our new home market,” said Al Mutawa. “India has always been of interest to us and CEPA made the decision of opening an office in Bengaluru easier.”

“Ducab has been supplying to the Indian market since 1988, with its first project being the Nhava Sheva Port in Mumbai. Ducab has supplied 263,000 MT of of CuEq (copper equivalent) of metals to the market through the years. This is equal to powering approximately 3 million houses.

The other big investments or commitments made by UAE businesses are by the likes of Emaar, LuLu and the Sharaf Group, while DP World is expanding the scope of its already substantial interests in that market.

But business chiefs say it is still too early to fully realise the full possibilities that come with CEPA. “The impact of such agreements can take time to be felt, as businesses need to navigate through the legal and regulatory requirements of investing in a foreign country,” said Abdul Jebbar P. B., Group Managing Director at Dubai-based Hotpack Global, currently on a major expansion in the UAE and Saudi Arabia.

India is becoming one of the most desirable markets for businesses from all over the world due to its sheer size. And the government has been prudent in encouraging investment.”

With CEPA, UAE businesses with an India focus might have that extra edge.

In this year of 2022, Japan and the United Arab Emirates are celebrating the 50th anniversary of the diplomatic relations which was established on 4th May 1972. The two nations have been fostering strong and friendly relationships for the past 50 years.

The trade relationship between Japan and the UAE have been traditionally highlighted by the cooperation in the energy field. However, in recent years both the governments have worked together on expanding the scope of cooperation in various fields such as education, renewable energy and space explorations. Let me point out the importance of the “Comprehensive Strategic Partnership Initiative (CSPI)” between our two countries, which is designed as a new cooperation framework based on the Joint Statement issued on the occasion of the visit by the then Prime Minister, Mr. Shinzo ABE to the UAE in 2018. The CSPI framework covers 12 fields of cooperation, not only traditional fields such as energy and business but also advanced technologies and women empowerment.

The bilateral cooperation has now flourished beyond the earth to the space. The UAE became the first Arab country to reach Mars in February last year with its Mars Mission named Hope Probe, and this made the people in the UAE and Japan excited. The HOPE was launched from the Tanegashima Space Center in Japan with an H2A rocket which was made in Japan by the Mitsubishi Heavy Industries, a renowned Japanese company. This is one among many contributions by Japan to the UAE’s space explorations, and the achievement gives us literally a “hope” for the future of our bilateral cooperation.

When we turn our eyes to the Expo, we can find interesting links between the two countries. The Emirate of Abu Dhabi participated in an Expo for its first time, even before the founding of the UAE, when the City of Osaka in Japan hosted the Expo in 1970. Half a century later, the UAE hosted the Expo 2020 Dubai, the very first Expo in the MENA region which saw the largest global gathering since the start of the pandemic, came to an end on March 31, 2022. Then, the baton of the Expo-host was handed over from Dubai to Expo 2025 Osaka, Kansai.

Relations on Trade and Commerce

Let me give you an overview of the trade relations between Japan and the UAE. The total value of imports from Japan to the UAE was USD 7.1 billion and that of exports from the UAE to Japan was USD 26.2 billion in 2019, which was before the pandemic. While the total value of both imports from Japan and exports to Japan dropped to USD 5.5 billion and to USD 16.3 billion respectively in 2020, the UAE is still one of the ten biggest importing partners for Japan and maintains strong trade ties with Japan. Transportation equipments account for the majority of Japan’s exports to the UAE. For Japanese industrial products, the UAE is an important destination because it has always been a re-exporting base to the markets abroad for these products. The importance of the UAE for Japan as a close trading partner would remain unchanged in the foreseeable future.

As for business and commerce relationships between our two nations, approximately 290 Japanese companies are currently operating in Dubai and the Northern Emirates, which cover a wide range of industries including manufacturing, wholesale and retail and transportation services. Many Japanese enterprises have established their regional headquarters for business in the Middle East and Africa in Dubai, owing to business-friendly environment for foreign companies created and enhanced by the UAE over the past 30 to 40 years, which consists of the stable social and political situation, the well maintained public safety and security and excellent infrastructure such as electricity, water, telecommunications, medical care and educational system, to name a few.

Furthermore, there are many free zones with much less restrictions for foreign investors and English is widely spoken as a business language in the UAE. These are the factors that have contributed to the UAE ranking first in the MENA region and 16th in the world in the business environment ranking issued by the World Bank. However, I believe the most important reason is that Dubai has created a diverse and tolerant society where people from different cultures and backgrounds find it easy to reside. The expat business community finds it welcoming that they have access to non-halal food and alcoholic beverages at select places in the emirate.

In addition, Dubai has succeeded in mitigating socio-economic impact of the pandemic since the early 2020, by starting PCR tests widely in the emirate while strengthening its medical systems, by having resumed to accommodate travelers including tourists from abroad as early as July 2020 and by accelerating the vaccination process at the fastest pace possible. Then, the Expo 2020 Dubai opened doors to the world, adopting effective preventive measures against the COVID-19 in October 2021. The event which was forced to be postponed for a year due to the pandemic, came to the grand finale with a great success at the end of March 2022. This success proved that those preventive measures by Dubai were correct and appropriate.

The government of Dubai has been standing firm with its policy of managing society “with COVID-19” since the early stage of the pandemic. This policy has made it possible for Dubai to continue to be a valuable and attractive investment destination not only for Japan, but also for countries all over the world.

Contribution to FDI from both sides

We, Japanese, welcome the trend of revamping the regulations on foreign investments in the UAE over the past few years. The abolishment of the required majority shareholding ratio of the UAE nationals in the foreign investments with the amendment to the Commercial Companies Law in September 2020 could be a tailwind policy for Japanese corporations who generally prefer 100% capital investments. Even the Japanese companies who have established their offices in the free zones see the new policy as a positive development in the UAE as it allows them to operate their businesses not only inside but also outside of the free zones.

It is noteworthy that each emirate is very proactive in attracting start-up companies from abroad. In this context, I could mention a few examples in Dubai – the Dubai Silicon Oasis, the Dubai Start-up Hub, and the Dubai International Financial Centre. Moreover, events such as GITEX and the Sharjah Entrepreneurship Festival are being held at various locations in the UAE to bring together the latest technologies and ideas from around the globe and Japanese start-ups are also turning their attention to the UAE.

Furthermore, I would like to point out that there is a growing business relationship between Japan and the UAE, not only at the national level but also at the local level, for example between Dubai and the Osaka Prefecture or the City of Osaka, the next host city of the Expo and the sister city of Dubai. Last December, the Osaka Chamber of Commerce and Industry co-hosted an online event with the Dubai Chamber of Commerce and Industry for business exchanges including a pitch session by enterprises located in Dubai and the other Middle Eastern countries who are keen to entering the Japanese market. Also, the Osaka Prefecture hosted a symposium in February 2022 connecting Japan and Dubai to encourage Japanese corporations to expand their operations into overseas as part of the commemoration events of the 50th anniversary of the diplomatic relations between Japan and the UAE.

Future Vision

As aforementioned, this year marks the 50th anniversary of the establishment of the diplomatic relations between Japan and the UAE. I, as the Consul-General of Japan in Dubai and the Northern Emirates, would like to emphasize my efforts in the following areas to make our relationship more multilayered and multifaceted towards the 50 years to come.

First, let me take up the economic area. I would like to bring new Japanese companies, especially start-up companies to the UAE, in addition to supporting Japanese enterprises who have been already operating in the UAE. On one hand, I believe that there are many start-ups in Japan which could provide solutions to the needs of the governmental organizations as well as private companies in the UAE.

On the other hand, I strongly feel that efforts have to be taken to make Japanese start-ups aware of the attractiveness of the UAE as an operation base and the business opportunities which the UAE is offering to foreign entrepreneurs. I would, therefore, like to promote exchanges between companies including start-ups from both nations and contribute to further economic development of our countries.

Secondly, I would like to increase the number of inbound tourists from the UAE by introducing them to various charms of Japan, especially food related ones such as wide variety of culinary in Japan and high-quality Japanese ingredients. We offered Saroma Wagyu which is one of the premium beef produced in the Hokkaido prefecture, Anpogaki (persimmons) from the Fukushima prefecture, and Crown Melon from the Shizuoka prefecture, when I hosted our Emperor’s Birthday Reception on the occasion of the 62nd birthday of His Majesty the Emperor Naruhito in February. After witnessing the long queue and receiving positive feedback from the guests, I found once again the tremendous market potential our food products have.

Lastly, I would like to develop platforms for further exchanges between the youths of Japan and the UAE who will lead the next generation of our great nations. In this context, I am strongly interested in promoting exchanges in new areas such as e-sports and e-games. The UAE Olympic Committee has recently recognized e-sports as an official event, and this proves the growing popularity of e-sports in the UAE. I have high expectations for young people to play a key role for deepening mutual understanding between Japan and the UAE and for being the driving force to further enhance our existing harmonious relationship for the next 50 years.

The United Arab Emirates government published the Federal Decree No. 32 of 2021 concerning UAE Commercial Companies Law (CCL 2021) which came into force on 2nd January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) were repealed.

Prominent provisions and amendments to the Law:

Public Joint Stock Companies (PJSC)

(a) Allows the establishment of companies for the purposes of acquisition or merger, and SPVs, and establishes a legal framework for these new legal forms and excludes them from some provisions of the Companies Law through a decision issued by the SCA to regulate the work of these forms of companies.

(b) Abolishes the maximum and minimum percentage of the founders’ contribution to the company’s capital at the time of the public offering as well as cancels the legal limitation of the subscription period and leaving the two matters to what is specified in the prospectus.

(c) Eliminates the requirement for the nationality of the members of the board of directors and upholds the organization shareholders’ decisions in the election of board members, in accordance with the terms and conditions set by the competent authority.

(d) Allows companies to transform into a Public Joint Stock Company and sell its shares or offer new shares in a public subscription without being restricted to a certain percentage by following the price-building mechanism of the security.

(e) Allows companies to divide and create legal rules governing division operations, thus contributing to diversifying the company’s activities and fields of work and increasing its projects and growth opportunities.

(f) Allows companies to determine the face value and to determine the percentage of the offering. The CCL 2021 allows shareholders to determine the nominal value of shares as specified in accordance with the PJSC’ Articles of Association thus removing the range of AED 1 to AED 100 prescribed by the CCL 2020.

(g) Finds financing solutions for companies through the issuance of other types of shares.

(h) Allow companies to issue discounted shares in case the market value of a company’s share price falls below the nominal value subject to (a) passing a special resolution; and (b) obtaining the approval of the Securities & Commodities Authority (SCA). However, the result of issuance of shares at a discount will cause a negative reserve, which must be settled from its future profits before any profit can be distributed amongst the shareholders.

Limited Liability Companies (LLC)

(a) Expiration of the Board of Managers’ term If the term of the Board of Managers expires, and a new Board of Managers is not appointed, then the existing board will continue to manage the LLC for a period of 6 months. At the end of this term a new board must be appointed by the LLC, and if not appointed, the Department of Economic Development (DED) can appoint a board whose term will not exceed one year, during which, the LLC must appoint a new Board of Managers. Therefore, the appointment of the Board of Managers by the DED is a stopgap arrangement that will be regularised if the LLC fails to appoint the board itself.

(b) Appointment of the Supervisory Board CCL 2020 obligated LLCs to appoint a Supervisory Board when the company consists of more than 7 shareholders. CCL 2021 has increased the number of required shareholders to 15. The Supervisory Board is appointed from at least three shareholders to supervise the company’s annual reports, budgets, distribution of profits and to also supervise the LLCs’ managers and submit a report in this regard to the General Assembly.

(c) Decrease in Legal Reserve CCL 2021 has decreased the extent of allocating a legal reserve from 10% to 5%, and as prescribed by the CCL 2020, the CCL 2021 emphasized that shareholders can stop this allocation if the legal reserve reaches 50% of the share capital.

Foreign Company Branches

Allows branches of foreign companies licensed in the country to transform into a commercial company with UAE citizenship.