Taxlinked Special Economic Zones (SEZ) Series: UAE
Our panelists were:
- Dr. Peter Wilson, PB First Global Tax Advisors, Dubai, UAE
- Andrew Morris, Partner, Banks Legal, UAE
Andrew Morris: My name is Andrew Morris. I’m a Partner at law firm Banks Legal in the UAE. As a background, I’m from New Zealand, I trained and qualified in New Zealand and it wouldn’t be for a number of years before I came out to the UAE in 2007. And so for the past 12 years my practice has probably been corporate and commercial with a focus on foreign direct investment. So I deal with a lot of businesses that want to come into the region and I advise on all aspects that have to do with structure themselves, both in the UAE but also with a view to expanding within the region.
Peter Wilson: Good morning, good afternoon everybody. I’m Peter Wilson and I’m an international tax adviser. I’ve been over the years working and living in Australia, London and New York and, since December 2016, I have been based in the UAE. My clients are not confined to locations in the UAE; they’re all over the world. I just happen to be in London at the moment, so that’s why I’m a bit dressed down compared to what I would normally be in the UAE.
Question 1: What exactly is a special economic zone?
Andrew Morris: When it comes to SEZs, the UAE is a bit more complicated than most. We have probably around more than 50 these days so we thought it’d be good to quickly explain in an UAE context what we actually mean by SEZs. So it’s helpful to quickly understand the legal and regulatory framework that we deal with here. So the UAE is a federation of 7 nation states. At the top level we have federal law, which includes the federal companies law, and then each Emirate within certain parameters is able to pass their own legislation, which does include matters pertaining to corporate structuring. And it’s at the Emirate level where the majority of SEZs or free zones are actually established, and so the exception being the financial free zones in Abu Dhabi and Dubai, which are actually established by federal legislation. It’s important to distinguish between SEZs that are established by law and that’s where many of the benefits are established. We also have other zones that are economic zones but they exist on what we call the mainland or onshore, which basically means outside of the SEZs established by law. So they are targeted at certain industries and provide facilities, but they don’t necessarily have the benefits of the legally established SEZs.
Peter Wilson: I’d just like to ask Andrew if he could just give some examples. Because I know there’s something called the Dubai Cars & Automotive Zone (DUCAMZ). Is that the zone only where you can retail cars or are you able to conduct other business activities there?
Andrew Morris. That’s a good question. Across the Emirates and predominantly Dubai, that’s where most of these zones are, all of them are established with some form of orientation towards a particular industry or purpose. And so it’s good to mention that there are zones that contain the automotive industry, you have port free zones, which are obviously focused on logistics and trade, financial free zones. So all of these zones will have a focus and often a purpose or infrastructure, but within those zones you will still have the capability to establish other companies that do other things. That might be ancillary service providers and companies that support the function of the zone. There are other zones, for example, Dubai Multi Commodities Centre (DMCC), which as its name suggest has a focus on trades and commodities. However, it has around 15 thousand companies in all sorts of disciplines, so as a policy they allow companies that are operating in many different areas to establish within the zone, so the answer is yes, you can establish companies in this zone even it’s not necessarily related to the industry that the zone appears to target.
Peter Wilson: So in the DMCC you could have a law firm?
Andrew Morris: Yes, that’s right. You have basically any type of business you can probably think of in the DMCC that are very open. They’re located in central Dubai, so there’s location, and there’s a lot of office space, probably 80 towers in that area, I think it’s one of the largest free zones in the world. As much as they have a stated purpose, they are also open to businesses of all types.
Peter Wilson: Is it possible for a company established in a free zone to have a branch outside the free zone?
Andrew Morris: The answer is yes, and that’s a development that we’ve seen over the past few years, more recently. And, again, to go back to the framework, if you’re licensed and established in the free zone, and you’re issued with a business license, which will have specified activities and that’s the scope of what that company can do. So if you’re in a SEZ, you’re restricted to operating in and from that SEZ. So what we’ve seen, with the exception of, for example, the port free zones, where access in and out is actually restricted, all these other zones are actually open access. So there’s always been a bit of confusion on how you’re allowed to operate from a free zone. What we’ve seen in recent years is that a lot of these free zones are now offering in conjunction with the onshore or mainland authorities the ability to establish a branch of that free zone company onshore the UAE, which effectively allows that company to carry out its activities in the UAE. That’s the trend and that’s a response both to the popularity of the free zone model but also a recognition that it’s a little bit difficult sometimes for companies to carry out business. So that’s been quite a positive recent development with respect to the flexibility of a SEZ company.
Peter Wilson: Can that lead to complications in the corporate structure and complications in the license for the branch outside of the free zone?
Andrew Morris: In terms of complications, the sort of basic point I suppose is, this is something that when we are advising companies on structuring, we’ve asked them, “What’s your operating footprint going to be?” We’ll draw down on to one of those directions to determine if a SEZ is where they should be. And also look at how they might be using it in the future. Where the branch structure comes into play is where initially perhaps operations can be confined and be carried out from the SEZ but in the future they might need the ability to operate onshore. That can include, certainly if you’re dealing with government, almost always they will have a preference or even a mandated requirement for you to have an onshore license. But complications wise, the branch license basically says that you’re licensed to carry out that activity outside the free zone in the Emirate where you registered the branch. So I don’t believe from a liability or tax perspective that still, the company that you established in the SEZ, a branch is not a separate legal entity, it’s simply the legal presence of that company onshore in the Emirate in which it’s established.
Question 2: Which are the main SEZs available in the UAE? What industries does each SEZ specialize in or cater to? Are there any particular success stories you’d like to share?
Andrew Morris: As I mentioned, there are over 50 spread throughout the Emirates, primarily in Dubai, so you have a lot of choice and that’s a key point. Each free zone has their own attributes. To give an example, the Jebel Ali Free Zone, which was the first free zone established in the UAE in 1985 has a strong emphasis on trade and logistics and operations and has a very established structure around that. It’s a very popular hub for regional trade and for companies bringing products into the region. I believe they handle about 20% of Dubai’s GDP, which is pretty substantial.
Another example is DMCC; they have around 16 thousand companies now established since they started in 2002 and, as I mentioned, that’s across a broad range of industries but also they have a pivotal structure around the trade and commodities such as gold, diamonds, tea, coffee and other sorts of commodities. In addition, they have commodities and derivatives exchange there, and I think they account for about 10% of Dubai’s GDP. So again that’s a story that has come up in its place and time.
The Dubai Airport Free Zone is another long established zone as the name suggests, it’s located proximate to the Dubai airport and is popular with food and beverage companies and logistics also. You have other companies such as Dubai Internet City, which is home to a number of global companies—Oracle, Dell, IBM, they are all in there. Initially, it had a focus on that sort of companies but, again, you have companies of all sorts that are in there. It’s very centrally located also. Those are a few examples of pretty well established zones but, as I mentioned, there are many zones that have their own focus.
Peter Wilson: What’s interesting is that one of the original intentions of the zones was to get like businesses established adjacent to each other using the theory that if they were next to one another, they’d run into each other and they could do a lot of business together. So you do have the tech zones, the commodities zones, the airports, the car zones, and the jewelry zones. When you travel around Dubai you can almost work out what zone you’re in by looking at the enterprises that have signs up there.
Question 3: What are some of the UAE SEZs’ main financial and tax advantages?
Peter Wilson: Well, for the uninitiated, one of the great benefits of the UAE, other than for certain companies and industries we do not need to talk about now, is that there’s no corporate tax. So it doesn’t matter whether you’re in a zone or out of a zone for those, there’s no corporation tax. Another benefit is there’s no personal income tax, so that doesn't matter whether you happen to have your residence inside a zone or outside a zone.
What has become important since the beginning of 2018 when the UAE introduced a VAT is that for certain of the zones they have been carved out to almost become a designated area and, if you’re trading with another party within the designated zone, you will not have any VAT liability, assuming there would be if it was a transaction that ordinarily there would be a liability to VAT. And if you’re trading with a party that’s in another designated zone—so let’s make it a cross-zone transaction—when the good goes across the free zone into onshore and goes into another designated zone, there’s no VAT on that transaction as well. That does not apply to all zones; there are some specific requirements, fences, regulations, and all this sort of stuff that designates which of the 50 or so free zones qualifies as a designated zone for this purpose. So all this is designed to improve the free flow of goods and services generally across borders and intra-zone so when the goods or services coming out of a zone and going onshore, that that’s the first point that the VAT becomes applicable.
Andrew Morris: You’ve got 100% of foreign ownership of companies established in the free zones. That’s also a big attractor. That’s different to if you’re established onshore. There are different types of entities but often you’ll require an Emirati partner, which could be an individual or a corporate entity to hold shares on the company on a nominee basis. There has been a law come out recently that has opened up that area to 100% foreign ownership on the mainland, which some companies have now managed to achieve that even though the implementation is still in process. That should be interesting in terms of onshore activities, you might find companies take advantage of that; they may start to focus on that instead of the free zone. But 100% repatriation of profits as a regional hub, free zones are popular. And then again the infrastructure, you’re dealing with one authority, you deal with the free zone authority in terms of all your licensing, visas, annual returns. If you’re on an onshore context, you might find yourself dealing with other government authorities. So those are some of the key benefits.
Peter Wilson: Another benefit we should talk about is that if you’re an onshore company in the UAE, you’re highly likely to qualify as a UAE resident for purposes of UAE double tax treaties. If you’re an offshore company for UAE purposes, then you can be an international company in Ras Al Khaimah or be an offshore company in Jebel Ali, these are a couple examples I’m aware of. So if you're an offshore company, even though you’re incorporated in the UAE, you fall in this funny status of being an offshore company, you won’t qualify as a resident of UAE for double tax treaty purposes. But if you’re incorporated in a free zone in the UAE and if you’re properly established in the free zone, traditionally you’d qualify as a resident of the UAE for double tax treaty purposes, even though there‘s no corporate tax. So the definition of a resident in a treaty sometimes requires the subject to tax liability or the subject to tax provision for the party to qualify as a resident under the treaty. So you have this interesting situation in the UAE, which is one of the reasons why it’s such a great place for international business to be located, is that you can establish a company onshore or within the free zone that will qualify as a UAE resident under a double tax treaty, most double tax treaties, there are some that you won’t but as a generalization it will, even though you’re not liable for corporate tax in the UAE and even though the shareholder, if the shareholder is a resident in the UAE, he’s not liable to any personal income tax in the UAE. And there’s no differentiation inside that rule as to whether the zone you’re established in is a good zone for no VAT or a zone that doesn’t give you the VAT exemptions. That’s a pretty powerful benefit.
Another interesting tax issue is that the UAE is currently on the EU’s blacklist of countries and that’s a consequence of the aggressive attitude of the EU under the code of conduct policy. The UAE earlier this year was put on the grey list and then Brussels decided that the UAE was not proceeding with great haste to implement the economic substance rules and put the UAE on the blacklist. Now, the UAE I believe is on the ECOFIN meeting that’s either today or tomorrow and the next couple of days and is being recommended to being removed from the EU blacklist because the UAE has brought in economic substance rules. And the UAE substance rules are probably some of the toughest substance rules in the world. But the point about it is that there was no differentiation within the UAE’s blacklist as to whether the UAE entity was an onshore entity, an offshore entity, a free zone entity or a designated entity. So the EU, in my view, has been very cavalier in the way it has treated the UAE, especially since it’s almost impossible to form a company within the UAE without some level of substance. I can go online, form a company in the UK with my ten pounds at Company’s House and I don’t need to have any substance. I’d like to invite Andrew just to talk about the basic levels of substance even before the new economic substance rules come in in the UAE that you have to have.
Andrew Morris: I think it makes the UAE quite interesting in this climate of substance, which is not limited to the UAE, it’s a global thing now. So, as Peter said, the majority of entities, the mandatory requirements to actually set it up will require you to establish a level of substance. The most basic example of that being, there are some exceptions but pretty much all companies will require you to take some form of lease of premises, that could be a physical office, a service office in a licensed business center, or some zones will allow you to have access to a hot desk. But in a minimum you have some form of physical location, in addition to which you need to appoint a manager that often you’ll find the requirement would be that they need to be residents, not in all cases, but practically speaking, you need to establish a local bank account, in some cases you’ll be required to demonstrate that you’ve paid out capital. We’re still waiting to see exactly how it will look in the UAE context but you already start to tick a few of the boxes.
Where the exceptions lie and Peter mentioned the offshore entities that you can establish here, to clarify there are companies that probably, if you’re familiar with the BVI company, they have somewhat their appearance, you establish it with just an agent, you use their address and it behaves very similarly. Those entities are not capable of sponsoring people; they are not issued with a business license to operate in the UAE as such. For those entities, it will be quite interesting how they will actually aim to meet the substance requirements because the actual nature of the entity does not necessarily lend itself easily to ticking the substance requirement boxes. But that’s a specific type of entity, though one that’s commonly used.
Peter Wilson: If I can elaborate on that. I sat alongside the regulator of Ras Al Khaimah offshore company in a seminar maybe ten days ago and he was specifically asked, “Given that for a RAKICC company it’s mandatory that it doesn’t have a presence in the UAE, how on earth is it going to establish that it has economic substance when its license specifically prevents it from having economic substance?” He said he doesn’t have an answer for that at the moment but they’re working through that. Is that going to end up with burying the license? You’re going to get into some very interesting issues. If you have a RAKICC company and you have economic substance problems, are you going to try to re-domicile the company out of being an offshore company into an onshore company and do the rules actually allow you to do that? Andrew would be better to speak about that than what I can, but it is relevant for these companies as well.
Andrew Morris: There are challenges re-domiciling that type of entity in the UAE into a zone that will allow you to start ticking those substance boxes such as a business license, renting an office, that sort of thing. The specific example that you mentioned, Peter, regarding the RAKICC, they have and I presume it was with this in mind, that they did at one point have some structure they were offering that with your offshore company you could own one of their—because they also have entities where you do get a license within the free zone—they were actually offering a structure where you could have your RAKIC owning one of those vehicles, and I’m not sure whether they were thinking of this as some form of work around. But that sort of demonstrates the thinking that’s going on and obviously some of the challenges that do exist with the introduction of economic substance.
Peter Wilson: Yeah, the economic substance rules, one of the main issues in the UAE is that it requires everybody to register, whether you’re an UAE incorporated entity or whether you are a branch in the UAE of a foreign entity, you’re required as of the 31st of December, 2019, to register. And it’s a part A and a part B process. Part A process is asking you 3 simple questions. The middle question is probably the most difficult one and that is: “Are you carrying out a relevant activity?” And if you say you’re not carrying out a relevant activity for that year, that’s the end of it and then you’ll come back in December 2020 and you’ll answer the same question again.
If you answer yes, then there’s a whole shooting match of other stuff you have to answer. Interestingly, the fines for UAE companies, I will give you an example. If you fail to notify as of December 2019, there’s a minimum fine of 10,000 dirhams, which is about 2,700 dollars. Whereas if you’re in the BVI and you fail to notify, the minimum fine is 10,000 dollars. So it costs you less to breach the rules in the UAE than it does in, say, the BVI.
Another example, you can get out of the BVI rules if you can convince the BVI that you’re a tax resident in another country. There’s no such exception in the UAE economic substance rules that I’m aware of. So if you have a trade license or a presence in the UAE inside a special zone or outside a special zone, you have to notify. And, at the moment, we don’t even know who people have to notify. They talk in terms of a regulatory authority, which we think will be the authority that grants the licenses under the zones, but we don't event know for sure whether that’s going to be the case and whether the notification process has to be the same. So there are a lot of very complicated issues going on but for those who have licenses or branches that are not registered for some reason or another in the UAE, you will have to register by December 2019, otherwise you will be fined. The UAE doesn’t charge corporate taxes but is very quick to impose penalties for the slightest breach. Just have a look at what’s happening with the introduction of VAT.
Question 4: What’s the process like to set up in one of these SEZs? Does the process vary widely from one SEZ to another?
Andrew Morris: Generally speaking, you’ll find the processes are similar. Primarily, because you’re dealing with a single authority and what you find is that most of these zones are basing themselves on the versions that have gone before them and they sort of make improvements to processes. There are some exceptions but in general you can expect the similar process.
Typically, the process will start with some form of initial application, which will basically be disclosing the basic information around who your shareholders are going to be, proposed directors, and obviously what type of entity you’re looking to establish, there are a couple options—LLC or even a branch of a foreign company in a free zone—and then you disclose the type of business activity you want to carry on. At that stage, depending on the activity, you might be asked to get approval from a third-party government authority for entities that are regulated or acquired there. But in the next stage, provided you get past that initial approval stage, you’ll be required to submit a bunch of legal documentation, obviously it will depend on who the shareholders are, but if it’s a corporate it will be the constitute of documents of that company, and you’ll also be asked to provide a resolution of that company resolving to incorporate that entity and authority granted to someone to make sure to deal with that authority.
It’s a lot simpler for an individual establishing a company. They can just be there in person or even give a power of attorney to someone. One of the things that can affect the timeline for setting up one of these companies is if you’re an overseas corporate because for those documents to be accepted in the UAE you have to go through an authentication process which, with the UAE not being a signatory of the Geneva Convention, so that can have a big affect on your lead time. But if you’re an individual shareholder or shareholders if you are here and your activities are unregulated or don't have a special regulation, you can get a company set up quite quickly, potentially a week if you do it well. Other types of activities can take months depending what it involves.
Peter Wilson: I will give you a couple elaborations on that. If you’re trying to set up a company in the UAE or you are a branch in the UAE of a foreign company and if on top of your company you have a trust, a traditional common law trust, you might as well give up because they hate trusts and they don’t understand trusts. So, as Andrew said, you’re better off having a really simple structure with a human being walking down the road holding up a flag that “I own this.”
Another issue that I’ve recently run into is proving ownership for UAE purposes. I was involved in advising an entity that had a Cook Islands company on top of it and the UAE requires apostilles and notarization at the UAE Embassy in the country of the company. There’s no such UAE Embassy in the Cook Islands and we assumed that the UAE Embassy in New Zealand would look after this for the Cook Islands but it doesn’t. So there was no way, it was not possible for us to satisfy the UAE requirements because the UAE didn’t have a diplomatic presence in the Cook Islands. There are a lot of frustrations that can follow if you do not set up your company or branch in the UAE with quite simple arrangements.
Another one that follows is if your entity owns real estate in the UAE, there’s a real estate tax when property is acquired or transferred. If you have a foreign entity that doesn’t change beneficial ownership but changes legal ownership, so it might go from mother and father to them as trustees through a trust to them as trustees to children as nominees for mother and father, for example. Each one of those changes in legal ownership, even though it doesn’t affect beneficial ownership, constitutes a disposal for real estate tax purposes in the UAE and there’s a 4% charge of value. So you really need proper professional people like Andrew setting up your entities to avoid, because if you don’t set up your entity right on real estate, when you come to sell the real estate, you cannot sell it because you cannot give proper title to the purchaser without paying all these huge back taxes. And that applies whether you’re inside a zone or outside a zone.
Andrew Morris: The battle you often have getting bank accounts opened here in a similar way, when it comes to that, the banks will ultimately, because they are required to pursuant to Central Bank regulations, they will want to trace back to the UBO and they will want to see the documentation to support that and see it authenticated as Peter described. So that’s another sort of operational aspect, I suppose, you need to consider when you’re considering what structure you’re going to employ and how you’re going to hold shares in these entities.
Peter Wilson: And if you have an offshore company—a RAKICC or a Jebel Ali offshore company—I don't know whether it’s still the same but when I last looked you wouldn’t get a bank account opened for those entities unless you’re able to call in some favors. Some people were advised to open these accounts for a specific commercial purpose and they do, but then they find out that they cannot transact business because they cannot open a bank account. So the moral of that story is be very careful and get proper professional advice, whether you’re inside a zone or outside a zone or what sort of entity you want, otherwise you’re going to be frustrated. The UAE just will not allow any more funny business going on with these companies because the Central Bank is all over the financial institutions, and the financial institutions, even if you’re a properly designated company carrying on a business, the financial institutions will come back to you 2-3 years after your company started and ask you to resubmit your due diligence stuff because the Central Bank is requiring them to do that. So it’s not, do it once and never again.
Question 5: How are the UAE’s SEZs “better” than SEZs elsewhere?
Andrew Morris: I suppose it’s a combination of factors and I think it relates a lot to the UAE’s position on the globe. It’s a very wide region, the lower Gulf, the GCC, the Far East, Africa, so obviously the UAE, in particular, Dubai has had this trade hub identity for some time now. So the benefits of these free zones around that and their role and the UAE generally and then also you have other benefits, I mentioned the infrastructure, but then also as a place to live and becomes more relevant as we start talking about things like substance. These actual hubs are places where there’s good quality of life and standard of living so when you talk about regional operations and business, the UAE, when we say that we often talk about Dubai and Abu Dhabi but not to exclude the other Emirates, people are happy to live there. I think you’re also in a very multicultural and multilingual environment, so you’re in contact with people from all over the globe, which is quite beneficial to facilitating commerce. And as much as there are challenges here, there’s a low level of corruption, I think. And once you get up and running, as much we’ve had some changes in recent years, it’s still relatively a light-touch regulatory environment. When you put a lot of these things together, it does set itself apart from other regions.
Peter Wilson: There are some interesting issues here. I’m not sure about this but my hunch is that the range of activities that you can conduct in the UAE is far wider than the range of activities you can conduct in zones in many other countries. The SEZs are really a creation of the WTO to facilitate global trade and in the developed countries of the world you have very few of these WTO-sponsored zones. The OECD in harmful tax practices and what have you focuses very much on SEZs on whether they are harmful or not harmful because a lot of countries set them up as a way to attract FDI and give tax benefits. But I think you will find that there are far fewer zones in most other countries and the nature of the activities that exist in other countries are much less than what they are in the UAE. I’m not quite sure exactly why that is, maybe it’s because the UAE somehow managed to convince the WTO that it’s a less developed country and needed many of these things to attract FDI. Maybe that’s what it is. What sets the UAE apart is the broader number of activities that you can conduct inside the zone, the zone not just giving a concession with respect to say customs duty, import duty and a deferral on VAT. It doesn’t charge corporate or personal tax as well. There’s a much broader number of activities and the financial consequences are much better in the UAE than I think probably in other countries.
Question 6: In your opinion, what needs to be improved to attract greater FDI to the UAE’s SEZs?
Andrew Morris: I think I’ll answer that question by sharing a few of the frustrations that our clients deal with. There’s, as I mentioned, a restriction on what a free zone company can do. As much as Peter is correct that the range is broad, you’re restricted to operating in and from that free zone. They started to address this by offering in some cases the ability to branch onshore. A continuation of that will add greater flexibility to what these entities can do, which is particularly important when particularly companies that are focused on operating in the UAE, they are often dealing across the Emirates. If you’re operating across all 7 Emirates, the laws of each Emirate would say that you need to register a company and have a license in each Emirate. That’s of course completely impractical and, at a practical level, you wont’ see that type of enforcement. We’re already seeing development in that area and if that area continues to develop, that’s good. I think focusing on the SMEs sector, which like in any economy is a very important part of the local economy. The experience is still that set-up costs are too high, as much as some of them have come down, for a start-up it still takes quite a big chunk of your start-up budget. Not to mention in some cases the timeframe to get up and running. So not only are you spending more, your time to market is extended. And then I’d say the banking situation. Again, much more to do with SMEs than what we see, but again the ability not only to set up an account but trade, finance and other facilities, that’s something I think companies operating here would like to see more of.
Peter Wilson: Once there’s no corporate tax in the UAE, you have to relicense your company each year. And everybody who’s a non-Emirati needs to have a visa and the visas can either be annual, 3-years or now 10-years, I think. I just renewed my company yesterday and I could do it online and it cost me 15 thousand dirhams. So each year I’m paying a fee to the regulator for the price of doing business, which I don’t mind, but I question whether it’s realistic in today’s world to be charging that fee every year. Should there be a loyalty bonus of some kind like if I’m going to Costa Coffee?
And the same with the visas. Yes, the visa concept and the re-registering enable the authority to know who’s in their country and there’s nothing wrong with that. But I’m just wondering, maybe it’s 7 thousand dirhams per year, I cannot remember how much it is, but you do have to pay each year for these things. And I’m just wondering whether either those fees should be rationalized or maybe the powers that may be should create a new zone where there’s a one-time fee for a license and a visa. Ok, there are these 10-year visas but I think that they are not freely available; you have to be almost a Superman. I recently heard of a fabulously wealthy gentleman from a country who managed to get a 10-year visa on the basis of investing a large amount of money in the UAE. Is that the way of the world? Do you get a 10-year of visa for investing a huge amount of money? But does that mean that if you invest half that amount of money can you get a 5-year visa? I think there should be a bit more transparency for the ordinary man on the street and what’s going on there to attract more FDI. To become a resident, you have to adopt the local religion and if you do adopt the local religion then you will be able to become an Emirati citizen, if I understand correctly. That’s a personal choice.
Andrew Morris: The other one is the retirement visas that recently started and that’s another subject area I suppose. The UAE’s movement towards a place where people actually will stay and retire. At the moment, we have such a large, I don’t know what the latest numbers are, but 90% of the population are expatriates, so we still have a saturation of people who will come here, work, repatriate and take everything back with them. I think as this place develops you’ll see developments there. Yes, developing but a lot could be done to make things easier, particularly for small business and operating costs.
Peter Wilson: Picking up on that point, I recently read that one of the major developers in the UAE, I think, had delivered 24 thousand residential apartments and was advertising on its website that it had 40 thousand residential apartments in process and under construction. If people who are buying or renting these places and living in SEZs, then it may well be that the UAE can attract more longevity to those SEZs by making it more attractive for these people who buy and rent these properties to actually stay longer.
Andrew Morris: Interestingly, we actually a few years ago advised an outfit in one of the Emirates in relation to the potential development of a retirement community. At the time, this was before they started talking about retirement visas, one of the big issues was, because this was at an Emirate level so things to do with visas are mandated on a federal level, so that was one of the big issues, “How do we get these people to stay here?” We actually started throwing these ideas around about potentially setting up a company to own the property and the person who is ultimately going to be the retiree would be given a vista visa for their company. So we were sort of meddling with the kind of framework that existed at the time, it’s moved on a little bit but there’s still a long way to go.
Peter Wilson: To attract more FDI into zones, I think, and since 90% of the population are expats but a lot of those expats are people working in the construction sites, there’s a lot of expats in the cities and financial centers and what have you, if more FDI is to be retained rather than be transient into the zones, I think they need to do something about this.
Peter Wilson: I think the UAE is a great place for zones, you can do more, the financial benefits are better, there are fees you have to deal with, there’s the uncertainty of how the law works in practice, but I think it has more to offer generally in this area of zones than most other countries have.
Andrew Morris: I agree with that. What I would say is the practical lay of the land here is equally important to the regulatory framework, so without self-promoting, it is important to speak to people that are on the ground who’ve been around for a while, whether it’s lawyers or tax advisors or other people here, that’s an essential part of market entry because they will have seen things and understand new situations and what’s going to be relevant. But, generally, the UAE is moving in the right direction; in the 12 years I’ve been here I’ve seen a world of change in this space and it’s continuing and let’s see how it will develop.