12 May
UAE, Bahrain unlikely to follow Saudi in hiking VAT: Experts
In a surprise move on Monday, Saudi Arabia increased VAT threefold to 15 per cent and also suspended the cost of living allowance to increase revenues.
The UAE and Bahrain are unlikely to follow Saudi Arabia in increasing value-added tax (VAT), says tax experts.
In a surprise move on Monday, Saudi Arabia increased VAT threefold to 15 per cent and also suspended the cost of living allowance to increase revenues.
“Cost of living allowance will be suspended as of June 1, and VAT will be increased to 15 per cent from 5 per cent as of July 1,” the Kingdom’s state news agency said on Monday.
Mayank Sawhney, managing director at MaxGrowth Consultancy, said the Kingdom’s move will prompt a discussion in the UAE and other neighbouring countries to increase the VAT rate in their respective countries.
“However, any such move could be detrimental to businesses and consumers in these countries, who have already been adversely impacted by coronavirus. Therefore, it is unlikely that the authorities in UAE and Bahrain will increase the VAT rates at this stage,” said Sawhney.
An official response from the UAE’s Ministry of Finance was awaited at the time of publishing this report online. The UAE had previously announced that it will not increase VAT for the next few years.
Sources and industry executive said that contrary to the Saudi move, the UAE was mulling dropping VAT temporarily until the situation surrounding Covid-19 is stabilised and economy returns back on track.
In fact, many European and Asian countries are turning to emergency tax breaks to support their economies against the Covid-19 threat. India, China, Finland, South Africa, Bulgaria, the US and the EU have announced some form of relief for their businesses and consumers in taxes to cope with the virus.
Anurag Chaturvedi, CEO, Chartered House Tax Consultancy, says considering current situation surrounding the pandemic and its impact, it will not be favourable decision to increase taxes.
“GCC governments are providing stimulus to support businesses against Covid-19 and any increase in taxes will reverse the effect and may result in deeper recession with increased inflation. KSA has more internal demand and can sustain the increased taxes whereas other GCC countries are more dependent on sectors like tourism, global trade and logistics etc. which will become unattractive by increasing tax,” added Chaturvedi, who is also secretary for ICAI – Dubai chapter.
Thomas Vanhee, partner at Aurifer Middle East Tax Consultancy, believes that the UAE and Bahrain could follow KSA given the similarities in their economic conditions but the UAE has different dynamics as compared to other countries.
“Given the similarity and the interdependency of the KSA economy with the UAE and Bahrain, it is not inconceivable that these countries will follow suit. The situation of the UAE may be slightly different since it is a confederation and not a unitary state. The dynamics between the Emirates may play out differently,” said Vanhee.
Impact of increasing VAT
Vanhee added that a hike in the VAT rate will impact consumer confidence.
“From a business perspective, those businesses which may have cared less about a mere 5 per cent VAT, will now increasingly turn their attention to transactions subject to VAT to ensure compliance and, more importantly, no VAT leakage. The economy is currently in a fragile state, therefore, this measure will be carefully weighed.”
Sawhney of MaxGrowth Consultancy noted that the increase in VAT rates in UAE in the current environment is going to have a significant adverse impact on businesses and consumers in the country.
“It could prompt exodus of more people from UAE, as such move will increase the cost of living while many people struggle to cope up with given their reduced income in the current environment on account of Covid-19,” said Mayank.
Anurag Chaturvedi noted that the impact of hiking VAT will depend on the size of the increase.
“Any increase in tax will tend to discourage activity and output. Increase in VAT may distort the choices made by households, businesses, and the foreign sector in some way.”
Source:https://www.khaleejtimes.com/coronavirus-pandemic/uae-bahrain-unlikely-to-follow-saudi-in-hiking-vat-experts
26 Mar
Private equity eyes industries crippled by coronavirus: ‘They have been waiting for this’
The coronavirus pandemic is shutting down entire sectors of the economy and putting millions of Americans out of work, but one corner of Wall Street may find opportunity amid the carnage: private equity.
The group, which includes investment giants Blackstone, Carlyle and KKR, has a record $1.5 trillion in cash ready to deploy and has been actively seeking deals across the struggling travel, entertainment and energy industries, according to a half-dozen investment bankers who declined to be identified to speak candidly about potential clients.
“They have been waiting for this type of market dislocation,” the head of mergers at a major Wall Street firm told CNBC. “I don’t think they wanted something quite this bad, but they did want a pullback in valuation.”
Private equity firms have been stockpiling cash in recent years as rising markets made it harder for them to invest, accumulating a record pile of “dry powder” for deals. The industry typically buys undervalued companies with borrowed money, taking them private to spruce up operations for an eventual sale. The high company valuations that kept them at bay collapsed this month amid widespread business closures and quarantines of some of the world’s largest cities.
But the confluence of forces at play — an oft-maligned section of Wall Street seeking money-making opportunities in an election year and amid an unprecedented global crisis that has caused thousands of deaths — could invite greater scrutiny on the industry. Critics including Sen. Elizabeth Warren have said private equity firms enrich themselves at the expense of workers and the companies themselves, which sometimes end up in bankruptcy.
“Vulture investors, especially in private equity, are waiting in the wings to scoop up scores of struggling businesses on the cheap,” tweeted Rohit Chopra, an FTC commissioner.
The first deals are likely to be investments rather than full-on takeovers, the bankers said. Transactions known as PIPEs, or private investments in public equity, are one way companies under distress can quickly raise cash. The buyer gets shares at a discount, and the new stock typically dilutes the holdings of existing shareholders.
“Private equity is trying to do PIPEs all over the place right now,” said a senior investment banker at another top Wall Street firm. The targets are “every industry where stock prices” have collapsed, this person said.
One example of a PIPE made during the last crisis: In 2008, Leonard Green & Partners bought a 17% stake in Whole Foods for $425 million, an investment that yielded more than $1 billion in profit when shares recovered a few years later.
While travel, entertainment and energy companies are in obvious need for cash infusion as demand has evaporated, over the longer term, the coronavirus pandemic could favor industries including health care and home security, according to a presentation from management consultant Bain.
Don’t take the money
For now, bank advisors are mostly telling corporations to ignore private equity money as lawmakers close in on a massive stimulus bill. The details of the $2 trillion bill, including the forms of relief struggling companies will get and at what terms, needs to be known first.
Another reason for a delay in deals: One banker said that private equity investors “only want to invest in the strongest companies” like makers of consumer staples, or top restaurant chains, and these companies aren’t yet willing to take on expensive forms of capital.
Still, even with anticipated federal aid like potential bridge loans, for many businesses, the crisis and its aftermath will take months, if not years, to play out, and collapsing revenue and share prices make them vulnerable to takeovers.
Last week, Goldman Sachs warned its clients to expect a rise in hostile takeovers and shareholder activism, according to a presentation sent to clients. The bank told clients that a shareholder rights plan, known as a poison pill, “is the single most effective takeover protection device” the companies can use, according to Vox, which obtained the memo. A Goldman spokeswoman confirmed its authenticity.
To be sure, private equity firms are also exposed to the coronavirus-induced downturn because they already own wide swaths of corporate America, including struggling retail shopping and entertainment properties. Even before the pandemic struck, lenders were increasingly concerned about defaults from companies owned by the PE industry.
As a result, many private equity firms are in “defense mode” across their portfolios, said one investment banking head.
Barbarians at the Gate
Still, because the industry’s management fees are based on investments that are locked up for years, private equity firms “should be quite resilient in the current market backdrop,” JMP Securities analyst Devin Ryan said Tuesday in a research note.
Private equity became widely known in the 1980s as a generation of corporate raiders including Carl Icahn and T. Boone Pickens sought bigger and bigger deals, culminating in the $31 billion takeover of RJR Nabisco in 1989.
The industry has swollen in size since the financial crisis, adding $4 trillion in assets in the last decade, as institutional investors including pensions and insurance companies seek out higher returns in a low-yield world. Last year, shares of PE firms Apollo and Blackstone soared roughly 90% after they changed their corporate structure to take advantage of the 2017 corporate tax overhaul.
While the market for leveraged loans has fallen off in recent weeks, leverage of roughly six times a target’s earnings is still available for private equity deals, according to the head of mergers quoted at the beginning of this article. Parties are having conversations about investments in hotels, restaurants, movie theaters and casinos, among other companies.
“These are fundamentally good businesses that are going to have a terrible year,” the banker said. “There’s an opportunity for private equity to go in there and take a meaningful stake or buy the company at a valuation they could not have gotten before.”
Source:https://www.cnbc.com/2020/03/25/private-equity-eyes-coronavirus-hit-industries-theyve-been-waiting.html
02 Mar
DIFC launches Dh5,500 new licence for startups, entrepreneurs
Dubai International Financial Centre (DIFC) has launched a new licence for startups, entrepreneurs and technology firms from different sectors priced at $1,500 per annum (Dh5,500).
The DIFC Innovation License allows access to co-working space at free zone with a flexible desk space at $500 per month. It also offers up to four visas on the first desk and subsidised visas of up to 50 per cent for innovation firms.
“DIFC Innovation License is sector agnostic, available to all start-ups, entrepreneurs and technology firms, offering a vast opportunity to establish, grow and upscale your innovative business to access the Middle East, Africa and South Asia (MEASA) markets, through Dubai,” reads a statement posted on its website.
The region’s largest financial free zone is home to more than 100 technology and start-up firms. In order to give boost to local startups and fintech industry, DIFC has accelerator programme FinTech Hive and FinTech Fund to bring young entrepreneurs closer to established players keen to cash in on young talent and ideas.
DIFC saw sustained growth in the first half of 2019, adding more than 250 new companies, and bringing the total number of active registered firms to 2,289, demonstrating a 14 per cent increase year-on-year. This has fuelled the creation of over 660 jobs, boosting the Centre’s combined workforce to more than 24,000 individuals, and has resulted in the occupancy of 99 per cent of DIFC-owned buildings.
Thanks to Dubai International Financial Centre, Dubai rose up the ranks of the Global Financial Centres Index (GFCI) to number eight position, representing its highest ever ranking.
Source:https://www.khaleejtimes.com/business/local/difc-launches-dh5500-new-licence-for-startups-entrepreneurs
23 Feb
Dubai Economy issues 4,692 Instant Licences since 2017
Facility provides convenient model for businessmen who can now obtain a commercial licence within 5 minutes
The Business Registration and Licensing (BRL) sector at Dubai Economy reported that 4,692 Instant Licences were issued since the launch of the service in July 2017 to date.
Among the Instant Licences issued, 3,448 were in the commercial (73.5 per cent) and 1,244 were professional (26.5 per cent) categories.
The Instant Licence service provides a convenient model for businessmen who can now obtain a commercial licence within five minutes, enabling them to establish and conduct business in Dubai easily. The initiative is a path-breaking service whereby businesses can secure their commercial license in one-step for the first year without having a company’s lease or location.
Through the Instant Licence, Dubai Economy seeks to highlight the sustainable economic development and competitiveness of the emirate.
All business activities can benefit from the service, except public and private shareholding companies, through eServices (ded.ae/instant), the various outsourced service centres in Dubai, or the Happiness and Smart Lounges.
Holders of general trade licences can only use electronic services. All business partners or one of them must be present while applying through the outsourced service centres or the Happiness Lounge and must provide a valid passport copy of all parties (partner and manager), residence visa copy and no-objection letter from the sponsor to the foreign parties.
The Instant Licence offers the option of an electronic memorandum of Association (eMOA), in addition to obtaining the license and entry in the Dubai Economy commercial registry.
Furthermore, the licencee is given membership in the Dubai Chamber instantly, an establishment card of the General Directorate of Residency & Foreigners Affairs as well as three work permits for employees from the Ministry of Human Resources & Emiratisation once the trade license is issued.
‘Native’ workers registration
The registration of ‘Native’ workers in the Ministry of Human Resources and Emiratisation is done while issuing the Instant Licence. If the partners wish to appoint the employees before the issuance of the Instant Licence, they need to follow a few simple steps or else skip the screen and complete the procedures.
The number of Instant Licence owners reached 16,935 and 87.6 per cent (14,842) of them are men while women account for 12.4 per cent (2,093). The businessmen who secured Instant Licences so far include those from Britain, Turkey, Saudi Arabia, India, China, Pakistan, Egypt, Jordan and Sudan.
An Instant Licence can be obtained for four legal forms of businesses – limited liability company (LLC), single member LLC, sole proprietorship and civil company.
The Instant Licence initiative has also contributed to the sub-indicator ‘Starting a business’ in the Ease of Doing Business Index 2020 issued by the World Bank, which ranked the UAE 17th globally.
Source:https://www.khaleejtimes.com/business/local/dubai-economy-issues-4692-instant-licences-since-2017
