ECONOMIC STIMULUS PACKAGE IN UAE DUE TO COVID-19

Economic Stimulus Package in UAE due to COVID-19

Coronavirus Disease 2019 (COVID-19)

Coronavirus Disease 2019 (COVID-19) is a Pandemic disease as
declared by World Health Organization (WHO) and was identified
in Wuhan, China, and has now spread throughout the world.

Dubai, a major business center in the Middle East, has been treated as
an economic hub and tax haven for the Investors / Businessmen. The
Taxation system is very satisfactory for the Businessmen and
Investors.

The UAE government, both at a federal and emirate level has been
working with banks, regulatory organizations and economic free
zones to support residents, and affected businesses.

UAE stimulus package brief overview

  1. First stimulus package on 12th March, 2020 worth AED 1.5 Billion
  2. Second stimulus package on 29th March, 2020 worth AED 3.3 Billion
  3. First stimulus package on 11th July, 2020 worth AED 1.5 Billion

Total stimulus packages announced so far by UAE Govt. valuing
AED 6.3 billion have the objective to reinforce the liquidity and
support business continuity of companies and to reduce the impact of corona-virus on the economy of the Country.

Brief Steps taken by UAE Government

S.No.DateAnnouncement(s)
1.12th March, 2020Announcement of AED 1.5 billion economic
stimulus package to enhance liquidity in
light of the COVID-19 outbreak;
2.14th March, 2020The UAE Central Bank (UAECB) launched
the Targeted Economic Support Scheme
(TESS);
3.16th March, 2020The Abu Dhabi Executive Council launched
16 initiatives to support businesses and the
community
4.29th March, 2020Dubai’s Free Zone Council launched a five
point stimulus package worth AED 3.3
Billion
5.11th July, 2020Stimulus package worth AED 1.5 Billion

UAE Tax Reliefs due to COVID-19

The Federal Tax Authority (“FTA”) in the United Arab Emirates (“UAE”) has extended the due date for :

  1. filing the Excise tax return and payment of excise tax for the month of March 2020 by one month from 15 April 2020 to 17 May 2020.
  2. monthly tax period that commenced on 1 March 2020 by one month so that it will now end on 30 April 2020 instead of 31 March 2020.

Economic Stimulus Package

With an aim to enhance liquidity to counter the COVID-19 outbreak, the Dubai government on 12th March 2020 had announced an economic stimulus package which includes :

  1. Custom Duty Refund: a refund of 20% on the custom fees imposed on imported products sold locally in Dubai markets.
  2. Minimum refund threshold : Only refunds of AED 100 or more will be processed and disbursed.
  3. 90% reduction of fees imposed on submission of customs documents;
  4. Reduction of municipality fees imposed on sales at hotels from 7% to 3.5%;
  5. Reduction in water and electricity bills by 10%
  6. Changes to bank guarantees or cash requirement rules.
  7. Hotel establishments and restaurants will be refunded 50% of the municipality fee on sales, which stands at 7% between July and December 2020.
  8. Hotel establishments and restaurants will be given half of the ‘Tourism Dirham Fee’ until the end of December 2020.
  9. Waive off penalties for private schools and allow the free renewal of their commercial and educational licenses until the end of December 2020.
  10. a freeze on the 2.5% market fees levied on all facilities operating in Dubai
  11. Reduce the cost of living and doing business : to reduce the cost of living and doing business for citizens, expatriate residents and the business community through 10% reduction in water and electricity bills including those charged in the residential, commercial and industrial sector, for a period of three months.
  12. UAE Central Bank Increases Its Economic Stimulus Package To AED 256 billion (US$70bn)(consists of AED 50 billion in capital buffer relief, AED 50 billion in zero-cost funding support, AED 95 billion in liquidity buffer relief and a AED 61 billion reduction of cash reserve requirements.)
  13. Extension of the capital buffer relief to the end of 2021 and allowed an extension of the zero-cost funding facility until December 31, 2020.
  14. RAKBANK takes measures to support SMEs – RAKBANK. Simplify platform’s monthly fee will be waived off for the next three months.
  15. Dubai Chamber has launched a free service to collect, process and deliver documents for the issuance of ATA Carnet for temporary admission of goods and attestation, starting from March 26, 2020.
  16. DMCC (Dubai Multi Commodities Center) has rolled out a business support package to support its 17,000 members, which will be applicable as of April 1, 2020, until June 30, 2020 which includes :
    * 100% waiver for late license renewal penalties
    * 100% waiver for all Flexi Desk and DMCC Business Centre penalties until the end of 2020
    * 100% waiver of the Office Sharing Permit fee,
    * 100% waiver of the Company Reinstatement fees
    * 30% discount on license renewal,
    * waiver of outdoor area rents for JLT retailers with existing contracts

New Cost Reductions Measures as introduced by DMCC for their Members:

DMCC has expanded and extended its business support package which will run until 31 August 2020. New support measures, applicable to DMCC’s existing member companies, include :

  • 33% discount on 3-year license renewal (or 1 year for free)
  • 25% discount on 2-year license renewal (or 6 months for free)
  • 20% discount on 1-year license renewal
  • 30% discount on additional license
  • 100% waiver on change of address fee for relocating from physical office to DMCC Business Center
  • 50% on license reinstatement fees if the company license was terminated by an authority due to non-license renewal
  • 50% discount on dormancy fees
  • 2 months’ rent holiday for Flexi Desk and DMCC Business Center tenants or monthly/quarterly installments with no discount
  • 100% waiver of the Office Sharing Permit fee,
  • 100% waiver of the Company Reinstatement fees

Further DMCC has allowed the following reduction on the total company set-up fee if the shareholders are residents of JLT :

  • 80% reduction on the total company set-up fee
  • up to 50% reduction on the total company set-up fee along with a Flexi Desk for one year,
  • flexible payment options for new DMCC Business Centre tenants
  • a complete digital process for business set-up from the comfort of their home.

17. DFIC (Dubai International Financial Center) and other Free-Zones have introduced a series of fiscal easing initiatives from April 1, to June 30, 2020 including deferment or rent-payables for upto six-months and granting installment facilities on the same. Other stimulus by DIFC include :

  • 1 % reduction in property registration fees for all transactions effected in between 01st April, 2020 to 30th June,2020, subject to registration within 30 days. (The effective rate will be 4% now)
  • Full waiver from Annual Licensing Fees for application for registration / incorporation from 01st April, 2020 to 30th June, 2020.
  • 10 % discount on renewal fees for renewals that are due between 01st April, 2020 to 30th June, 2020 (This excludes Data Protection Fees and DFSA fees, if any)
  • To ensure continual growth for tech & start-up community, DIFC fintech Hive will :
    • Waive 50% License Fee for renewal of existing licenses until 30th June,2020
    • 100% waiver of annual licensing fees for new clients until 30th June,2020
    • Deferment of leases until 30th June,2020.
  • Further to ensure uninterrupted business, the DIFC Courts shall also go digital with various initiatives including being Remote Court of First Instance (CFI), Remote hearings for Small Claims Tribunal (SCT), online filing and hearing, e-registration of wills etc.
  1. In collaboration with DFSA (Dubai Financial Services Authority) the following business continuity measures have been adopted by DFIC :
  • 50% waiver for remainder application fees for 2020
  • 100% waiver of registration fees
  • Flexible requirements for permanent premises
  • Extension in time-line for application and authorization process
  • Temporary relief from requirements for capital
  1. UAE Securities and Commodities Authority provides various regulatory reliefs including :
  • Additional 45 days to file their financial statements of the FY 2019 and Q1 of 2020.
    (It has issued a circular informing traders that they have been allowed a grace period of additional 45 days so that they can report their disclosure statements no later than 14/5/2020 and 30/6/2020 for the FY 2019 and Q1-2020, respectively.)

20. DLD (Dubai Land Department), through its Real Estate Regulatory Agency, launches “Together” CSR initiative

  • Supplies free of charge to those in need and affected in many projects and freehold areas across the Emirate.
  • cancellation of fines for 2019 and 2020
  • the provision of flexible installment service for service fees
  • Suspension of rent evictions for the month of March and April
  • reduction of service costs, and
  • Provision of a flexible payment option for air conditioning services.

Other reliefs to the real-estate sector include :

  • 5% increase in loan-value ratios on mortgage loans for first-time home buyers. This is a bid to infuse liquidity and will now ensure more funds to loan-borrowers by way of a loan.
  • Permitted additional 10% increase of exposure to banks for the real-estate sector, subject to enhanced capital holding. This means that now banks can have an exposure of upto 30% in the lending portfolio (instead of 20% previously).

21. Dubai SME allocates AED 20 million for capital guarantee scheme launched by The Mohammed Bin Rashid Fund in partnership with Beehive

On 11th July, 2020: stimulus package AED 1.5 billion has been announced which extends the validity of some of the initiatives announced in the first stimulus package for an additional three months until the end of September 2020 as part of support extended to the private sector in recovering from the crisis.

Further different stimulus packages have been announced by various other authorities / regulators/ associations including Nakheel, Dubai Holding and Meraas, JAFZA, National Industries Park, Dubai Auto zone, Abu Dhabi Global Market (ADGM), Government of Abu Dhabi etc. to name a few.

Prepared By : CA Heer Gajjar and CS Lalit Rajput

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