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Sharjah hosts Pakistan property exhibition

UAE-based Pakistanis can head to ‘Real Estate and Investment Pakistan Expo’ (RIPE), being held at the Sharjah Expo Centre over the weekend to scour through property bargains during the first edition of the two-day Pakistan Property Exhibition that will open and will conclude tomorrow.

“Developers from the port city of Karachi and Province of Punjab will showcase and sell their projects at the exhibition. The exhibitors will also feature exclusive deals and bargains visitors. On sale are housing plots, villas, apartments, commercial offices and plots amongst other investment options,” said Adnan Iqbal, who has conceptualised and presented this opportunity to the residents of the northern emirates by hosting it in Sharjah.

“There are approximately 1.3 million Pakistanis living in the UAE, making up one of the largest expatriate communities in the country.”

Iqbal further added, “The need for investment back home has surged a demand for such events which provide a common platform for the developers, whilst giving the investor a bouquet of opportunities to choose from.”

Exhibitors will feature exclusive spot sales and easy monthly payment plans for visitors. The event will also witness the promotional activities of the latest Pakistani Film to launch “Chupan Chupai” featuring Ahsan Khan and Neelam Muneer who will make a stellar appearance for the Pakistani fans, at the event. The visitors can participate in the raffles draw to win IPhones and LEDs.

UAE ‘disappointed’ at inclusion in tax haven blacklist; confident of swift removal in 2018

The UAE has issued a statement expressing its disappointment over the country’s unfortunate inclusion in recent EU list of non-cooperative tax jurisdictions, reiterating that the UAE remains “fully committed to maintaining international standards.”

The statement by the UAE’s Ministry of Finance reads:

“The Government of the United Arab Emirates is surprised and disappointed that it has been included by the European Union in a list of non-compliant tax jurisdictions.

“We remain fully committed to maintaining the highest international standards of financial oversight and tax regulation, and will continue to work with our international partners to deliver this.”

The EU had, on Tuesday, December 5, released its first-ever list of ‘non-cooperative tax jurisdictions,’ which it said had been agreed by the Finance Ministers of EU Member States during their meeting in Brussels.

In total, the list named 17 countries for ‘failing to meet agreed tax good governance standards’. The UAE was named as part of that list while an additional 47 countries are said to have committed to addressing deficiencies in their tax systems and to meet the required criteria, following contacts with the EU.

The UAE’s Undersecretary of the Ministry of Finance, Younis Haji Al Khouri, said: “The UAE has worked to meet the European Union’s requirements in terms of exchanging tax-related information.”

He added: “We have committed to a reform process which will be finalised by October 2018, and we are absolutely confident this will ensure the UAE is swiftly removed from the list. We look forward to moving into the next phase of cooperation with our EU partners on the important issue of tax regulation.”

The UAE government’s official statement noted that, “since early 2017, the UAE has worked transparently with our European Union counterparts to ensure that we meet the criteria laid down by European Union Member States.

So, what’s EU’s problem?

While releasing the list on December 5, the EU noted that “this unprecedented exercise should raise the level of tax good governance globally and help prevent the large-scale tax abuse exposed in recent scandals such as the ‘Paradise Papers’.

However, the UAE has addressed every issue raised by the EU, and the latter has acknowledged the same. “As the European Union has itself noted, we have addressed each and every issue the EU has raised. We have drafted, legislated and implemented significant reforms to ensure that we remain in lock-step with our OECD partners and international best practice,” the UAE government said in the statement.

“The sole outstanding issue is the implementation of the BEPS Minimum Standard, which we have committed to finalise by October 2018 and ratify by March 2019 – giving our federal structure sufficient time to allow for ratification across the seven Emirates. We stand by this realistic timeline,” it noted.

BEPS, or base erosion and profit shifting, refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the inclusive framework, over 100 countries and jurisdictions are collaborating on the implementation of the OECD/ G20 BEPS Package.

“We will continue to work with our international partners on this issue, and are confident that we will be recognised as an internationally compliant partner at the EU’s next review,” the UAE said in the statement.

UAE vows swift EU tax compliance

The UAE expressed surprise and dismay over European Union’s decision to include the Emirates in a list of non-compliant tax jurisdictions, and said it expects to be removed from the list swiftly.

“We have committed to a reform process which will be finalised by October 2018, and we are absolutely confident this will ensure the UAE is swiftly removed from the list,” the government said in a statement on Thursday.

On Tuesday, EU finance ministers adopted a blacklist of 17 jurisdictions, including the UAE and Bahrain, deemed to be tax havens, following a year of negotiations, singling out countries that EU officials accuse of facilitating the creating of shell companies and other structures designed to aid tax avoidance.

Yousef Haji Al Khouri, Undersecretary of the Ministry of Finance, said the UAE has worked to meet the EU’s requirements in terms of exchanging tax-related information. “We look forward to moving into the next phase of cooperation with our EU partners on the important issue of tax regulation.”

Al Khouri pointed out that the EU had acknowledged that the UAE has addressed each issue that has been raised, and that the UAE has drafted, legislated significant reforms to ensure that they remain in “lock-step” with partner countries in the Organisation for Economic Cooperation and Development and international best practice.

The only remaining issue in the case of the UAE is the implementation of the BEPS (base erosion and profit shifting) minimum standard, which the UAE has committed to finalising in October 2018 and ratifying in March of the following year, giving the UAE’s federal structure the time necessary to ratify the measure across all seven emirates.

BEPS is an agreement signed by some OECD member countries to tackle tax avoidance strategies that allow multinational companies to shift profits artificially to low or no-tax locations.

The statement said the UAE stand by “this realistic timeline,” adding that it was confident of being recognised as an internationally compliant tax jurisdiction at the EU’s next review.

EU ambassador Patrizio Fondi said the placement in the list must not be seen as the end-game. “On the contrary, the exercise is ongoing and remains a matter of cooperation between partners.”

According to reports, a further 47 countries on the blacklist may no longer be used by EU institutions for international financial operations, and transactions involving them could be subject to closer scrutiny.

Gary Dugan, former chief investment officer of National Bank of Abu Dhabi, said the timing of the UAE being placed on the blacklist was surprising, as most banks in the Dubai International Financial Centre and in the onshore market had already cleaned up their books in the last few years.

“This will make some of the European private banks nervous, and might tighten their compliance even more to make sure they don’t get on the wrong side of a fine,” he was quoted as saying.

 

Why NRIs opt for UAE loans

Most of the expats when they land in the UAE dream of owning a big house, a car and a business that can support them for the rest of their lives in their home countries. Many of them – with an average middle class income – opt for loans which they remit to meet their financial objectives.

Out of over eight million expats in the UAE, there are approximately 2.8 million Non-Resident Indians (NRIs) , accounting for the largest expat community in the country. NRIs remitted Dh14.64 billion, or around 35.9 per cent of the total value of the UAE remittances, during the second quarter of the year which saw total remittances reaching Dh40.8 billion.

Apart from the easy availability of loans in the UAE, one of the key advantages is that the interest rates in the UAE are lower than those offered by banks in India. Considering the impact of multiple factors – including currency fluctuation – the question that arises is that how beneficial it is for the NRIs to opt for loan in the UAE and invest in India. Despite low-cost and easier borrowing in the UAE as compared to India, analysts are of the view that it’s easier said than done.

Vijay Valecha, chief market analyst at Century Financial, says when taken in the context of reducing interest rates, personal loans in India have interest rates in the range of 16 to 18 per cent while in UAE it varies from 5 to 6 per cent.

“Personal loans in UAE are clearly much cheaper when compared to India. Financially, it makes a lot of sense to take a loan in UAE rather than in India. A loan in the UAE in dollar terms means there is no currency risk for taking loans over here. On the other hand, loans taken in India lead to continuous hedging of the position and currency conversion charges,” he said.

Exchange rates benefits: According to Valecha, NRIs can benefit from higher loan value and enjoy higher exchange rate benefits when they opt for loan in the UAE and transfer it to India. For NRIs who want loans for usage in the UAE itself it would be better to opt for loans in the UAE as they get better interest rates and do not need to incur any currency conversion charges as well. Anita Yadav, head of fixed income research at Emirates NBD, noted that the clear advantage is the ease of borrowing and lower interest rates. But it’s not as easy as it reads. “In theory, borrowing in the UAE at lower interest rates and investing in India in higher yielding assets would make sense. However, in practice this is not so easy. Unsecured borrowing or personal loans are generally not cheap and secured borrowing needs collateral security to be offered. It is difficult to offer assets based in India as security.” She added: “Currency fluctuation is a major risk, too. Investors may make money on higher yielding assets in India but may lose if rupee depreciates against dirham. Another factor to remember is the taxes in India. While gross return may be high, total return net of taxes may not be high enough to justifying borrowing in the UAE and investing in India.”

Strong local demand spurs UAE non-oil growth in November

The UAE’s non-oil sector witnessed a strong growth on the back of new orders from local companies.

The Emirates NBD Purchasing Managers’ Index (PMI) for the UAE rose to 57.0 in November from 55.9 in October, signalling a faster rate of growth in the non-oil private sector last month.

The PMI reading was the highest since August, and the second highest reading this year.

Output and new orders rose at a faster rate last month, despite an outright decline in new export orders. “This suggests that the driver of growth is domestic demand. The November survey confirms our view that the UAE’s non-oil sector will likely see strong growth in the fourth quarter of this year, as both households and business boost purchases before VAT comes into effect at the start of next year,” said Khatija Haque, head of Mena Research at Emirates NBD.

However, job growth remains soft (the index slipped to 50.9 in November; a five-month low) and there is also little evidence of wage growth, she said.

The muted employment and wage data suggests that any boost to household consumption this quarter will likely prove temporary. Input cost inflation accelerated in November, on the back of higher purchase costs.

However, firms were unable to pass on these higher costs, with average selling prices declining (albeit modestly) once again in November. Purchasing activity and accumulation of pre-production inventories has been sharply higher year-to-date compared with last year.

While some of this might be attributed to pre-VAT stockpiling, survey respondents indicated they had boosted inventories ahead of an expected upturn in sales. The overall level of business optimism remained high in November, although the index slipped slightly from October to 59.2. Firms cited projects related to Expo 2020 as one reason for their optimism about the coming year.

Federal tax authority announces supplies subject to VAT

The Federal Tax Authority (FTA) has announced the list of supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Select supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax). These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% VAT, as well as zero-rated supplies and exempt supplies:

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