ADGM Strengthens Market Trust with New Whistleblower Framework
Abu Dhabi Global Market (ADGM), a key financial hub in the UAE, has introduced a new whistleblowing framework to strengthen the market integrity. This initiative aims to promote transparency and accountability across ADGM entities and is a combined initiative of the ADGM authorities. The framework outlines a comprehensive system for reporting suspected breaches of ADGM laws or financial crimes while ensuring protection for whistleblowers who come forward with information about misconduct.
Key Features of the ADGM Framework
Clear Regulations: ADGM has established specific rules to protect and encourage the reporting of ‘protected disclosures’ made in good faith.
Reporting Channels: Both internal and external reporting channels are available for reporting suspected breaches of ADGM laws or financial crimes.
Anonymous Reporting: Protection is ensured for those who report misconduct anonymously and in good faith.
Non-Retaliation: Stricter employment regulations safeguard employees across all ADGM entities from retaliation for whistleblowing.
Governance Standards: All ADGM entities must adhere to good governance requirements that support effective whistleblowing practices.
Written policies and procedures: Required for firms licensed by the Financial Services Regulatory Authority, designated non-financial businesses or professions, and large entities within the financial centre.
Requirements for ADGM Entities
By May 31, 2025, all entities within ADGM must establish proportionate systems to facilitate whistleblowing.
These systems must be documented, particularly for larger entities and those with higher financial crime risks.
This framework underscores ADGM’s commitment to uphold global business standards and continuously improve its regulatory environment. It provides a solid foundation for maintaining trust and integrity in the financial markets.
Things to know about Prescribed Company in the DIFC, Dubai
The Dubai International Financial Centre (DIFC) is a leading world-class business and lifestyle destination in the Middle East, Africa, and South Asia (MEASA) region. DIFC has a close to 20-year track record of facilitating trade and investment flows across MEASA. The region comprises 72 countries with a combined population of around three billion people and a nominal GDP of approximately USD 8 trillion. The centre offers a wide range of opportunities for setting up operating, holding, and tech companies for those who are focusing on business success. Among those, the revised regulation for Prescribed Companies is now attracting entities with its peculiarities.
DIFC introduced the Prescribed Company Regulations to supersede and broaden the scope of the previous regulations, the Special Purpose Company Regulations (SPC) and the Intermediary Special Purpose Vehicle Regime (ISPVR) in 2019. As a result of the enactment of the DIFC Prescribed Company Regulations, all Special Purpose Companies under the SPC Regulations were reclassified as Prescribed Companies. A key feature of this new regulation is its flexibility, fostering a business-friendly environment that promotes efficiency in time and cost savings for companies operating within the DIFC.
On July 15th, 2024, DIFC enacted a key amendment in the existing PC Regulations which significantly expand and simplify the current regime in the DIFC. The changes ensure that the companies are used as true holding company vehicles, rather than operational entities.
Now, what exactly is the Prescribed Company?
What is a Prescribed Company in the DIFC?
A Prescribed Company in the DIFC is a private company established under the DIFC Prescribed Company Regulations. It can be set up by a Qualifying Applicant or for a Qualifying Purpose. Qualifying Applicants include DIFC-registered entities, affiliates of such entities, shareholders, ultimate beneficial owners controlling a DIFC-registered entity, authorized firms, funds, UAE government entities, or family-operated businesses.
New PC Regulations Unveiled!
Effective from July 15, 2024, the DIFC has introduced significant updates to its PC Regulations. One among them is the expansion of the eligibility criteria for Prescribed Companies. Previously, eligibility was restricted to specific types of entities (qualifying applicants) and activities (qualifying purposes).
To incorporate or continue a Prescribed Company in the DIFC, applicants must now satisfy one of the following criteria:
1. The Prescribed Company is controlled by one or more:
a) GCC Persons.
b) Registered Persons.
c) Authorized Firms.
2. The Prescribed Company is established or continued in the DIFC for the purpose of holding legal title to, or controlling, one or more GCC Registrable Assets.
3. The proposed Prescribed Company is established or continued in the DIFC for a Qualifying Purpose; or
4. The Prescribed Company established or continued in the DIFC has a director appointed from a DFSA-registered Corporate Service Provider
How Does a CSP Facilitate the Establishment of a Prescribed Company?
Any individual or corporate entity that does not qualify for a Prescribed Company under the qualifying requirements can still establish one, regardless of their country of residence. This is possible if the PC appoints a director who is an employee of a DFSA-regulated CSP. This CSP must also have an agreement with the DIFC Registrar of Companies to undertake specific compliance and AML functions on behalf of the PC.
Key Changes from the Old PC Regime
Previously, the PC regime restricted eligibility to entities with a strong DIFC nexus or those involved in specific qualifying activities, limiting the product’s appeal to the existing DIFC client base. The new regulations have significantly expanded the eligibility criteria, allowing for the formation of PCs under broader circumstances.
DIFC believes these changes will expand the appeal of this vehicle to a global investor base while maintaining necessary ties to the DIFC and GCC. To accommodate potential increased demand, DIFC is enhancing its AML procedures and risk management framework.
What Happens to Existing PCs That Fall Outside the New Regime?
Existing PCs will be restricted to their designated purpose as holding companies, prohibiting employment. This ensures their function as pure holding vehicles. PCs that no longer align with these criteria will benefit from transitional arrangements and a new commercial package offering continued licensing advantages similar to the previous regime. The package, named “Active Enterprise,” provides flexible options and reduced fees for qualifying applicants seeking alternative structures with the option to have employees.
Active Enterprise is a private company that can be established by a Qualifying Applicant. This structure is suitable for Holding Companies, Managing Offices, and Proprietary Investment activities across various sectors such as real estate, agricultural enterprises, management, and healthcare. The package has:
Option to have employees: In the case that Active Enterprise or its affiliate has an office in the DIFC.
Reduced licensing fees: USD 100 Application Fee (one time) and an annual commercial license fee of USD 1000 (Data protection fees USD 750 – if applicable).
Flexible registered address: An Active Enterprise can have its own DIFC office space, co-working desk, share office space with its DIFC affiliate or, if the entity has no employees, use an appointed CSP’s registered address in DIFC.
Common law jurisdiction with independent DIFC Courts
Quick and easy, fully digital registration process: In-principal approval may be granted within three business days from the application submission.
No attestation is required for corporate documents.
Globally competitive and attractive tax regime.
Zero currency restrictions and 100% foreign ownership.
Zero restrictions on capital repatriation.
Why a Prescribed Company in DIFC?
There are several compelling reasons to opt for a Prescribed Company setup in DIFC:
Low-Cost Setup and Maintenance Costs: The cost of setting up and maintaining a DIFC Prescribed Company is considerably lower compared to a standard DIFC operational license.
Flexible Office Requirements: Prescribed Companies enjoy flexibility in office arrangements, allowing them to have their own DIFC office space, share space with individuals fulfilling qualifying requirements, or appoint a CSP for registered address services.
Favorable Tax Environment: The company benefits from 0% taxation on dividends and qualifying income, along with access to DIFC’s comprehensive network of double taxation treaties.
Legal Certainty and Efficiency: Operating within the DIFC’s English common law-based legal system, the company enjoys greater flexibility and innovation compared to other UAE free zones.
Fast-Track Application Process: Prescribed Companies benefit from an expedited application process, being exempt from auditing and filing accounts with the DIFC Registrar of Companies.
Exemptions for Crowdfunding and Structured Financing Activities
A Prescribed Company in DIFC with a crowdfunding structure enjoys several exemptions, further highlighting the benefits of a Prescribed Company in DIFC.
Crowdfunding Exemptions: A PC with a crowdfunding structure is exempt from the Companies Law requirement to have no more than 50 shareholders. Additionally, if its annual turnover is no more than USD 5 million, it is exempt from the need to prepare and file audited accounts, even if it has more than 20 shareholders.
Structured Financing Exemptions: PCs involved in structured financing are exempt from filing and auditing requirements. Furthermore, PCs issuing bonds or sukuk to the public can bypass the usual prohibition against private companies making public offers and the 50-shareholder limit.
Reduced Fees and Cost Efficiency
The PC regime in the DIFC offers a low-cost structure with significantly reduced fees. The application fee is a one-time payment of USD 100, and the annual license fee is USD 1,000. This cost efficiency, combined with the flexibility and exemptions provided by the PC structure, makes it a highly attractive option for businesses seeking a cost-effective entry into the DIFC.
Application Process for the set up of Prescribed Company in the DIFC
DIFC is Ready. Are You?
With the introduction of this new PC regime, DIFC aims to balance requiring substantive economic activity and providing access to flexible corporate structures for legitimate purposes. In the new UAE Corporate Tax era, which addresses substance concerns, the DIFC believes that expanding the PC regime is timely and beneficial.
Disclaimer:
The information provided in this article is for general informational purposes only and should not be considered legal or professional advice. As always, we recommend that you consult with your legal/incorporation, financial and/or tax advisors
AI in M&A: Why AI Might Be the X-Factor in Your Next M&A
From self-driving cars navigating city streets to chatbots that answer your customer service questions, Artificial Intelligence (AI) is rapidly transforming our world. This wave of innovation isn’t stopping at the doorstep of the business world either. Mergers and Acquisitions (M&A), a sector traditionally known for its reliance on experience and intuition, is being reshaped by the power of AI.
The high-stakes world of M&A is about to get a major upgrade with AI. AI is poised to become the secret weapon of dealmakers, transforming the way deals are sourced, analysed, and executed. Forget lengthy due diligence process and gut-feeling decisions – AI promises to inject efficiency and insightful data analysis into every stage of the M&A process.
Let’s explore how AI will revolutionize M&A, from deal discovery to successful integration.
AI in M&A: Enhancing Efficiency and Driving Innovation
AI can significantly enhance efficiency by automating repetitive tasks, analyzing vast amounts of data, and providing valuable insights. Imagine AI-powered tools that can sift through piled documents during due diligence, identify potential risks and opportunities, and even generate draft reports. This frees up dealmakers to focus on strategic decision-making, creative problem-solving, and relationship building – aspects where human expertise remains irreplaceable.
AI can foster innovation in several ways. It can automate document review, data analysis, and risk assessment, allowing dealmakers to focus on decision-making and creative problem-solving. Additionally, AI-powered tools can analyze historical data to identify patterns and predict deal success rates, informing better deal selection and execution strategies.
M&A Deal Phases Poised to Benefit from AI
The potential benefits of AI extend across the entire M&A lifecycle:
Developing M&A Strategy: AI can analyze market trends, identify potential targets, and assess strategic fit.
Sourcing Targets: AI can search vast databases and identify companies that align with specific criteria.
Legal Review: AI can automate contract review, identify key terms, and suggest revisions.
Due Diligence: AI can analyze financial statements, identify potential risks, and extract relevant information from contracts.
Deep Data Review: AI can analyze vast amounts of unstructured data from various sources to uncover hidden insights.
Integration Planning: AI can model different integration scenarios and predict potential challenges.
Integration Execution: AI can automate tasks and track progress during the integration process.
Deal Postmortem: AI can analyze deal data to identify areas for improvement in future transactions.
AI in M&A: The Transformative Power of AI in Due Diligence
Due diligence, a critical yet time-consuming phase in M&A, stands to gain significant benefits from AI. AI can analyze vast amounts of data from contracts, financial statements, and other sources much faster than humans. This allows for a more comprehensive review, uncovering potential risks and opportunities that might otherwise be missed. AI can also identify patterns and trends in historical data, helping dealmakers predict potential post-merger challenges.
AI and Job Displacement: A Collaborative Future
Concerns about AI replacing human jobs in M&A are understandable. However, AI is more likely to complement and enhance the capabilities of dealmakers rather than eliminate them entirely. Repetitive and mundane tasks will be automated by AI, freeing up dealmakers to focus on higher-value activities that require human expertise, such as negotiation, relationship management, and strategic decision-making. AI will become a powerful ally, augmenting human capabilities and enabling dealmakers to deliver greater value.
Proceed with Caution: Responsible AI Adoption is Key
While the potential of AI in M&A is undeniable, responsible adoption is crucial. Here are some key considerations:
Compliance and Risk: Ensure AI tools comply with evolving regulations and mitigate potential risks associated with data security and bias.
Human Oversight: Maintain a healthy level of human oversight to ensure the validity and accuracy of AI-generated outputs.
Data Security and Privacy: Select AI tools that prioritize data security and user privacy.
Understanding the opportunities and risks associated with AI in M&A is paramount for informed decision-making and successful deal execution.
As AI continues to evolve, dealmakers who embrace this transformative technology will gain a significant competitive edge. By leveraging AI-powered tools and platforms, they can enhance efficiency, streamline processes, make more informed decisions, and ultimately, achieve greater deal success. The future of M&A is here, and AI is at the forefront of this transformation.
MS for Making the Deals Work for You
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ADGM Annual Accounts: Deadlines, Extensions, and Penalties
Operating within the Abu Dhabi Global Market (ADGM) offers a dynamic and internationally recognized platform for businesses. As a premiere international financial centre, companies and Limited Liability Partnerships (LLPs) are required to file annual accounts in the ADGM. These accounts serve a critical purpose: fostering transparency and ensuring compliance with financial regulations.
Let’s explore more about the ADGM Annual Accounts.
What is ADGM Annual Accounts?
ADGM annual accounts are comprehensive financial statements prepared by companies and Limited Liability Partnerships (LLPs) registered under the Abu Dhabi Global Market (ADGM) framework. These accounts adhere to International Accounting Standards (IAS) and provide a detailed picture of the entity’s financial performance and position for the preceding financial year.
Types of Accounts to File
The nature of the accounts you need to submit depends largely on the size and type of your business. Generally, ADGM requires the submission of audited annual accounts, which include:
An Auditor’s Report
A Director’s Report
A Board resolution approving the accounts
Small businesses that qualify under the small company’s regime can file a simplified version of their accounts, including an unaudited balance sheet. To qualify as a small company or LLP, your business must have:
A turnover not exceeding USD 13.5 million
No more than 35 employees
Public interest entities and financial service providers are excluded from this regime. The unaudited balance sheet must include a statement indicating it has been prepared according to the provisions applicable to small companies.
Filing Deadlines
Every ADGM business has an Accounting Reference Date (ARD) which sets the deadlines for filing. New companies must file their first annual accounts within nine months of their ARD, while existing businesses must adhere to a nine-month filing deadline following their ARD.
Also, the deadlines for filing annual accounts vary depending on the type of company:
First Annual Accounts: New companies must file within nine months of their ARD if the financial year is 12 months or less. If the financial year exceeds 12 months, accounts must be filed within nine months of the first anniversary of incorporation.
Subsequent Annual Accounts: Existing companies must file within nine months of their ARD for each subsequent year.
For instance, a company incorporated on 11 November 2022 with an ARD of 31 December 2023 must file by 11 August 2024 for its first financial year. For the following year, the deadline would be 30 September 2025. For public companies, the filing period is six months instead of nine.
Filing Procedure
All accounts must be submitted via the ADGM online registry solution. Log into your firm’s account, select “Maintain Company,” and then choose “Lodge Annual Accounts.” Follow the instructions to upload your accounts and any supporting documents. You will receive an automatic acknowledgment upon submission. The Registration Authority may review your accounts before accepting them.
Changing an ARD
Companies can request a change to their ARD, provided they meet the eligibility requirements. This change must be supported by a resolution from the directors and submitted to the Registration Authority. Businesses can change their ARD by notifying the Registration Authority and submitting a supporting directors’ resolution.
Extensions and Penalties for Filing Accounts
In exceptional circumstances, businesses can apply for an extension to the filing deadline, but these applications must be submitted before the original deadline and are evaluated on a case-by-case basis. If annual accounts are not submitted on time, businesses can face penalties of up to USD 15,000.
Detailed Requirements for Annual Accounts
When preparing annual accounts, the following requirements must be met:
All accounts must be denominated in USD
Balance sheets must be signed by a director, with the director’s name stated
For audited accounts, the director’s report must be signed by a director or company secretary, with the name of the signer stated
The auditor’s report must include the audit firm’s name and the senior auditor’s name
Filing ADGM annual accounts is not just a regulatory obligation, but a valuable tool for businesses. Timely and accurate accounts increase your credibility with stakeholders, provide insights to guide strategic decisions, and potentially ease access to funding. Moreover, staying compliant with filing deadlines reduces the risk of sanctions and demonstrates your commitment to good corporate governance. By prioritizing early preparation for ADGM annual accounts, you unlock a range of benefits that position your company for success within the thriving Abu Dhabi Global Market.
Disclaimer
*Registered in Abu Dhabi Global Market(RegisteredNo.000007218). We are not an ADGM Registered Corporate Service Provider.
DEWS in DIFC Advantage: A Modern Approach to End-of-Service Benefits
Have you ever wondered why top talent from around the world is flocking to Dubai? Various factors contribute to this trend, with one of the key reasons being the Dubai International Financial Centre (DIFC). The DIFC’s proactive approach, consistently reviewing and refining its policies, fosters an exceptional environment for attracting and retaining top-tier international talent. Aligning with the forward-thinking vision of the United Arab Emirates’ National Agenda and Dubai Plan 2021, the DIFC prioritizes the creation of a global hub for talent and innovation.
Beyond competitive salaries, the DIFC acknowledges the importance of long-term benefits that contribute to employees’ financial security and professional development. A cornerstone of this commitment is the implementation of the DIFC Employee Workplace Savings (DEWS) plan. Introduced in February 2020, the DEWS plan marks a significant transformation in how the DIFC manages end-of-service benefits for its workforce.
Benefits of the DEWS in DIFC
The DEWS plan offers a structured approach to accumulating end-of-service benefits by mandating employer contributions based on employees’ basic salaries and length of service. Additionally, employees have the option to make voluntary contributions to further enhance their savings, providing them with a flexible and robust tool to achieve their financial goals.
DEWS in DIFC: Key Entities Involved
DEWS Supervisory Board: This board oversees the plan, ensuring it meets the needs of members and aligns with international standards. It comprises an independent chairperson, representatives from Dubai’s Department of Finance, Dubai Government Human Resources, DIFC Authority, a DIFC employer, and a DIFC employee.
Plan Administrator: Zurich Workplace Solutions (ZWS): ZWS administers the DEWS plan, handling enrolment, contributions, investments, and withdrawals. They provide real-time access to plan information through an online portal and support via a DIFC-based team.
Master Trustee: Equiom: Equiom ensures the DEWS plan meets members’ needs, acting as the independent legal owner of contributions and overseeing investment options.
Investment Adviser: Mercer: Mercer provides independent investment advice, managing a range of dynamically managed investment portfolios.
Employer Contributions
Participation in DEWS is mandated by law for all DIFC employers. Employers contribute a percentage of employees’ basic salaries to their DEWS accounts monthly. The contribution rates are:
5.83% for employees with less than 5 years of service.
8.33% for employees with 5 years or more of service.
Voluntary Contributions
Employees can enhance their DEWS savings by making voluntary contributions through salary deductions. This is a simple way to achieve long-term financial goals. Employees can contribute up to 100% of their basic monthly salary, either regularly or as a lump sum.
Investment Options
The DEWS plan offers a range of investment options to suit different risk appetites and financial goals. Employees can choose from conservative, moderate, and aggressive investment funds managed by professional asset managers.
Fees and Charges
The DEWS plan has fixed fees for service providers and variable fees based on investment choices. The fixed fees are:
0.80% for the Plan Administrator (Zurich).
0.20% for the Trustee (Equiom).
0.23% for the Investment Advisor (Mercer).
Variable fees for investment management range from 0.03% to 1.88%.
Default Investment Strategy of DEWS in DIFC
By default, all contributions are invested in the DEWS Low Moderate Growth strategy, which aims for medium to long-term growth using a balanced approach with exposure to both growth and defensive assets. Employees can remain in the default strategy or switch to other available strategies using their online DEWS account. Employers seeking to opt out of DEWS will have to implement a Qualifying Scheme and apply to DIFC Authority (DIFCA) to obtain a Certificate of Compliance.
The DEWS in DIFC plan exemplifies the DIFC’s commitment to attracting and retaining top international talent. By offering a structured, transparent, and flexible approach to end-of-service benefits, the DEWS plan empowers employees to take control of their financial future while ensuring a secure and competitive work environment. This innovative solution aligns perfectly with the DIFC’s vision of becoming a global hub for talent and innovation, fostering a thriving and dynamic ecosystem that benefits both employers and employees.
Dubai’s DIFC Employment Laws: What You Need to Know Before You Start
Dubai’s impressive skyline and reputation for innovation attract professionals from around the globe who are seeking ideal career opportunities. However, before embarking on a new career path in Dubai, a thorough understanding of the city’s employment regulations is essential. Dubai operates under a unique legal framework, and the Dubai International Financial Centre (DIFC) presents a distinct set of employment laws specifically tailored to the international business community.
Key Aspects of the DIFC Employment Law
Written Employment Contracts: The DIFC Employment Law mandates written employment contracts for all employees. These contracts must clearly outline essential terms like job title, duties, remuneration, working hours, and notice periods. Clear and comprehensive contracts help prevent misunderstandings and disputes down the line.
Minimum Employment Standards: The law establishes minimum employment standards covering working hours, rest breaks, annual leave entitlements, sick leave, and end-of-service gratuity. Employers must comply with these standards to ensure fair treatment of their workforce.
Termination Procedures: Specific procedures govern termination of employment in the DIFC. Employers must provide notice to the employee, pay outstanding wages or entitlements, and issue a termination certificate. Understanding these procedures helps ensure lawful termination practices.
Dispute Resolution: The DIFC provides a robust system for resolving employment disputes through its Employment Tribunal. Employers should be prepared to engage with the Tribunal and comply with its decisions to avoid further legal issues.
DIFC Employment Laws: Understanding Recruitment and Hiring Practices in DIFC
Compliance with Anti-discrimination Laws: Job postings and recruitment practices must comply with anti-discrimination laws, ensuring fairness and equal opportunities for all candidates.
Work Permits and Visas: Foreign employees require the necessary work permits and visas to be employed legally. Employers must follow the procedures for obtaining these.
Background Checks and Qualifications: Conducting background checks and verifying qualifications helps ensure candidates are suitable for the position.
Minimum Wage and Working Hours: Employers must adhere to the minimum wage requirements and working hours regulations set forth by the DIFC Employment Law.
Probationary Period: A probationary period of up to six months is allowed to assess new hires. The terms of the probationary period should be clearly outlined in the employment contract.
Onboarding Process: A comprehensive onboarding program helps new employees acclimate to their roles and responsibilities, setting them up for success.
Employment Contracts and Offer Letters in DIFC
Governing Law: DIFC Employment Law No. 2 of 2019 governs employment contracts in DIFC. It outlines the rights and obligations of both parties.
Essential Elements of Employment Contracts: Key elements to include in an employment contract are names of parties, job title and description, start date, contract duration (if applicable), salary and benefits package, and notice period for termination. Specific terms relevant to the industry or role can also be included.
Offer Letters: Offer letters formally propose a position to a candidate before they sign the employment contract. They should detail the job title, salary, start date, and any other relevant terms.
Execution and Legal Advice: Both parties must sign the documents, and it’s advisable to provide each party with a copy of their records. Seeking legal advice before finalizing contracts ensures they are legally sound and compliant.
DIFC Employment Law:The Wage and Salary Regulations in DIFC
The DIFC Employment Law safeguards employee rights regarding wages and salaries. Here’s a breakdown of the key points for employers:
Timely Payment of Wages: Wages must be paid at regular intervals, not exceeding one month. Employers must also provide pay slips detailing wage breakdown, deductions, and bonuses, and should be in a printable format.
Payroll: The payroll should be processed within 7 days of the payment period.
Benefits and Leaves: The DIFC Employment Law mandates several benefits and leave entitlements for employees:
Annual Leave: A minimum of 20 days of paid annual leave is mandated, with some companies offering more.
Sick Leave: Employees are entitled to paid sick leave for a limited period, as outlined in the employment contract or company policy.
Maternity Leave: Female employees are entitled to paid maternity leave, with specific durations and conditions defined by law.
Paternity Leave: Fathers are also entitled to a period of paid paternity leave, although typically shorter than maternity leave.
End-of-Service Gratuity: Employees are entitled to a gratuity upon termination, calculated based on their salary and length of service. The DIFC has launched the DIFC Employee Workplace Savings (DEWS) plan to modernize the end-of-service benefits system for employees. By reflecting global best practices, DEWS replaces the traditional, unfunded end-of-service gratuity structure with a transparent, professionally managed, and regulated savings plan.
Termination of Employment: Both employers and employees can initiate termination of employment, adhering to the legal procedures:
Notice Periods: Minimum notice periods for termination are stipulated in employment contracts or as per the law.
Redundancy: In case of redundancy, employers must follow specific procedures and provide severance pay.
Disciplinary Action: Termination due to disciplinary issues requires following fair procedures and due process.
Termination Certificates: Upon termination, employers must issue a termination certificate to the employee.
Dispute Resolution: The DIFC Employment Tribunal provides a mechanism for resolving employment disputes between employers and employees.
Steps for Dispute Resolution: Employees can file a claim with the Tribunal if they believe their rights have been violated. The Tribunal will then hear the case and issue a binding decision.
Alternative Dispute Resolution (ADR): Employers and employees can explore ADR options like mediation or conciliation before taking the matter to the Tribunal.
Dubai’s DIFC stands out with its distinctive employment regulations designed to support an international business environment. For professionals looking to advance their careers in this thriving metropolis, understanding these legal requirements—from detailed employment contracts and fair wage practices to robust dispute resolution processes—is essential. Compliance with DIFC Employment Law not only ensures adherence to legal standards but also contributes to a positive and efficient work environment. By being proactive in understanding and applying these regulations, both employers and employees can explore Dubai’s job market with confidence, making the most of the opportunities this innovative city has to offer.
Why Family Offices in the UAE Thrive at Business Environment
From its emergence back in the 6th century to being the leading players in private wealth management advisory, Family offices in the uae have undergone a remarkable revolution. With their operational flexibility, family offices are now reshaping global trade opportunities. In recent times, many countries worldwide have supported family businesses with institutional and policy backing, raising awareness, educating, and ensuring regulatory frameworks to ensure their continuity.
The UAE government is dedicated to supporting family offices by providing legislative, structural, and regulatory tools essential for the private sector’s success, crucial to the broader UAE economy’s health.
Family Offices in the UAE – a legislative revolution
A new UAE Federal Decree Law No.37 of 2022 on Family Businesses (the “Law”) was issued in October 2022 and came into force on 11 January 2023.
Establish a robust legal framework for ownership and governance of family businesses.
Facilitate smooth transfers of ownership between generations.
Support the continuity and sustainability of family businesses in the private sector.
Introduce mechanisms for resolving family disputes effectively.
Enhance the economic contribution and competitiveness of family businesses in the UAE.
Top freezones for your Family office in the UAE
Abu Dhabi Global Market (ADGM)
The Abu Dhabi Global Market (ADGM) is one of the premium destinations for family offices. ADGM allows Single Family Offices (SFOs) under its Commercial Licensing Regulations, even though specific SFO regulations are absent. SFOs function as private companies with limited liability for shareholders. They provide services such as wealth and asset management, legal and accounting support, and administrative services exclusively to the family and their entities. This setup aids in protecting wealth tax-efficiently, alongside other ADGM wealth management options like SPVs and foundations.
Dubai International Financial Centre (DIFC)
The Dubai International Financial Centre (DIFC) has introduced new regulations for family offices under the Family Arrangements Regulations 2023. These regulations, effective from 31 January 2023, replace the previous Single-Family Office Regulations (SFO Regulations) of 2011. One significant change is the removal of the requirement for family offices to register with the Dubai Financial Services Authority (DFSA) as a Designated Non-Financial Business or Profession. This update aims to enhance the regulatory framework for family offices within the DIFC, supporting the initiatives of the Global Family Business and Private Wealth Centre.
DIFC Family Wealth Centre
The DIFC Family Wealth Centre (DFWC) supports family businesses and Ultra High Net Worth Individuals (UHNWIs) by offering tailored solutions aligned with the UAE’s commitment to these sectors. Their “Family Arrangements Regulations” aim to sustain and expand family enterprises and wealth, providing personalized services, education, networking opportunities, and advisory to guide families effectively.
Government initiatives for Family offices in the UAE
1)Unified Family Business Registry
The UAE Ministry of Economy introduced a unified registry for family businesses, supported by four cabinet resolutions aimed at enhancing governance and competitiveness. This initiative aims to establish the UAE as a preferred destination for local, regional, and global family enterprises.
They play a crucial role in driving the national economy forward, supporting its shift towards a knowledge-based future. The unified registry launch marks a significant step in enhancing governance and streamlining registration processes for family enterprises in the UAE. It’s about creating a cohesive system that builds on their existing strong legislative and technological foundations.
2)Dubai Family Business Management Programme
The Dubai Family Business Management Programme is designed to support the growth of Dubai’s business community by nurturing innovative leaders capable of addressing future challenges. This program supports Dubai’s business community by developing innovative leaders in Dubai capable of addressing future challenges. It focuses on preparing the next generation of family business leaders by enhancing governance, sustainability, global trade strategies, legal education, social responsibility, networking, media presence, and overall success preparation.
3)Abu Dhabi Family Business Index
The Abu Dhabi Department of Economic Development (ADDED) on a collaboration with the United Emirates University (UAEU) has signed an MoU to launch the Abu Dhabi Family Business Index.
An initiative to rank and evaluate family-owned and family-controlled businesses in Abu Dhabi, this index will assess factors like revenue, industry impact, employment, governance structures, leadership diversity, succession planning, longevity, and socio-economic contributions. By combining the expertise of UAEU and the economic development focus of ADDED, this initiative aims to enhance Abu Dhabi’s reputation as a hub for innovation and economic prosperity. It’s about understanding and improving how family businesses operate and contribute to the local economy.
The UAE has become a top spot for Family offices, with financial assets growing fast, especially from UNHWI’s. With projections indicating further expansion by 2026, the country’s appeal is strengthened by its progressive regulatory frameworks, legal innovations, and favorable tax policies. As global interest intensifies, the UAE is on track to be a key place for family offices offering great chances for wealth management and growth in the years ahead.
ADGM Employment Regulations: Key Requirements and Best Practices
The United Arab Emirates has long been a leader in advocating for both employee and employer rights. Within this progressive landscape, the Abu Dhabi Global Market (ADGM) distinguishes itself with advanced employment regulations that ensure compliance while fostering a mutually beneficial environment for all stakeholders. This premier financial centre provides a sophisticated legal framework, integrating local and international best practices. For businesses, this means streamlined operations and efficient workforce management. ADGM’s dedication to transparency and balance enables businesses to attract and retain top talent, driving them towards greater success.
ADGM Employment Regulations 2019
ADGM’s employment regulations are governed by the ADGM Employment Regulations 2019, which ensure a fair balance between employer and employee obligations, including payroll. Unlike other parts of the UAE, the UAE Federal Law No. 33 of 2021 concerning labor relations does not apply to ADGM. Instead, ADGM has its own set of employment regulations, making precise and comprehensive payroll management crucial for compliance.
Key aspects of these regulations include:
Timely Payment of Wages: Employers must ensure timely payment of wages to employees.
Pay slips: Employers are required to provide detailed pay slips to employees.
End-of-Service Gratuity: This is calculated based on an employee’s tenure and is a mandated benefit.
Employment Contracts and Visas
ADGM generally follows a contract-based employment system. Employers and employees must have a written contract outlining the terms and conditions of employment, remuneration details, probation, benefits, duties, working hours, notice periods, and termination conditions. This contract must be provided within one month of the commencement of employment.
Employers are responsible for obtaining work permits for their employees and covering all associated costs. Visa applications in ADGM are handled through the Corporate Relations Office at ADGM.
Duties and Obligations
The ADGM Employment Regulations detail the duties and obligations of both employers and employees. Employers must ensure health insurance coverage for their employees and adhere to health and safety standards in the workplace. Discrimination and harassment based on gender, race, religion, or disability are prohibited, promoting a safe and inclusive work environment.
Overtime:
The maximum working time is 48 hours per week with no opt-out option.
Overtime applies to employees, excluding managers and supervisors, for hours worked over 832 in four months.
Overtime compensation can be monetary, time in lieu, or both, with rates of 25% (daytime) and 50% (9 pm to 4 am).
Payments must be made within one month after the four-month period.
Employers must keep time records for employees nearing or exceeding the Threshold.
Sick Pay:
Sick leave is divided into:
10 business days at full pay.
20 business days at half pay.
30 business days without pay.
Employers can terminate employees exceeding 60 business days of sick leave in 12 months, except for Disability-related leave.
Minimum Notice Period:
The notice must be in writing:
Seven days for employment under three months.
30 days for employment of three months or more.
Fines and Potential Compensation:
Employers failing to pay wages within 14 days may be ordered to pay compensation up to the last Daily Wage for each day of delay.
Discrimination:
Color is now a protected class according to ADGM Employment Regulations.
Breaches can result in compensation for up to three years of Basic Wages and fines of up to USD 20,000 for non-compliance with court recommendations.
Termination of Employment and End-of-Service Gratuity
Termination procedures in ADGM require a 30-day notice period. Immediate termination without notice is permissible for justifiable cause. Employees are entitled to end-of-service gratuity if they have completed at least one year of continuous employment, provided the termination is not due to employee misconduct.
Non-Employee Engagement
The Registrar of ADGM has outlined rules for engaging non-employees, including secondees, outsourced individuals, interns, and temporary freelancers. These rules set conditions for temporary work permits, applicable fees, and fines for non-compliance.
The UAE, with its diverse jurisdictions, operates under various rules and regulations that form the backbone of its business environment. Understanding these regulations is essential for achieving business excellence. The Abu Dhabi Global Market (ADGM), in particular, has established employment regulations that provide a robust framework for employment within its jurisdiction, setting minimum employment standards, balancing employer and employee rights and obligations, and aligning with international best practices. This comprehensive framework covers aspects such as employment contracts, visas and work permits, duties and obligations, remuneration, working hours, leave entitlements, labor rights, and termination procedures.
For businesses operating in ADGM, precise and comprehensive payroll management is crucial to ensure compliance with these unique regulations. Adhering to these standards not only ensures legal compliance but also fosters a fair and conducive working environment, safeguarding the rights and interests of both employers and employees. By maintaining high standards in payroll management, businesses can contribute to a stable and attractive labor market within ADGM, promoting long-term success and sustainability.
MS for Payroll Precision in ADGM
Understanding the ADGM Employment Regulations ensures compliance with regional regulations, mitigating risks of non-compliance such as fines, legal issues, and reputational damage. Compliance with the ADGM builds trust and credibility, crucial for attracting and retaining international stakeholders. By using our expert payroll services in MS, you can confidently manage payroll and focus on driving business success, one of key factors of the ADGM Employment Regulations.
Qualifying for a 0% Corporate Tax Rate in the DIFC: What Operational Companies Need to Know
Choosing the right business structure and location is a crucial yet initial step when starting a business in the United Arab Emirates (UAE). Out of the seven Emirates, Dubai stands out with its excellence in areas like tourism, real estate and trade etc. attracting the crowd including High Net Worth Individuals around the globe. For the last 20 years, the Dubai International Financial Centre (DIFC) in Dubai has offered numerous incorporation benefits, making it the best choice for many, and with the option to establish an operational company. Setting up a business in the DIFC provides several advantages over other parts of Dubai.
The DIFC offers benefits such as proximity to major markets, flexible company structures, strong intellectual property protection, a streamlined visa process, access to funding, and a supportive environment for business growth. These advantages can significantly help companies succeed in today’s competitive business landscape.
Corporate Tax Rate in the DIFC for Operational Companies
The UAE’s new federal corporate tax system offers significant advantages to businesses operating within its Free Zones including DIFC. These entities can enjoy a 0% corporate tax rate, but specific criteria need to be met. In contrast, companies located outside Free Zones face a standard 9% tax on their taxable income exceeding AED 375,000. However, Free Zone businesses including operational companies can maintain this attractive 0% tax rate on their qualifying income by achieving Qualifying Free Zone Person (QFZP) status. It’s important to note that any income earned by a QFZP that doesn’t meet the qualifying criteria will be taxed at the standard 9% rate. This system provides a clear incentive for Free Zone companies to comply with QFZP requirements and continue benefiting from a competitive tax environment.
To understand the Corporate Tax implications for Free Zone operational companies, let’s first explore the core features of the new UAE Federal Corporate Tax system.
Which of the DIFC entities Qualifies for a 0% Corporate Tax Rate?
The good news is that possibly most of the operational companies in the DIFC can benefit from a 0% corporate tax rate on their qualifying income. To qualify as a Qualifying Free Zone Person (QFZP) and enjoy this tax advantage, your company must meet specific criteria:
Substantial Presence in the UAE: Demonstrate a strong physical presence in the UAE with a local office and employees.
Qualifying Income Generation: Your primary source of income must stem from compliant business activities conducted within the DIFC or with international clients.
Opting Out of Standard CT Rates: You cannot choose to be taxed under the standard corporate tax rates that apply outside Free Zones.
De Minimis Threshold: Any non-qualifying income must be below 5% of your total revenue or AED 5 million, whichever is lower.
IFRS-Compliant Audits: Maintain accurate financial records and have them audited according to International Financial Reporting Standards (IFRS).
DIFC Authority Requirements: Ensure compliance with any additional stipulations set forth by the DIFC.
What Activities of operational companies in the DIFC qualify for the 0% Tax Rate?
The UAE Ministry of Finance categorizes business activities for corporate tax purposes. Here’s a focus on qualifying activities that benefit from the 0% tax rate in the DIFC or any other Free Zone.
Manufacturing and Processing
Trading of Qualifying Commodities
Investment Holding
Ship Ownership and Management
Reinsurance and Fund Management Services
Wealth and Investment Management
Headquarters and Treasury Services to Related Parties
Financing and Leasing of Aircraft
Distribution and Logistics Services
Ancillary Activities Supporting the Above
It’s important to note that there are also excluded activities listed in the official documentation that may not qualify for the 0% tax rate benefit.
Understanding Qualifying Income for Operational Companies in the DIFC
Qualifying income refers to the portion of your company’s earnings that is eligible for the 0% corporate tax rate in the DIFC. Here’s a breakdown to help you determine what qualifies:
Transaction with another Free Zone person: If your business transactions are with another business entity within the same Free Zone, the income generated from these transactions can be considered as qualifying income.
Transaction with a non-Free Zone person: If your business transactions are with an entity outside the Free Zone, the income from these transactions may not be considered as qualifying income.
Income from all other transactions: All other income, provided they satisfy the de minimis requirements, can be considered as qualifying income.
However, qualifying income does not include income generated from domestic (mainland) or foreign permanent establishments, immovable property outside the Free Zone, and certain other activities like income from non-commercial properties.
Corporate Tax: Filing and Payment Procedures for DIFC Companies
Registration: Applications for corporate tax registration are submitted through the DIFC’s Corporate Registry. They will assess your eligibility for a Corporate Tax Registration Certificate (OCRT).
Required Documents: The registration process involves submitting an application, paying fees, and providing detailed financial information, including income, expenses, assets, liabilities, and capital.
Ongoing Obligations: Once registered, you must comply with the relevant tax rules and regulations set by the Federal Tax Authority (FTA). This includes filing yearly tax returns reporting your taxable income and profits. You may also need to submit annual financial statements and audited financials upon request from the FTA.
Simplified Filing: The FTA offers various e-services for DIFC taxpayers, including online registration, tax return submission, and online tax payments. They also have a Voluntary Disclosure Program for rectifying past non-compliance.
MS for corporate tax compliance Operational companies in the DIFC
Uncertain about the impact of the UAE’s new Corporate Tax Law on your operational company in the DIFC? MS can be your trusted advisor. We provide comprehensive support, from maximizing the 0% tax benefit offered by Free Zones to ensuring compliance with transfer pricing regulations. Our experts simplify tax record keeping and reporting, keeping you informed of any future changes in the tax environment. Let MS guide your operational company towards success in the DIFC.
Payroll Best Practices in the UAE Financial Freezones: ADGM and DIFC
The UAE Constitution and societal values are foundational in upholding and protecting workers’ rights. As a member of the International Labor Organization (ILO), the Arab Labor Organization, and other international bodies dedicated to employment rights, the UAE remains committed to transparency and fairness in its obligations toward all workers. The UAE continuously reviews various work-related aspects, including recruitment, hiring processes, and the living conditions of expatriate workers. Significant strides have been made to ensure that workers are treated with respect and equality and have accessible, confidential avenues for reporting labor disputes and abuse.
Employment Benefits and Sector Differences in the UAE
Employees in the UAE, whether local or expatriate, are generally entitled to a range of benefits. However, some benefits are exclusive to local employees, and there are notable differences between public and private sector employment. Furthermore, specific regulations apply to employees working in areas such as the Dubai International Financial Centre (DIFC), the Abu Dhabi Global Market (ADGM), and the other UAE Free Zones.
While the UAE constitution and its membership in international labour organizations establish strong employee rights, these rights translate into concrete obligations for employers. One key area of obligation is ensuring fair and transparent compensation and benefits. This is where payroll services come into play. Understanding UAE labour laws related to payroll, such as minimum wage, overtime, and end-of-service benefits, is crucial for employers to fulfill their obligations and maintain a compliant and positive work environment.
Wage Protection System in the UAE
In the UAE, the Wage Protection System (WPS) is a government initiative designed to ensure timely and full payment of employee wages. Implemented by the Ministry of Human Resources and Emiratisation, WPS mandates that all private sector employers pay their employees’ salaries through an approved electronic system, typically through banks or financial institutions. This system aims to enhance transparency, protect workers’ rights, and streamline payroll processes by providing a reliable and secure mechanism for wage disbursement. Compliance with WPS is crucial for businesses to avoid penalties and ensure adherence to labor regulations.
Grasping Legal Essentials for Payroll Services in the UAE
Know the UAE Labor Laws: Understanding the UAE’s labor laws and regulations related to payroll, such as minimum wage standards, overtime rules, and end-of-service benefits, is crucial. Ensuring compliance helps avoid penalties and legal issues.
Keep Informed: Stay updated on any amendments or new regulations from relevant UAE authorities, such as the Ministry of Human Resources and Emiratization (MOHRE).
Maintain Detailed Records: Accurately document employee information, including personal details, contracts, salary structures, and attendance. Errors in this data can lead to payroll mistakes and legal issues.
Regular Updates: Update employee records regularly to reflect changes in salary, benefits, allowances, and tax status, ensuring payroll calculations are accurate and compliant.
Follow Payroll Schedules: Ensure salaries are paid on time according to employment contracts and UAE labor laws. Delayed payments can hurt employee morale and lead to legal disputes.
Automate Payments: Implement automated payment systems to ensure prompt salary disbursements, considering banking holidays and other relevant factors.
Secure Payroll Data: Ensure the confidentiality of payroll information in compliance with UAE data protection laws, such as Federal Law No. 2 of 2019 on Information and Communication Technology.
Implement Security Measures: Use robust security measures to protect payroll data from unauthorized access, breaches, and cyber threats, including encryption, access controls, and regular backups.
Flawless Payroll: Ensuring Smooth Operations in ADGM
The significance of payroll services in ADGM is multifaceted, addressing both legal compliance and operational efficiency in this prominent international financial center. ADGM operates under a regulatory and legal framework, which includes its employment laws and standards distinct from other parts of the UAE. The ADGM Employment Regulations 2019 ensure a fair balance between employer and employee obligations including the payroll. Other key aspects include timely payment of wages, and payslips, along with a mandated end-of-service gratuity calculated based on an employee’s tenure. This uniqueness necessitates precise and comprehensive payroll management and employee rights to ensure full compliance with local regulations, including specific requirements for salary disbursements, end-of-service gratuities, and tax obligations.
In the DIFC, the importance of payroll services extends beyond mere compliance to encompass critical aspects of regulatory adherence and operational efficiency. The DIFC maintains a distinct legal and regulatory environment, encompassing specific employee compensation mandates such as the DIFC Employee Workplace Savings (DEWS) scheme. DEWS is a mandatory savings plan designed to provide financial security to employees upon the termination of their employment.
Under DEWS, DIFC employers are mandated to contribute a percentage of their employees’ salaries, including allowances and benefits, into a designated savings account. Accurate management of these contributions is essential for regulatory compliance, as failure to adhere to DEWS requirements can lead to substantial fines and legal issues. Professional payroll services play a pivotal role in this process by ensuring that DEWS contributions are correctly calculated, processed, and reported in line with DIFC regulations. These services also facilitate clear communication with employees about their DEWS entitlements and streamline the integration of DEWS management with overall payroll operations. By ensuring precise DEWS administration, businesses in DIFC can enhance employee satisfaction and retention while maintaining a competitive edge in the global financial market.
Payroll Precision with MS
Professional payroll services of MS in ADGM and DIFC are equipped to handle all the complexities, ensuring that all statutory requirements are met accurately and on time. This mitigates the risk of non-compliance, which can result in substantial fines, legal disputes, and damage to a company’s reputation. Given ADGM and DIFC’s global stature and most reputed regulatory environment, maintaining compliance is not just about avoiding penalties but also about fostering trust and credibility among international stakeholders and clients.
