UAE to impose 9% corporate tax on businesses from June 2023

Newsletter

02 Feb 2022

For our top talks today, UAE to impose 9% corporate tax on businesses from June 2023. here will be a standard statutory tax rate of nine percent for corporate profits above 375,000 AED (102,000 USD) with profits below that taxed at zero percent, in a move to support small businesses. The key features of the proposed regime are expected to strengthen UAE’s position as a global hub for business and investment and as a leading international financial center. Some of these key features include: A progressive (0%-9%) tax rate to support small businesses and startups; Exemptions for Dividends and capital gains earned from qualifying shareholdings; No taxation on Dividends, capital gains and other investment returns earned by foreign investors; A minimal compliance burden for businesses and; No corporate tax will apply on personal income from employment, real estate and other investments. (Zawya)

According to Moody’s the introduction of the corporate income tax is the most significant fiscal reform since 2018. The new tax would bring many additional benefits for smaller companies in the UAE,
as in some ways the UAE has alleviated this issue though the reduction of fees and charges, said Stuart Cioccarelli, Partner and Head of Tax, and Shabana Begum Partner, Head of Transfer Pricing, KPMG Lower Gulf. “Only Oman in the GCC currently has a corporate profit tax that applies to businesses owned by citizens and foreigners alike—most other GCC nations imposing corporate taxes on foreign companies (and only Bahrain not taxing any foreign companies).” The new tax will broaden the revenue base for the federal government and, most likely, also for the individual emirates, in line with the current approach to distributing VAT receipts—representing a new source of revenue in additional to license fees, service fees and volatile land sales. (Zilla Capital)
In a similar context, the Egyptian President Abdel Fattah El-Sisi has ratified amendments to the value-added tax (VAT) and the stamp tax laws.
As per the amendments, advertisements on TV, radio, as well as billboards and online ads will be subject to 14% VAT, replacing the 20% stamp tax, which they were previously subject to. Moreover, El-Sisi has ratified a bill that provides for 5% to 15% of the annual surplus generated by ministerial private funds to be transferred to the state treasury. The bill is expected to achieve around 2.5 billion EGP to 3 billion EGP for state revenues, representing about 7% to 8% of the annual surplus of 36 billion EGP. The president also ratified amendments to some provisions of the law governing public universities and the law governing the Academy of Arts. The legislation will come into force once the executive regulations are published by the Official Gazette. (Enterprise)
Going to Saudi Arabia, the growth of mergers and acquisitions (M&As) will continue in Saudi Arabia this year on the back of a 30 percent growth from 2020 to 2021, according to foreign direct investment advisors, Sovereign AEI.
Paul Arnold, managing director of Sovereign Saudi Arabia said: “Saudi Arabia is probably the Middle East’s most active M&A market. A new report by the partnership said there had been significant inbound activity in the kingdom’s green energy sector, as well as manufacturing and technology, with the kingdom becoming one of the most attractive markets for companies looking to expand through M&A. Meanwhile, outbound investment had been fueled by the need to attract foreign skills and expertise, the report said. (Zilla Capital)
And going back to Egypt, Egypt plans to start production from two new natural gas wells in the Zohr field, the largest in the Mediterranean, within a few months, according to a statement by the Egyptian Ministry of Petroleum.
The discovery of the Zohr field contributed to opening the appetite of investors to work in the Egyptian gas sector and increasing the number of discovered wells, which led to Egypt completely stopping importing gas at the end of September 2019, and even switching to an exporter. Egypt is working to transform into a major energy hub in the region by liquefying gas and re-exporting it. The country's current total production of natural gas is between 6.5 to 7 billion cubic feet of natural gas per day. The giant Zohr field covers an area of 100 square kilometers and is located in the Shorouk concession, which covers an area of about 3,000 square kilometers in the Mediterranean. (Bloomberg Asharq)
The European Bank for Reconstruction and Development (EBRD) has invested over 1 billion EUR in 20 projects in Egypt during 2021.
The bank’s investments in Egypt’s green economy made up 44% of total investments, EBRD noted. Moreover, 75% of EBRD’s investments in Egypt were made in the private sector. Key green investments in the North African country included the 36 million USD package for the development of the Kom Ombo solar plant, the release added. This package will contribute to adding about 200-megawatt (MW) energy capacity, raising the share of renewable energy in the Egyptian energy mix, and promote private-sector participation in the power sector. (Arab Finance)
Moreover, Egypt has reduced its forecast for the budget deficit in the current fiscal year 2021-2022 to 6.7%, from a previous forecast of 6.9%, and to less than 6% for the next year 2022-2023, from 6.3% as previous expectations, according to a statement of the Ministry of Finance yesterday, Tuesday.
The budget deficit in Egypt reached 7.4% in 2020-2021, while the deficit reached 3.9% in the first half of this year, compared to 3.6% for the same period last year. A few days ago, Egypt raised, according to a cabinet statement, its estimates of the budget deficit for the current and next fiscal year, before amending it today in a statement by the Ministry of Finance. (Bloomberg Asharq)
Moving to our EGX and companies talks, Affirma Capital and StonePine ACE Partners Limited have entered an agreement to jointly invest 20 million USD for a significant minority stake in Nerhadou International for Pharmaceuticals and Nutraceuticals.
Nerhadou is one of the largest and fastest-growing nutraceutical and pharmaceutical players and the first to introduce the oral dispersible film (ODF) technology in Egypt. The transaction closing is pending regulatory approvals, including the Egyptian Drug Authority (EDA) and satisfaction of certain conditions agreed between the parties. Renaissance Capital served as the exclusive financial advisor on behalf of Affirma Capital and StonePine, with White and Case acting as the legal advisor. Meanwhile, ADIB Capital, the investment banking arm of ADIB Egypt, acted as the lead sell-side advisor on behalf of Nerhadou, while Al Tamimi and Company served as the legal advisor. (EGX)
Cairo-based social commerce platform Brimore has closed its Series A round at a value of 25 million USD.
The round was led by the International Finance Corporation (IFC) and Endure Capital, with participation from Fawry, Flourish, Endeavor Catalyst Fund, and existing Brimore investors, including Algebra Ventures, Disruptech, Khawarizmi Ventures and Vision Ventures. Brimore will use the fresh funds in boosting its products and suppliers and expanding across Africa to become the continent’s leading social commerce app. Three years into its foundation, the platform has been successful in growing by 400x, as well as establishing a massive network of about 75,000 resellers to cover 27 cities within Egypt, with a focus on rural and remote areas. (Arab Finance)
Ezdehar Management announced the first close of the Ezdehar Mid-Cap Fund II (EMF II) with total commitments of 168 million USD.
This has surpassed the first original close target of 100-120 million USD, aiming for a final close of 180 million USD by the end of 2022. The first close of EMF II, along with existing EMF I investments, bring Ezdehar’s assets under management in Egypt to over 250 million USD. EMF II will maintain Ezdehar’s investment strategy and bolstering mid-cap companies going through transformative growth through injecting fresh capital, provision of hands-on operational support, and instilling best-in-class ESG standards. (Arab Finance)
HSBC Holdings plc is investing 100 million USD in Breakthrough Energy Catalyst as an anchor partner.
This investment will accelerate the global net-zero pathway and bolster the bank’s goal to achieve net-zero climate impact by 2050. Moreover, HSBC will join the leadership council for Breakthrough Energy Catalyst, providing an expert view on the transition opportunities in some of its biggest markets, mainly in Asia and the Middle East. Catalyst funds actual projects, not companies, and it brings together businesses, governments, philanthropists, and individuals to invest in the needed clean technologies to eliminate emissions. (Arab Finance)
Engineer Ashraf Sabry, founder and CEO of “Fawry” for banking technology and electronic payments, said that it is awaiting the approval of the Central Bank of Egypt regarding its agreement with several banks to allow the transfer of remittances from Egyptians abroad in a momentous manner at “Fawry” outlets in Egypt.
He revealed that his company is looking forward to becoming part of the instant payments network recently launched by the Central Bank. Sabry added that his company is seeking to cooperate with 6-7 banks in the new instant payments network, noting that the network is still in an experimental period that ends next June. (EGX)
Jazz Hotel and Resorts Management Company, affiliated to Travco Group, intends to raise its prices by 20% as of the beginning of next May, according to Alaa Akel, the company's president.
The company decided to increase the prices of the services it provides during the current year to improve the level of income and keep pace with the operating cost. He pointed out that the group currently owns and manages about 58 hotels and resorts in various Egyptian tourist destinations, pointing out that his company opened during the month of April about 3 new hotels in Marsa Alam and Sahl Hasheesh. He added that the capacity of the three hotels that were recently opened reached 1,000 rooms, with an investment cost of about 1.7 billion EGP. (Al Mal)
The transactions of the small and medium-sized companies’ market (Nile) increased during the trading month of January by about 62% compared to its value during the month of December, and it recorded 307 million EGP.
According to the EGX data, the Industrial and Engineering Projects Company’s share dominated the Nile Stock Exchange’s shares last month, acquiring the largest value by about 75.3 million EGP, while removing the Utopia Real Estate Investment share to end the month’s trading at 10.81 EGP per share. (Al Mal)