United Arab Emirates business support guidance

Commencing in February 2020, the UAE authorities have introduced a series of temporary measures which are intended to insulate the citizens of the UAE and its businesses affected by the effects of COVID-19.

This includes a package of measures to support the business community and the economy including, but not limited to:

• financial support package for the economy;
• Central Bank’s targeted economic support scheme;
• financial incentives for free zone entities;
• financial initiative packages for SMEs;
• efforts to stabilise market values;
• prioritisation of government suppliers;
• easing of visa renewal processes for workers;
• reduction in utility bills;
• suspension of evictions;
• customs’ initiatives;
• improved automation proposals; and
• a Ministerial Decree providing greater flexibility to employers.

The purpose of this note is to provide a brief oversight of the measures introduced by the UAE Government, both on a federal and emirate level, to help support businesses in light of the COVID-19 pandemic.

The latest information on the various measures is available here.

Cabinet Support Package for the Economy

The UAE Cabinet announced on 22 March 2020 that it would be providing Dh 126 billion of financial support to the economy. As of 5 April, this support package has now been doubled and amounts to approximately USD 70 billion. The support is proclaimed to have three objectives: (i) to reduce the cost of doing business in the UAE, (ii) to support small businesses, and (iii) to accelerate the implementation of major government infrastructure projects.

In conjunction, the Cabinet announced that it would be establishing dedicated teams to ensure that remote working is sustainable and effective for the economy. The teams are tasked with making daily reports to the Cabinet on the financial impacts of COVID-19 on the economy and what measures can be adopted to address the negative impacts.

Central Bank’s Initiatives and Targeted Economic Support Scheme

In mid-March, the UAE Central Bank lowered the interest rates applied to the issuance of Certificates of Deposits by 75 basis points with the intent of increasing spending in the economy. This move followed the decrease in respect of the US Dollar with the same decrease by the US’ Federal Reserve. In line with the reduction of the interest rates, there has also been a reduction by 50 basis points in the REPO Rates for borrowing short-term liquidity. Further fiscal initiatives introduced by the Central Bank in March included a reduction in the rates applicable to the Interim Margin Lending Facility and the Collateralised Murabaha Facility by 50 basis points.

The UAE Central Bank has introduced the Targeted Economic Support Scheme (“TESS”) which has the objectives to facilitate the temporary relief from the payments of principal and/or interest or profit on outstanding loans for all affected private sector corporates, SMEs and individuals. The relief will not apply, however, to government loans nor loans from foreign entities.

TESS relieves existing capital buffers to facilitate the lending capacity of the banks operating in the UAE and also provides guidance to all financial institutions within the State.

The scheme has been effective since 15th March 2020 and provides a zero-collateral facility that can be drawn by all banks and financial institutions in the UAE. The facilities are to be provided against Certificates of Deposit issued by the Central Bank. The Central Bank guidance provides a comprehensive review of how the Support Scheme will function and will also permit banks in the UAE to tap into their conservation buffer up to a maximum of 60% for one year.

As of 7 April, TESS has been strengthened to allow individuals to defer their principal and interest until the end of this year.

The effects of TESS provide the provision of AED 50 billion through collateralised loans and AED 50 billion freed from capital buffers, totaling the equivalent of USD 35 billion.

Dubai Free Zone Initiatives

Free zones operating within the Emirate of Dubai that include, the Dubai International Financial Centre (“DIFC”), the Dubai Multi Commodities Centre (“DMCC”), Jebel Ali Free Zone, and Dubai Airport Free Zone will benefit from Dubai Free Zone Council’s package that includes the postponement of rents for six months, improved facilitation for payments by instalments, refunds of security deposits and guarantees, cancellation of free zone applied fines, and permission for temporary contracts that allow the free movement of labour between free zone companies.

The waiving of any transfer fees between employment will assist both employers and employees should unpaid leave or redundancies be necessary and should allow for a more fluid and dynamic workforce to tackle the changing economic environment.

The DIFC specifically has announced that over a three-month period they will introduce five initiatives that enhance support to companies operating within their jurisdiction and which include the following:

• deferred payment on all leases;
• full waiver from annual licencing fees for new entities;
• 10% discount on renewal of licence for existing entities;
• reduction of fees for property registration; and
• free movement of employees in and out of the DIFC to other free zones.

The DIFC has also introduced additional measures for new and existing DIFC entities. For firms wishing to come into the DIFC, more time will be granted for the application and registration process; new firms will receive a 50% discount on the application fees; and Domestic Funds will receive a waiver on the registration fees. Measures which will benefit Existing Authorised Firms include, among other things, the extension of their returns and reports filing deadlines; waivers for applications, modifications and late return fees; and waiver on the listing fees for new SME issuers.

The DMCC has also announced a separate Business Support Package that includes:

• 100% waiver for late licence renewal penalties;
• 100% waiver for all Flexi Desk and DMCC Business Centre penalties until 2021;
• 100% waiver of the Office Sharing Permit fee;
• 100% waiver of Company Reinstatement fees;
• 30% discount on licence renewal;
• 100% waiver of outdoor rents for retailers; and
• 2-month waiver for rental fees for entities affected by temporary closures.

3.6 The Dubai Healthcare City Authority (“DHCA”), the governing body of Dubai Healthcare City, has announced business relief packages for its free zone community. DHCA’s Relief Package is targeted towards various business segments in the free zone and considers three broad components:

• waivers and discounts for directly-impacted segments;
• additional benefits for businesses operating in DHCA-owned properties; and
• waivers and discounts in regulatory fees for hospitals, clinics, education providers, research institutions, retail stores, hotels, F&B outlets, consultancies, and support services among businesses.

3.7 The packages offer discounts on commercial and clinical fees for all directly impacted segments of up 100%. It also includes discounts on commercial and clinical fees for all other segments (excluding pharmacies and supermarkets) of up to 50%.

Many of the free zones in the UAE have introduced their own initiatives and packages and we can provide further information on specific jurisdictions upon request.

Establishment of Dubai’s Startup Hub and Remote Access

The Dubai Chamber of Commerce and Industry’s entrepreneurship initiative – Dubai Startup Hub - has provided its first wholly online event for its members. 40 new members participated and can benefit from online mentorship to support entrepreneurs on their new ventures during this difficult period.

Small Businesses Initiatives in Abu Dhabi

The Abu Dhabi Department of Economic Development and the Abu Dhabi Department of Finance, in conjunction with Abu Dhabi registered banks have introduced a series of initiatives for both individuals and SMEs. These initiatives have been drafted to assist both those directly affected by COVID-19 and the wider SME community who are experiencing the indirect effects of the outbreak.

The initiatives for individuals affected by COVID-19 consist of:

• A deferment on instalments on existing loans and credit cards for up to three months;
• Halt foreclosures on defaulting mortgages until 30th June 2020;
• Prevent suspension of bank accounts for retrenched customers until 30th September 2020;
• Refund credit card processing fees for foreign currency transactions incurred after 1st January 2020 associated with cancelled travel plans; and
• Instalment plans introduced for utility bill payments until 30th June 2020.

For all individuals, irrespective of whether they have been impacted by COVID-19 consist of the following:

• Deferment of interest on new loans for up to 3 months;
• Reduction of interest charges for eligible customers;
• Reduce bank charges by 50% on settling existing loans;
• Reduce required down-payment by 5% for first time homebuyers; and
• Interest free instalment for school tuition fees.

The Abu Dhabi initiatives also address SMEs impacted by COVID-19 and include:

• Defer instalments on existing loans and credit cards for up to three months;
• Reduction on bank merchant service fees;
• Reduction on banking fees and charges; and
• Reduction on minimum average balance requirements.

As with the initiatives for individuals, SMEs that are not directly impacted by COVID-19 can avail of the following benefits:

• Defer instalments on new borrowing for up to three months;
• Reduction of interest charges on new borrowing; and
• Reduction of bank charges by 50%.

Further information and advice on how small businesses can take advantage of the Abu Dhabi initiatives can be provided on request.

Stabilisation Initiatives of Market Values

The United Arab Emirates Securities and Commodities Authority (“SCA”) issued a decision which introduces a 5% limit down on stock prices in the United Arab Emirates. The cap was introduced on 18th March 2020 and will apply until further notice.

A limit down cap specifies the maximum permissible decline in the price of stocks during one trading day. The limit across all sectors is now set at 5%, but the SCA decision allows for markets to potentially increase the limit to 7% for certain stocks selected by the markets. Any such decision will be based on specific criteria which must be approved by the SCA. Nasdaq Dubai, Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX) have published press releases confirming that they have also now introduced a 5% limit down across all securities listed on their respective exchanges.

Whilst the introduction of the revised limit down cap will stabilise any declines, the SCA has announced that it is actively considering other remedial regulatory action at this time.

Support and Prioritisation for Government Suppliers

The Federal Cabinet has announced that federal ministries and bodies are to fast-track payments that are due to any government suppliers and payments are to be made within fifteen days.

Those suppliers who have been delayed in their execution of federal government contracts may also benefit from a federal resolution that announced that there will be no fines for such delays for the next three months. The Cabinet also announced that this three-month period may be extended following this period.

Visa Renewals

The Ministry of Human Resources & Emiratisation and the Federal Authority for Identity and Citizenship have introduced an automatic renewal for labourers and domestic support staff whose medical tests have not been completed. The initiative has been introduced to ease the strain on medical facilities who generally conduct fitness to work tests.

The result of the initiative is that once worker renewal fees have been paid, the worker will remain an authorised resident of the UAE.

Unified Digital Platform

The Ministry of Finance has announced that it will launch a unified digital platform that will provide the ability to settle fees for common federal and local government services. The aim of the platform is to provide an interconnected platform that provides the ability to access shared government services without manual procedures. The purported aim of this platform is to increase efficiency and to achieve sustainability of financial flows for both local and federal revenue.

Reduction in Utility Bills

A decision has been issued by the UAE Cabinet that imposes a 20% discount on water and electricity bills for three months starting in April 2020. At this stage, the reduction in fees will apply to industrial plants, shopping malls, commercial shops, hotels, and hotel apartments.

The above industries/entities will also benefit from a deferral of six months for water and electricity connection installations and a freeze on reconnection fines and a removal of administrative fees for electricity connection.

Suspension of Eviction Judgments

All eviction and rental judgments issued in the Emirate of Dubai during March and April 2020 will be suspended for residential and commercial facilities.

The initiative is proclaimed as a humanitarian gesture; however this will prove to be an important stopgap for individuals and entities who are struggling during this period and may seek to use this assurance to attempt to rebuild their standing.

Dubai Customs Initiatives

In an attempt to ensure that the UAE’s international trade and imports are insulated against the turbulence of the supply of goods, Dubai Customs Department has introduced a stimulus package for imports and have announced a stay of their auditing procedures.

Specifically, Dubai Customs will refund 1% of customs duty ordinarily imposed on imported goods (typically 5%) that are sold to the local UAE market. This refund will apply to goods imported between 15th March 2020 and 30th June 2020.

Those who undertake brokerage services for customs matters will have the AED 50,000 bank or cash guarantee revoked and for those entities who have already deposited the guarantee will have the amount refunded to them.

RAK Tourism Initiatives

The Ras Al Khaimah Tourism Development Authority will introduce support measures in mid-April. This will include a six-month waiver of all touristic licences; waiver of tourism dirhams from March to May; a complete exemption of tourism licencing fees for Q2 and Q3 and tourism licencing fines until September 30. The Authority also announced internal Stimulus Committee and Steering Stimulus Committee representing the emirate.

The announcement also details a Financial Incentive Package for non-government owned touristic entities. It has been announced that hospitality partners will be able to benefit from complimentary participation in a diverse array of exhibitions and roadshows set to take place in 2020 and 2021 within the emirate and abroad.

Smart Attestations

Initiatives are not limited to financial packages, but also attempts to improve efficiency and remote operations. An example of this is in the developments with attestations.

The UAE is heavily reliant on the attestation of documents to prove legitimacy and validity of documents that are pivotal to business. The attestation process ordinarily involves a face-to-face meeting to attest the relevant document. In the Emirate of Sharjah, the Sharjah Chamber of Commerce has confirmed that they will accept attestation through their website and dedicated Smart App for all transactions in an attempt to ensure that the payment process remains efficient throughout this period.

Their attestation service will allow investors to complete transactions remotely whilst receiving a ratification of signature, individual sponsorship, minors permission, a certified true copy, guardian approval, and external transactions, in addition to the possibility of online payment via credit card or prepaid from the account of the registered company.

Employment Provisions

The UAE has introduced a Ministerial Decision that addresses the stability of employment for private sector companies during the precautionary measures adopted by the State to tackle COVID-19. The Decision applies to all private entities operating in the State and provides the private company and the employee with the bilateral ability to agree to work from home, receive, paid or unpaid leave, and reduction of wages either during this period or permanently. These amendments to the employment agreement cannot be taken unilaterally and are intended to protect the best interests of both employer and employee. The Decision also announces the establishment of a virtual labour market system which is intended to entail the registration of employees on a system that allows the ready rotation of employees between private companies according to necessity. The decision will only be effective during this period of uncertainty and provides benefit to both the employer and employee.

The UAE has also introduced a Ministerial Decision that addresses the stability of employment for UAE-nationals employed in the private sector. The Ministerial Decision formed a committee tasked with the following:

• developing a set of support packages to guarantee the presence of UAE nationals in the labour market;
• oversee and supervise the implementation of Ministerial Decision 212 of 2017 regarding the protection of UAE nationals;
• study cases of terminated UAE nationals;
• develop recommendations to the Minister of Human Resources and Emiratisation for those studied cases of terminated UAE nationals and propose support packages to keep or re-employ those employees by other employers;
• monitor the implementation of the suggested support packages with the competent authorities inside and outside the Ministry; and
• any other tasks which the Minister or Chair (of the committee) hands over to the committee.

A Ministerial Resolution has been issued that mandates that only 30% of workers are permitted to be present at a workplace during this period. Subsequently clarification has been issued exempting certain establishments from these reductions. These include the health sector, hospitality sector, and financial sector.

The Ministry of Human Resources and Emiritisation has launched the ‘Early Leave Initiative’ which enables residents in the private sector who wish to return to their home countries to do so during the precautionary measures that are currently being undertaken. The employees will be asked to submit annual leave for this or agree unpaid leave with their employers.

The Ministry of Human Resources and Emiratisation announced that employers must ensure employees are paid on time in compliance with Ministerial Decision No. 739 of 2016 on the protection of wages. Should the employer and employee mutually agree to temporarily reduce the employee’s salary, employers must immediately update the systems approved by the Ministry of such changes (to the mutually agreed employment contract).

Foreign Direct Investment Positive List

The UAE Cabinet has issued a ‘positive list’ of sectors which foreign nationals (i.e. non-UAE and non- GCC nationals) are able to own 100% of an onshore company’s shares. The initial Foreign Direct Investment Law (“FDI Law”) was issued in 2018 (Federal Law No. 19 of 2018) which introduced (amongst others) the negative list of activities which foreign nationals will be unable to invest in.

Each activity on the positive list will require specific (not insignificant) capital requirements which investors will need to consider. It is important for investors to also note that each Emirate will be entitled to specify which of the activities listed in the positive list can be exercised in their respective Emirates with 100% ownership. We expect each Emirate to focus on attracting investments in specific sectors.

Insurance Authority Capital Relief

In an attempt to assist regulated mid-sized insurance brokers in the UAE with cash flow, the Insurance Authority will reduce bank guarantees by AED 1 Million. To benefit from this initiative, brokers will be required to meet the specific criterions set by the Insurance Authority prior to submitting their request.

The current value of each bank guarantee will depend on whether or not the broker is incorporated in the UAE, if a branch of a foreign entity or is incorporated in a UAE free zone. The reduction in bank guarantees will apply to all the above mentioned forms.

The intention behind this initiative is to ease financial strain on mid-sized brokers and improve their cash flow and liquidity.

Re-Establishment of Commercial Trading

18.1 The Government of Abu Dhabi issued a circular that allows the management of commercial centres to reopen once they have organised COVID-19 screening for all of their instore employees and obtained negative result certification from the Department of Health. Thermal scanning cameras have been installed at the entrances of malls.

DMCC Employment Guidelines

The Dubai Multi Commodities Centre (DMCC) has issued their own COVID-19 Employment guidelines (No. 1/2020) which allows employees to work remotely with the exception of key employees working in vital industries.

The new guidelines also permit employers to place employees on paid leave without the employee’s consent. Mutual consent would however be required for any reduction of the employee's basic salary but such reduction should not affect the employee's allowances. Mutual consent would also be required for an employee to be placed on unpaid leave for a specified period (renewable upon mutual consent). The measures do not affect the employee's entitlement to medical insurance, the continuation of their residence visa and work permit.

Dubai Notary Public

The Dubai Courts have announced that as of 12 May, notary public service centres are to be reopened – these include the notary publics at Al Twar Centre, the traffic department in Al Barsha, Al Barsha Mall and Wafi Mall.

Applicants can therefore get their transactions notarised at those branches, but it should be noted that this excludes any notarisation of memorandums of association or their amendments. Any applicants looking to notarise those excluded transactions should contact the notary directly for guidance.

Dubai Health Authority Exemptions

The Dubai Health Authority (“DHA”) has issued a circular exempting new applicants from health license tests (which include both electronic and verbal tests) for 20 different medical specialities. The exempt specialities include A&E, family, anaesthesia and general medicine practitioners.

Umm Al Quwain Financial Support Packages

The ruler of Umm Al Quwain has issued a Decree (No. 2 of 2020) which introduces a number of financial support packages. These include a 50% discount on fees for new business licenses and license renewals at the Umm Al Quwain economic development department (these relate to renewals of commercial, industrial and professional licenses). Fines for any of these expired licenses has been cancelled.

Lastly, the Decree also includes a 50% fee reduction on all fees relating to the Umm Al Quwain chamber of commerce and industry.

Fujairah Licensing and Tax Fee Waivers

The ruler of Fujairah has issued a Decree (No. 4 of 2020) which, amongst others, exempts entities undergoing certain economic activities from licensing fees and taxes for the remainder of year.

Those impacted by the exempted licensing fees include entities in the fitness, food and leisure industries. Whereas hotels and hotel apartments shall be exempted from any local taxes.

DIFC Reopening Plan

The DIFC has announced that it began reopening from 28 May. This follows an earlier announcement by the Crown Prince of Dubai on the phased reopening of the Emirate. The DIFC reopening plans will apply to offices, retail, food and beverage outlets.

All offices are now allowed to reopen and resume operating under normal working hours (to be aligned with the National Disinfection Programme), but those offices are limited to 50% capacity. Furthermore, all employees are expected to wear face masks at all times when entering and working in the DIFC. Employees (as well as visitors) will also have their temperatures taken at parking entrances, receptions and all main DIFC entrances.

Dubai Economy Reopening Guidelines

The Dubai Department of Economic Development has issued guidelines for businesses which were allowed to reopen from 27 May 2020. The guidelines are intended to apply to cinemas, entertainment activities, , retail and wholesale outlets, barbers and hairdressers, valet parking and offices.

Offices, office buildings and social welfare services will be permitted to operate under normal working hours with 50% capacity of common areas within office premises and 50% for employees.

The guidelines also include general provisions which would apply to (amongst others) airports which will reopen for returning UAE residents and transit passengers (subject to approval of the authorities), dental clinics, auction houses, and educational and training institutions.