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Dubai International Financial Centre Issues New Laws


International Tax Review
September 2005


The Dubai International Financial Centre (DIFC), an onshore
financial free zone to complement the several free trade zones
already existing in the United Arab Emirates, offers a 50-year tax
holiday, 100% foreign ownership and unrestricted repatriation of
profits and dividends. It is almost a year since the ruler of Dubai
enacted the centre's first laws on September 19 2004.

The DIFC aims to benefit the region as a whole by acting as a
catalyst for the region's economic development by bridging the time
differences between the New York, London and Hong Kong financial
centres. Its regulatory and legal framework builds on the best
practices of these centres. The DIFC operates under its own laws and
court system, separate from the local Dubai and federal systems.

Article 14 of Law No 9 of 2004 for DIFC stipulates a zero tax rate
for a period of 50 years from the date of enactment. The tax holiday
can be renewed for a similar period by resolution of the ruler of
Dubai. Branches of foreign banks in the UAE are regulated by the
Central Bank and are subject to corporate income tax. Those setting
up in the DIFC will fall under the jurisdiction of the Dubai
Financial Services Authority (DFSA) and will benefit from the tax
holiday. The DIFC is open to the wholesale banking, capital markets,
asset management, reinsurance and islamic finance sectors, as well
as those companies providing ancillary services to these sectors.

New laws were recently enacted in a number of areas: Employment Law,
Law of Obligations (non-contractual claims), Implied Terms in
Contract and Unfair Terms Law, Law of Damages and Remedies
(structures to recover damages) and Law of Security (forms of
security interests as collateral for debts). The DIFC therefore
falls outside the remit of the UAE civil and commercial laws and all
entities being set up in the DIFC will be under the jurisdiction of
the DIFC judicial court system. The DIFC Company Regulations,
detailing the processes and procedures to be followed in compliance
with the DIFC Companies Law, were also recently finalized and
issued. Personal property and real property laws are still under
development.

 

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