Newsletter September 2010 Dear protagonists and friends of our newsletter, An Asian proverb says: "It is no use to go to the mountain and tell your wishes to the moon." This applies as well in business. Ideas, plans, thousands of pages of paper, visions don’t bring any change. Only those who are willing and able to implement their wishes into reality (which always raises the question what is "reality"?) can actually make a difference and effect something.

The new DTT between Germany and UAE seems to be formulated away from reality as well. It is largely inapplicable, since it defines "residence in the UAE" in a way that only UAE nationals are residents. A company is defined as UAE resident just in case that it is 100% held by UAE nationals. For details see point 1.

Overtaken by the reality seems to be the Dubai developer Nakheel. Now the first suit was filed against them on at least 50 million AED. This case shall be watched with interest; on the one hand whether filing a lawsuit makes any sense and on the other hand how neutral 3-judgestribunal convoked by Sheikh Mohammed, will act. (For details see point 5).

The reality is getting closer to business in Qatar. The small country, which is sitting on one of the largest gas bubbles in the world, is becoming to temple no. 1 for investors in the next few years. However, Qatar has not yet the same liberal principles to foreign investors such as the UAE. Therefore the investor has to put his attention on the legal provisions for opening a subsidiary in Qatar and take specific barriers in the administrative structures and sometimes in the lobbies as well. Due to the fact that already a quite remarkable number of our clients chose the way to Qatar, we will go to Qatar as well this autumn by entering an association with a prestigious local law firm and sending a German- English speaking lawyer there. (For details see point 12).

We don’t narrate our desires to the moon but implement them. We recommend the same to our clients. Go there where your expertise, your products and your quality is still needed. And furthermore go there where the economy is in a position to pay a fair price for your products.

Another Asian proverb says: "The finger is not the moon." When you point your finger at your goal, it frequently conceals the goal. So try to use your options and tools for the purpose of showing you the way and not of hiding the same. I remain, this time - with a little more philosophical regards – Yours Theodor Strohal

OFFICE NEWS

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We welcome our intern Carla Castaños, Spanish and English native speaker, good knowledge of Arabic, French and Italian, LLB from the Escuela Libre de Derecho de Sinaloa, Culiacan, Mexico. Thus, we are expanding our operation on the Spanish-speaking community.

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We welcome further Ms Meenu Rani, LL.B Hons. from MD University Rohtak, Haryana, India, who will strengthen our firm from October 10. She will cover the growing need of legal advice for the Indian community. She speaks English / Hindi / Punjabi.

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We have concluded an Association Agreement with the Hungarian law firm Dr. Szatmari. Dr. Szatmari was authorized to use name and logo of the STROHAL LEGAL GROUP and will represent our interests in Hungary: Dr. Csaba Szatmári Law Office, H-5600 Békéscsaba, Luther st. 10, Hungary, Te: +36 (66) 443 363, email: [email protected] Dr. Szatmari specializes in corporate law, tax law and property law.

Upcoming events/ seminars: 1st October 9 am – 18pm: Intercontinental Hotel, Singapore: Doing Business in the Middle East Dr. Strohal talks about Market Setup and Tax Issues in the UAE Organizer: i.e. Singapore, seminar program and registration: http://iesingapore.eventshub.sg/Default.aspx?Calid=1&eventid=1521 Dr. Strohal is now permanent delegated speaker of the i.e. Singapore (Government of Singapore) and the University of Dubai for business delegations from Singapore.

26. October 10 - 14h: HOTEL MERCURE KORONA, BUDAPEST, CALVIN SQUARE. "Easy Market Entry, significant tax savings HUNGARIAN FOR ENTREPRENEURS in the United Arab Emirates. Further seminars are planned for that week in Gyor, Balatonfüred and Szeget.

News: 1.

DTT UAE- Germany

It seems like some mistakes slipped into the new double taxation treaty between the UAE and Germany. In the German attempt to create a stricter agreement this time (compared to the old treaty, which ran out in 2008) the resident definition in article 4 was further restricted. In the new treaty resident in the UAE is only: a company which is incorporated in the United Arab Emirates and has its place of effective management there, provided that the company can give evidence that its capital is beneficially owned exclusively by the United Arab Emirates and/or by a government institution of the United Arab Emirates and/or federal or local governments and/or by individuals being residents of the United Arab Emirates and the company is controlled by the aforementioned residents. This rule declares nearly all companies in the UAE as nonresident, with the effect that the treaty doesn’t apply for them. The same error affects individuals as they had to be national of the UAE to have their residence there. Funny enough this was not the intent of the parties as now all the new stricter rules come to nothing.

2.

US is using Blackberry data for spying

The Dubai police chief accuses US of using Blackberry data for spying purposes. The UAE government requests access to the encoded e-mail data. “The intelligence agencies of US, Israel and UK would gain access to blackberry user data. For this reason his government is trying to restrict the use of the smartphones "said Dhahi Khalfan Tamim, Dubai police chief, according to a report in the newspaper al-Khaleej."The United States is the main beneficiary from the fact that there are no controls for the Blackberry, because they have an

interest in spying on the United Arab Emirates. The West accuses us, to limit the freedom of Blackberry users, while the United States, Israel and Great Britain have access to all transmitted data." The police chief was speaking at a summit of Arab Telecom, IT managers and government representatives. Saudi Arabia justifies his claim to gain insight into the encrypted data stream from BlackBerry customers with the protection from terrorist attacks. The Emirates, where 500,000 BlackBerry users are located, has had for a long time a public conflict with the operator and device maker Research in Motion (RIM). The Federal Government has threatened to block Blackberry services from 11th of October 2010 on, if RIM does not grant them access to encrypted messages. Still, a solution has not been found.

3.

New customs regulation

The UAE is the first country in the Gulf region to join the ATA Carnet System. An ATA Carnet is an international customs document often called the merchandise passport for temporary freight. Carnets facilitate temporary imports into foreign countries. By presenting an ATA Carnet to foreign customs, businessmen pass import duty free and import tax free for up to one year. This is important as it enables businessmen to participate in exhibitions in the UAE or abroad. The ATA exists since 1963 and is managed by The Corporation for International Business. Right now 60 countries are members of ATA Carnet.

4.

New Taxation Treaty with Singapore

Singapore and Germany are close to finalizing a new agreement for the avoidance of double taxation. The German economy fears new burdens will result from this treaty as it will follow the form of the recently reached agreement with the United Arab Emirates (UAE): German companies that are active there, will be required to pay tax in Germany of its profits in the UAE. The tax deduction of already paid taxes in the UAE merely helps as the UAE raises no taxes. This regulation shall now apply for Singapore as well, in the interest of the German taxpayers. Already in March 2009 Singapore had offered Germany and other countries to incorporate the standards of the industry organization OECD countries to exchange information on tax evasion in the existing agreement. 20 countries, including France and Britain have accepted the offer and reached new agreements with Singapore long ago - not so Germany.

5.

First trade creditor files suit against Nakheel

Here we go- the first lawsuit was filed. A specific tribunal consisting of three judges will decide. The first trade creditor has filed a lawsuit against Dubai World's Nakheel property developer unit with the special tribunal set up to handle disputes over its debt restructuring, which could further delay a settlement. The tribunal said the suit, filed in mid August, was served by Dubai based Construction Delivery Group (CDG). CDG's lawsuit contends that it is owed 50 million UAE dirhams ($13.6 million) in principal, interest and damages related to a facilities management contract for properties at the Palm Jumeirah, one Dubai's three artificial palm shaped islands. State run conglomerate Dubai World reached agreement with 99 percent of its bank creditors earlier this month to restructure $24.9 billion in debt. Under Nakheel's restructuring plan, trade creditors have been offered 40 percent of what they are owed in cash and an Islamic bond, or sukuk, in lieu of the rest. The tarnished construction company Nakheel, luxury hotels, the casino operator MGM and amusement parks are part of Dubai World. CDG's

suit

raises

concerns

that

negotiations

are

not

going

smoothly.

A source close to Nakheel said: "It's certainly not good for Nakheel and has the potential to delay the process." He added that if Nakheel felt that many of the creditors were opting to go through the court for repayment, it would consider invoking a voluntary restructuring arrangement.

6.

Wills of non-Muslims can now be attested at Dubai courts

The Dubai Courts Notary Public Department will be available to attest the wills of non-Muslims from October 1. The decision is part of a drive to improve services offered to the public by the courts, explained the Director of the Notary Public Department. He said the new ruling is in line with Notary Public laws and was introduced by the Head of the Court of First Instance. Nevertheless he pointed out that attesting the will does not necessarily mean it will be implemented, as each case is different and subject to the law. Before now, attestation of wills for non-Muslims could be done only at embassies and consulates, as well as some licensed offices in free zones. Applicants who wish to have their wills attested must provide proof of ownership of the assets mentioned in the will and should submit the application

personally or through a representative who must hold power of attorney that specifically mentions the will. The will may include movable funds and property, located in or outside the country. It is also possible to cancel or amend the will.

7.

Nuclear Energy in the Arab States

Egypt and the United Arab Emirates began the construction of nuclear plants for energy; other countries are planning to follow. But the risks of nuclear technology are blinded out. The United Arab Emirates is the country most advanced with its nuclear plans. In rush, they got the award in a South Korean consortium for the construction and operation of four reactors, which shall go into operation between 2017 and 2020. More reactors shall follow. In a policy paper from 2008 the government forecasts an increase of electricity demand by more than 150 percent until 2020. In order to allay concerns of foreign countries about possible military ulterior motives, the UAE covenant to abstain from the critical technologies for the enrichment and reprocessing. Therefore they reaped international praise. Even Jordan and Saudi Arabia are striving for the use of nuclear power; Algeria, Libya and Morocco have also signalised interest. If these plans implemented, numerous nuclear power plants in the region will be constructed medium term - despite the fact that the Arab countries try to position themselves as future solar energy exporters.

8.

RAK Airways re-launches operations

RAK Airways is set to re-launch its operations in September or October with two aircrafts covering its new routes to India and Saudi Arabia. The airline plans to break even for the first time with its reopening.

9.

Abu Dhabi: Steady performance

Over the past two years, while the world has been fighting recession, Abu Dhabi has shown flexibility and stability, having a good standing for continued growth. This flexibility is apparent in the 6% growth of non-oil activities, last year, softening the blow of the loss of revenue due to a 35% decrease of oil prices during the same period. The recently released Abu Dhabi Statistical Yearbook points out to further positive economic data. The publication shows that the number of business registrations has grown, the unemployment rate is set low at a 3.25%, and inflation has dropped to 0.78%. In addition, fixed capital formation

increased slightly, while the emirate’s imports more than doubled comparing it to figures from 2007. Overall, Abu Dhabi’s economy has slowed down with an 18% decline in its nominal GDP between 2008 and 2009, to Dh547bn. However, the emirate continues to have one of the highest GDP per capita in the world, set at $90,517 as to last year’s figures. The emirate continues to be an attractive destination for foreign investment. The government has set its 10 key focus sectors in its Abu Dhabi Economic Vision 2030, covering from media, tourism, and financial services to certain industries important to the emirate’s development.

10. World Economic Forum’s Global Competitiveness Report ranks UAE among top ten countries in 18 competitiveness indicators This year’s Global Competitiveness Report by the World Economic Forum ranked the UAE at its 25th place in the world for competitiveness, third – for the second year in a row – for "Innovationdriven economies", which rates countries based on “their adoption of factors that promote innovation in economic development.” It is worth to be mentioned that the UAE is the only Arab country classified in this group. The country was also ranked third in 'quality of infrastructure’ and in 'government provision of high-technology products.' Meanwhile, it ranked fourth in 'stability, security and its association with a positive business environment' and 'quality of infrastructure for air transport.' Other positive indicators were its sixth place in 'goods market efficiency', in 'quality of road infrastructure', in 'foreign direct investment' and in 'technology transfer' ratings. Overall, the country reached 18 top ten positions in competitiveness at a global level. This shows a trend in advancing in competitiveness ranking, where the country raised eight positions in 2009 compared to 2008.

11.

Labour ministry unveils electronic permit service

The Ministry of Labour launched its electronic permit service in August 29th. This new service will substitute permits being distributed at the ministry's counters or through the post. Another addition to the system is that it also includes establishments and companies employing less than 50 workers. Companies with more than 50 people working for them must subscribe “to the electronic service to receive a quota of permits limited by the ministry according to the establishment's category.” The final goes is to be able to provide all the ministry’s services electronically through linking establishments to the ministry's system, thus available seven days a week, 24 hours a day.

Up until the end of August, 530,000 permits were issued electronically, and 111,000 establishments benefited from the service. Free zone companies are not affected by these provisions.

12.

Qatar: Investment unlimited

Doha (gtai) - Qatar opposes to the global trend: Experts are predicting an economic growth rate for 2009 and 2010 in two-digit. Important drivers are projects in the energy, infrastructure and construction sectors. In particular, new gas liquefaction plants push the growth. In addition, the current performance record remains positive despite currently low export prices for oil and gas and rising imports. The volume of imports of German goods has increased over the past year. Qatar has invested large budget surpluses of recent years in industry and infrastructure. The strategy seems to be paying off: According to the Economist Intelligence Unit (EIU) the Qatari economy will grow this year by 13.7 and 2010 by 20.3%. Sheikh Hamad bin Khalifa Al Thani wants to put the economy on a broader base, reduce dependence on oil and gas, and strengthen the infrastructure. The government also wants to encourage the private sector and therefore reduced the corporate tax from 34% to 10%. It is also planned to cut bureaucracy and the supervision on the financial sector will be standardized.

13. UAE's GDP to top 1 trillion dirhams this year Ahmed Humaid al Tayer, governor of the Dubai International Financial Centre, has said the UAE's gross domestic product is expected to exceed $272bn this year as liquidity returns and trade picks up, Bloomberg has reported. In 2009, GDP reached Dhs914.3bn as the economy slowed after real estate prices plummeted and credit markets tightened. "Most sectors of the economy are doing well and growing such as trade, transport and even finance," he said.

14. Cut Salik and speed cameras, says Khalaf Al Habtoor Finally a reasonable approach, and beyond that, from somebody important in Dubai. Let’s hope the responsible departments will follow this recommendation: Khalaf Al Habtoor has called for Dubai’s controversial ‘Salik’ road toll system to be “made free” and the number of speed cameras to be cut, arguing they are discouraging companies and investors from relocating to the region. In an exclusive interview with Arabian Business, the founder of the Al Habtoor Group and one of the UAE’s most respected business leaders, said: “If they insist on Salik either they have to reduce it or

to make it free.” Asked whether he would like to see it scrapped altogether, he said: “Yes.” Al Habtoor also claimed the number of speed cameras in the emirate is now “unacceptable.”