The UAE’s non-oil foreign trade reached a record Dh2.23 trillion ($607.1 billion) last year, as the Arab world’s second-largest economy accelerates efforts to reduce its dependence on hydrocarbons and boosts its economic partnerships globally.
This was the first time the UAE’s non-oil foreign trade crossed the Dh2 trillion mark with values for the January-December period increasing more than 17 per cent compared to the same period in 2021.
“The UAE’s non-oil foreign trade has broken all records in 2022,” Dr Thani Al Zeyoudi, UAE Minister of State for Foreign Trade, said.
“Amid global challenges, the UAE has cemented our status as a major trading hub, a gateway to the world, and a global market … we will continue to work on extending our trade partnerships and help define the future of trade,” Mr Al Zeyoudi said.
China, Asia's largest economy, was the UAE's top trading partner during the period, with bilateral trade between the two countries at Dh264.5 billion. It was followed by India (Dh180.9 billion), Saudi Arabia (Dh135.2 billion) and the US (Dh110 billion).
Last year, the share of exports in the UAE's total non-oil trade rose to 16.4 per cent from 11.9 per cent in 2015, while the share of imports fell to 56.1 per cent from 61.2 per cent in 2015.
The share of re-exports reached 27.5 per cent of total non-oil trade, up from 26.9 per cent in 2015.
The UAE’s total exports value surged almost 6 per cent on an annual basis to Dh366 billion last year, from Dh265.5 billion and Dh240.1 billion in 2020 and 2019, respectively.
The UAE’s top commodities for re-export in 2022 included smartphones, diamonds, automotive parts and jewellery and gemstones.
“Our foreign trade … is accelerating … and our international economic relations are growing … and the investment, tourism and real estate demand for the UAE is achieving unprecedented numbers … and the UAE government will continue to provide the best environment for businessmen who accompany us on the historical growth journey of the UAE,” Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said in a tweet on Monday.
In 2022, the UAE signed its first Comprehensive Economic Partnership Agreement (Cepa) with India, one of the world’s fastest-growing economies, which helped propel bilateral trade to $38.6 billion in the first nine months of 2022 — almost double the figure recorded in the same period of 2020.
The Cepa with India came into effect on May 1. The benefits of Cepa include enhanced market access, lower or eliminated tariff rules, simpler customs procedures, clear and transparent rules and rule-based competition.
The countries are already on course to achieving $88 billion worth of trade in this financial year, Sunjay Sudhir, India’s ambassador to the UAE said last month at the India-UAE Partnership Summit in Dubai.
Last year, the UAE also signed Cepa accords with Indonesia and Israel, and is currently holding negotiations with Turkey, Georgia, Colombia and Cambodia.
The Cepa agreements with India, Israel and Indonesia are expected to expand the UAE’s economy by 2.6 per cent by 2030, Dr Al Zeyoudi said last year.
The UAE economy made a strong recovery from the coronavirus-induced slowdown and the pace of economic momentum has continued to improve on the back of government initiatives, higher oil prices, a strong performance in its real estate sector and a rebound in travel and tourism.
The UAE economy is estimated to have grown by 7.6 per cent last year, the highest in 11 years, after expanding by 3.9 per cent in 2021, according to the UAE Central Bank.
Overall, the country’s economy is projected to grow 3.9 per cent in 2023, according to the central bank.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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