Abu Dhabi earmarks 15% of procurement spending to SMEs and micro businesses

The government of Abu Dhabi is earmarking 15 per cent of procurement spending and annual contracts to micro, small and medium enterprises (mSMEs) from 2020 onwards to spur growth and offset the impact of the coronavirus pandemic.

The aim is drive the growth of small businesses as “backbone of the economy”, the Abu Dhabi Media Office said in a tweet late on Tuesday evening.

Other measures to help smaller firms include the suspension of bid bonds and waivers of performance guarantees for projects worth up to Dh50 million, which are being introduced from this year onwards for mSMEs and Emirati entrepreneurs. These measures are being taken as part of the Ghadan 21 initiative, further tweets from the Media Office on Wednesday explained.

SMEs are a key component of Abu Dhabi’s business landscape, accounting for 98 per cent of all companies in the emirate, 29 per cent of its gross domestic product (GDP), and 44 per cent of the non-oil economy.

Abu Dhabi, which accounts for about 6 per cent of the world’s proven oil reserves, last month, rolled out an economic stimulus package to help soften the impact of the coronavirus on its economy. The economic relief scheme includes 16 initiatives aimed at reducing the costs of living and supporting businesses in the emirate.

Earlier in April Abu Dhabi’s department of finance teamed up with three of the emirate’s top lenders to expand the SME Credit Guarantee Scheme introduced as part of Abu Dhabi’s economic stimulus.

Under the deal with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank and the country's biggest lender First Abu Dhabi Bank, the government is guaranteeing up to 80 per cent of the value of the scheme extended to SMEs, it said in an April 16 statement.

The pact provides SMEs with wider access to renewable financing options for working capital loans for a three-month duration and term loans for up to four-year duration to support further investment in Abu Dhabi, the department of finance said at the time.

The UAE, the Arab world's second-biggest economy, rolled out Dh282bn in fiscal and monetary support last month, providing zero interest funding to banks to boost lending growth in the country. The government has also implemented a variety of other initiatives that range from discounted utility bills to waivers of fees to buttress the economy.

Lenders in the UAE have already rolled out a comprehensive package to reduce financial distress of their customers including relief for their SME clients, through reduced costs and fees, loan deferrals and reduced interest rates and processing fees.

Earlier this month the UAE Central Bank also urged lenders to support their private sector clients and individual borrowers to cushion the impact of Covid-19. The CBUAE said banks have so far tapped 60 per cent of a Dh50bn Targeted Economic Support Scheme that was launched in March.

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

COMPANY PROFILE

Name: Mamo

Year it started: 2019 Founders: Imad Gharazeddine, Asim Janjua

Based: Dubai, UAE

Number of employees: 28

Sector: Financial services

Investment: $9.5m

Funding stage: Pre-Series A Investors: Global Ventures, GFC, 4DX Ventures, AlRajhi Partners, Olive Tree Capital, and prominent Silicon Valley investors.