The Ministry of Economy last year launched a new vision for Small and Medium Enterprises (SMEs) to provide UAE businesses with more growth possibilities and improved market access, on March 12, 2022, in Dubai. Photo: Ministry of Economy
The Ministry of Economy last year launched a new vision for Small and Medium Enterprises (SMEs) to provide UAE businesses with more growth possibilities and improved market access, on March 12, 2022, in Dubai. Photo: Ministry of Economy
The Ministry of Economy last year launched a new vision for Small and Medium Enterprises (SMEs) to provide UAE businesses with more growth possibilities and improved market access, on March 12, 2022,
Mohammed Alardhi is the executive chairman of Investcorp, chairman of Muscat Stock Exchange MSX and chairman of Royal Jet
March 09, 2023
Small and medium enterprises (SMEs) in the GCC region have suffered from the fallout of the Covid-19 pandemic and the subsequent global economic downturn. It is now time to empower entrepreneurs to lead their enterprises to success, especially in the context of net zero and overall national socio-economic goals. A truly inclusive economy will support the growth of small businesses and empower them to make valuable contributions.
According to a report published by the International Monetary Fund in December 2019 (titled Enhancing the Role of SMEs in the Arab World – Some Key Considerations), SMEs in the Gulf countries at the time accounted for 15-30 per cent of their national GDPs, which was behind the global average of 40 per cent in emerging economies.
Small businesses were also among the first to face detrimental impacts of challenges arising from the pandemic and subsequent lockdowns. While we have come a long way as a region to recharge our economies, there is a dire need to empower small business owners so they can reach their maximum potential, not only in terms of output but to support our nations in becoming more sustainable.
Governments across the region have launched a series of initiatives towards sustainability and made progress most notably in the area of renewable energy. Although to move forward, the contribution of both corporations and SMEs is crucial.
The Organisation for Economic Co-Operation and Development (OECD) published a paper in November 2021 that stressed the importance of small businesses as drivers of socio-economic change, their impact on the carbon footprint and also challenges they face with environmental degradation. The paper also pointed out how SMEs are led by entrepreneurs who are innovative and forward-thinking in their overall approach to business, which means they have great potential to make an impact in the realm of sustainability.
Given the tradition of entrepreneurship in the Gulf region, it is no surprise that we have a wealth of ideas with profit-making potential. And while business infrastructure has improved over time, more collaborative strategies from within the private sector can engage owners of small businesses and set them up for success.
One way to fill this gap is for small businesses to actively work on job creation with greening goals in mind
Larger private sector organisations can engage with SMEs in industry-wide greening initiatives – whether it is reducing the carbon footprint in their current operations or fostering new ideas that can open new revenue streams and support environment conservation goals.
Strategic partnerships between corporations and small businesses can create synergy and contribute towards industry-wide growth while targeting climate goals.
There is also room for governments to collaborate more closely with SME owners and aspiring entrepreneurs to support them in greening their existing businesses and developing innovative solutions for climate preservation.
Funding is a major area of concern for SME owners. So this is a great time for financial institutions in the region to work with them to develop flexible financing models that see them through various stages of organisational growth.
The greatest asset the GCC region boasts is the youth, a segment of the population that is increasingly educated and driven. There still remains, however, a gap between private sector employers and graduates. Globally, young minds have been instrumental in pushing the movement for climate change. The Middle East should be no exception especially when it is home to bright and capable young citizens.
One way to fill this gap is for small businesses to actively work on job creation with greening goals in mind. Companies can harness fresh young talent through internship programmes that focus on greening and innovation.
Also, SMEs can work with educational institutions to engage with students to encourage an early and continued interest in sustainability in the context of lifestyles and business.
While it is encouraging to know that myriad efforts are under way across the GCC region within the realm of sustainability, there are still ways to go in order to meet net zero emissions. As mentioned earlier, we are still dealing with the fallout from economic setbacks, but the region has come out strong, with both the public and private sectors remaining focused on recovery.
The increasing complexity of the modern world requires multi-faceted approaches for economic inclusion and subsequent growth. GCC countries have a series of strengths – from dedicated governments to innovative entrepreneurs and bright young minds who are capable of leading the region towards a sustainable future.
Proactively collaborating, focusing on greening business and developing innovative solutions while strengthening small businesses will be the way forward to climate safety and ultimately, net zero emissions.
The biog
Name: Younis Al Balooshi
Nationality: Emirati
Education: Doctorate degree in forensic medicine at the University of Bonn
Hobbies: Drawing and reading books about graphic design
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
As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
