The advice firm will not be able to carry out any regulated activities for new clients, but it can continue to serve clients it had before the restrictions came into effect.

The regulatory action took place on 7 December 2022 and the watchdog gave the company until 20 December to clear them.

Sam Instone, UK chief executive of AES, told International Adviser the FCA’s decision was “self-imposed” and “voluntary”. He added the restrictions came from recommendations provided by external compliance consultants hired by the advice firm.

The FCA told IA that, while it could not comment on individual firms, its supervision approach is split in two when it comes to applying restrictions: either voluntarily from the firm or handed directly by the regulator.

Review

The FCA Register shows that, by 20 December, AES needs to provide the watchdog with a review of all its financial promotions, and amend or withdraw any promotions that “fail to comply with the relevant rules in the FCA’s Handbook”.

This will include notifying all the people who were clients of the firm when the restrictions came into effect.

Instone told IA that part of this was adding clarifications on AES’ website regarding the fact that UK rules and protection won’t apply to clients outside Britain.

Additionally, the company has been required to review all individuals performing designated senior management functions and to apply for approval for all those performing such functions who were not previously authorised and to provide the FCA with a “current staff structure chart, with full job descriptions, of all individuals performing designated senior management functions”.

Instone added that the UK watchdog required further explanation on why the company has two chief executives. As a result, the firm clarified that Instone is chief executive of the UK business, while Pippa Miller is chief executive of the Middle East arm.

All the information will need to be part of a written report to be sent to the FCA, including a list of clients to whom its has written as part of the restriction exercise.

Instone said they intend to provide the regulator with the written report by 5pm on 20 December 2022.

On 11 October 2022, savings and investment company National Bonds launched a golden pension scheme in the UAE in a move to ramp up its suite of financial planning solutions for nationals and residents.

The scheme, which is targeted towards 89% of the UAE’s population that are expats, will help employees of registered corporates get a head start in retirement.

Employees have the flexibility to contribute as little as AED100 (£23.47, $27.23, €27.14) on a monthly basis and earn a profit on the sum saved, which can be availed in addition to the earned gratuity provided by their organisation. The scheme aims to support companies with their employee retention efforts as well as help them plan ahead for their end-of-service finances.

Clients will also be eligible for life takaful cover provided by local takaful operators.

International Adviser spoke with several financial advice firms in the UAE to discuss how much impact this scheme will have on the expat market.

Game changer?

Sam Instone, director at AES International, said: “Not yet a game changer – although it’s another move in the right direction along with so many changes. The IMF has just forecast 4% growth for next year – world leading and exciting compared with many economies so the outlook is great.”

Sandeep Ghosh, consultant at Holborn Assets, added: “The golden pension scheme has been welcomed as another leap by the UAE towards offering expats a permanent home. While UAE nationals have a robust pension system in place, expats still have to weigh up complex and often fee-laden solutions to plan for retirement.

“Not only will this appeal to those feeling they have little choice but to repatriate at retirement, but also the allure of this scheme will draw in new expats to the UAE who may have earlier hesitated at forfeiting their pensions back home.”

Sean Keheller, chief executive of Mondial Dubai, said: “It is certainly important because it is offering a capital guarantee together with Shariah compliance, with the support of an entity owned by the Dubai government. In isolation, not a game changer, but evidence of further momentum in the direction of travel for workplace savings as a replacement for gratuity liability.

“The word ‘pension’ has been bandied about by the press who seem to be lacking in the knowledge that pensions are normally government controlled, possessing tax benefits, and with other complications which, I believe, the UAE would be keen to avoid.”

Entice expats

The launch of the scheme shows the direction of travel for the UAE wealth and advice market. It could even be the kickstart for more expats to retire in the country.

Chris Ball, managing partner of Hoxton Capital Management, said: “Right now, getting visas and healthcare insurance is the issue with retiring in the UAE.

“The older you get, the more expensive healthcare gets and with visas, the luxury of not having to work comes at a cost of owning your own property or having a golden visa. However, it is becoming more attractive and a real option for many expats who want to continue to live here and benefit from the perks, such as low tax.”

Christopher Davies, financial planner at The Fry Group, added: “The scheme appears to be a savings vehicle that can be used alongside your employers’ end of service gratuity.

“Whilst this additional saving can help meet your retirement expenditure among potential other investments, I do not believe that it provides benefits that would attract the retention of retiring expats in the region.”

More competition

The region has big product providers, but it doesn’t necessarily have an array of firms offering different solutions.

So, do advisers want more firms in the market offering these types of products?

Hoxton’s Ball said: “Better choice of products, in general, is a good thing. So, having more products available in the market is certainly worthwhile. Competition and efficiencies within the market, by having more providers that operate in it.”

The Fry Group’s Davies added: “There are many savings products available to individuals but an expansion of options available is always welcome.

“It would be positive to see more low-fee, transparent solutions available at a low entry point for individuals such as this.”

Looking long-term

The UAE is gradually improving its retirement outlook and is on course to move away from a low-tax jurisdiction to a region that people want to spend their later years in.

But there are still changes that advisers want to see to make sure expats can have a comfortable and attractive retirement.

AES’ Instone said he wants to see chnages in the citizenship programme, ongoing visa developments, the ability to purchase property anywhere and an improving legal system.

Hoxton’s Ball added: “From an adviser’s point of view, more incentives around funds and building those things up is a step in the right direction. Less focus is needed on gratuity, which is essentially dead cash. Instead, we should be helping people get it invested and growing it.

“Similar style to a 401k scheme in the US, defined contribution/workplace pension and auto-enrolment schemes in the UK, it’s important to get these things more inbuilt into people’s packages. This would help with encouraging more people to live here long term.”

The fintech solution provider has named Ryan Hicke as chief executive.

He is executive vice president and chief information officer.

Hicke will succeed founder Alfred West Jr, who is transitioning to the role of executive chairman.

Aviva

The insurance giant has appointed Charlotte Jones as chief financial officer and executive director with effect from 5 September 2022.

She was previously chief financial officer of RSA Insurance and interim chief executive of the RSA UK and International business.

AES International

The Dubai-based firm has hired Chloe Higgins as senior associate.

Higgins was previously at UK firm Equilibrium Financial Planning, where she was senior client manager and team leader.

Rothschild & Co

The financial services giant has hired David Kilshaw as a managing director and head of private client wealth solutions in its UK wealth management business.

He joins from specialist private client advisory firm Rawlinson & Hunter.

Tilney Smith & Williamson

The wealth management and professional services group, which is set to re-brand to Evelyn Partners, has named Andrew Wilkes as chief professional services director.

He joined the firm in 2004 and has been head of tax for the past two years.

Wilkes succeeds Susan Shaw, who has been a member of the professional services executive for the last 10 years and who has led the business for the past four.

Shaw will hand over the reins to Wilkes at the beginning of July. She will remain as a partner but return to client work before retiring next March.

Also, the firm has hired Sarjul Patel as US/UK tax director.

Patel was previously associate director at US Tax & Financial.

Killik & Co

Georgie Killik will take on the role of deputy senior partner of Killik & Co.

She was previously head of innovation.

Ross Trustees

The professional trustee and pensions services firm has named Andrew Bradshaw as chief executive.

He will succeed Nigel Moore, who will remain on the board.

IQ-EQ

The financial services provider has hired Andréia Prates and Rachael Leung as client service directors in Asia.

Prates joins IQ-EQ’s Singapore office and previously worked for Deutsche Bank, Standard Chartered Bank and Brown Brothers Harriman.

Leung joins in Hong Kong.

IQ-EQ has additionally strengthened its senior client servicing team in Asia with the promotion of Connie Chan, who will take on the role of client service director in Hong Kong.

Epworth Investment Management

Simon Woolnough has been named as head of business development at the firm, according to his Linkedin profile.

He was previously head of distribution, tax at the Blackfinch Group.

Charles Russell Speechlys

The law firm has appointed Tom Henderson as head of trusts.

He joins Charles Russell Speechlys from Rawlinson & Hunter, where he established the firm’s Zurich office and started its Swiss trust company.

Businesses will become subject to UAE corporate tax from the beginning of their first financial year that starts on or after 1 June 2023.

The UAE corporate tax regime has been designed to “incorporate best practices globally and minimise the compliance burden on businesses”, the Ministry of Finance said in a statement.

The tax will be payable on the profits of UAE firms as reported in company financial statements prepared in accordance with internationally acceptable accounting standards, with minimal exceptions and adjustments.

It will apply to all businesses and commercial activities, except for the extraction of natural resources which will remain subject to Emirate-level corporate taxation.

There will be a standard statutory tax rate of 9% and a 0% tax rate for taxable profits up to AED375,000 (£76,000, $102,000, €91,000) to support small businesses and start-ups.

No corporate tax will apply on personal income from employment, real estate and other investments, or on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE.

Address challenges

Younis Haji Al Khoori, undersecretary of the Ministry of Finance, said: “As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally.

“The certainty of a competitive and best in class corporate tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment.”

“With the introduction of corporate tax, the UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices.

“The regime will pave the way for the UAE to address the challenges arising from the digitalisation of the global economy and the other remaining BEPS [Base Erosion and Profit Shifting] concerns, and execute its support for the introduction of a global minimum tax rate by applying a different corporate tax rate to large multinationals that meet specific criteria set with reference to the above initiative.”

Details

The UAE corporate tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.

The country will also “not impose withholding taxes on domestic and cross-border payments, or subject foreign investors who do not carry-on business in the UAE to corporate tax”, the Ministry of Finance added.

Businesses that have an international headquarters in the UAE “will be exempt from paying tax on capital gains and dividends received from its qualifying shareholdings, and foreign taxes will be allowed to be credited against UAE corporate tax payable”.

Al Khoori added: “The introduction of a corporate tax regime will help the UAE achieve its strategic ambitions and incentivise businesses to establish and expand their activities in the UAE.”

UAE businesses will be “given ample time to prepare for the introduction of corporate tax in the UAE” and the Ministry of Finance “plans to issue further information on the UAE corporate tax regime toward the middle of the year to help businesses get ready and be fully compliant”.

Reaction

Sam Instone, director at AES International, told International Adviser: “It’s great to see the UAE develop its tax framework as the country moves from strength to strength. Corporation tax will no doubt enable continuing development of what has been a remarkable story over the last fifty years since the country was formed.

“The standard rate of 9% with an exemption for small businesses is highly competitive and shouldn’t pose any issue to businesses looking to benefit from life and opportunities within the Emirates.”

Alison Whatnall, chief operating officer at GSB Capital, told IA: “In recent years, the UAE has taken substantial steps to improve tax transparency and facilitate the exchange of information for tax purposes by bringing its domestic tax rules in line with international standards.

“Many changes in the UAE were driven by the country’s cooperation with the Paris-based Organisation for Economic Cooperation and Development’s base erosion profit shifting project which sought to challenge international tax avoidance and tackle gaps in existing tax rules that allow the profits of multinational companies to be creatively accounted away from high tax jurisdictions to low or no tax environments with little economic activity.

“So, whilst this announcement was expected as we see the UAE move more in line with other competitive economies, as obscure as it may sound, it is a positive move not only for the local economy but also impacted companies and should not be met with distain.”

David McGuane, chief financial officer at Finsbury Associates, added: “It was the logical next step for the UAE to impose corporate tax in order to further diversify their sources of income. The level of 9% is competitive compared to global corporate tax rates and brings the UAE line with some other GCC countries who have already implemented corporate tax regimes.”

The changed working week will commence 1 January 2022, across the federation of seven emirates – Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain – that make up the UAE.

The working week is currently Sunday to Thursday.

The UAE government said in a social media post on 7 December 2021: “UAE announces today that it will transition to a four-and-a-half-day working week, with Friday afternoon, Saturday and Sunday forming the new weekend. All Federal government departments will move to the new weekend from 1 January 2022.”

The details around when the changes will kick in for the private sector is unknown. But the government did say that the newly established working week changes will:

• Have eight working hours a day on Monday to Thursday from 7.30am to 3.30pm;
• Have four and a half working hours on Friday from 7.30am to 12.00pm;
• Have Friday sermons and prayers to be held after 1.15pm all year long in UAE;
• Have possibility of flexible working hours and work-from-home options on Friday; and
• Have longer weekends to “boost productivity and improve work life balance”;

Influx of new wealth

Nigel Green, chief executive and founder of DeVere Group, said: “This is a major cultural, societal and economic shift that can be expected to provide a massive boost for the UAE economy.

“The UAE, and in particular Dubai and Abu Dhabi are already recognised as two of the most powerful business and financial hubs in the world by international investors who are lured by the incredible possibilities offered in terms of finance, trade and commerce, plus the famous ‘can do’ attitude and the low tax environment in these destinations.

“The transition to a four-and-a-half-day working week, which now aligns with most major economies around the world, will prove to be another significant ‘pull’ for international corporations that are currently based elsewhere.

“We can expect there to be a steady influx of new wealth and job-creating businesses relocating to the UAE on the back of this announcement. The working week announcement is a game-changer for the UAE, significantly ramping up its already impressive competitive advantage.”

Sam Instone, director of AES, added: “This is a fantastic development. Many private sector firms I have spoken to are already planning to align with this.

“It will help investment advisers align with the rest of the world and attract businesses and people to the region. I am hugely excited by the regional growth opportunities this will potentially bring and the influx of talent that is likely to follow.”

World first

Hannah Greenwood, managing director at Finsbury Associates, said: “It improves our ability to deal with investment providers on behalf of our clients as our working days are aligned, and should help speed up some business processing times. I believe it will have a positive economic impact on the UAE and highlights our emerging status on the global map.

“With regards to the implementation of a 4.5-day work week, this will help boost work-life balance and has been well received here in the UAE. Throughout the past two years, there has been a significant shift to more flexible work arrangements, something we have taken on board here at Finsbury Associates and implemented since before the pandemic.

“We don’t expect the reduced working week to have any impact on productivity within the business; on the contrary, it shows the UAE as a leader in terms of offering flexibility and work-life balance.

“In doing this, the UAE has become the first nation in the world to implement a national working week shorter than the five day average and we anticipate the formalisation of these initiatives will help to attract and retain talent within the UAE.”

Dean Kemble, managing partner at GSB Capital, added: “Detail on how this would apply to the private sector is still to be clarified, however as a progressive forward thinking advisory business, this will support our integration with major global financial markets, who mainly operate Monday to Friday.

“The changes will elevate the UAE further as a country focused on the social benefits of its citizens and residents. On initial review, GSB is well positioned and any transition will be relatively seamless. It will be change we embrace which will support our clients, skilled teams and business.”