Doing Business in Dubai Alex Gray International Trade Director 17 th November 2012 Oct 2011 Version 4.0 Internal use only.

The UAE Economy Abu Dhabi Dubai Sources: EIU, Central Bank Data, HSBC Global Research Growth opportunitiesGDP growth of 3.6% forecast for 2012 Safe haven within the wider region One of just 3 countries in the MENA region that has not witnessed significant demonstrations Resilient economy, better structured Asset prices are far less “frothy” and there is no sign of a credit bubble Real estate assets still stand up to 50% lower than their peak values Lending growth has started to return gradually Oil ties the economy to Asia more than the West UAE is the 4 th largest oil producer in the region High oil prices continue to provide shore-up budgets Oil exports are predominantly tied to Asia and not the West Key Themes

Doing Business in the UAE Opportunities  Access to a Diversified Economy that is the second largest in the GCC  Access to wider GCC region  Growing hub for world trade and re-exports enjoying Well established ports and infrastructure/banking Favourable tax environment Convenient time zone Stable political situation Fixed Currency Highly skilled expatriate workers No material exchange controls Free-zones facilitate entry and access Challenges 7 Emirates, 36 Freezones, Federal and Emirate laws As per the latest World Bank, Ease of Doing Business Index, UAE ranks 40th out of 183 economies The Global Competitiveness Report for , ranks the UAE 25th out of 139 economies Despite the world class infrastructure and ease of trading across borders, challenges particularly exist in starting a business and protecting investors rights The UAE is not an English common law jurisdiction

Tax and Legal framework Taxation Environment No VAT levied in the UAE No withholding taxes No thin capitalisation rules No transfer pricing rules No personal income taxes No corporate taxes in Free Zones No requirement to file corporate tax returns in the UAE 5% import tariff on most goods levied ONLY ONCE at the first port of entry to the GCC The UAE has signed double taxation treaties with over 40 countries – including INDIA Legal Environment Complex legal environment which is a mixture of federal and emirates law Restrictions exist on foreign ownership of companies, property and shares Key laws are: Federal companies law, Commercial Agencies Law, Federal Industry Law & Government Tenders Law Federal law permits a range of entity types to be established (for instance partnerships, JVs Bankruptcy law has lagged economic development and has not been tested in the courts

Certain financial intermediaries are subject to special laws Services and industries relating to national resources are also subject to separate legislation The Federal Laws do permit sole proprietorships, partnerships and JVs as well – however these are not commonly deployed Alternative Strategies for Entry 100% owned by foreign company Restricted activities Not licensed to do conduct business/market directly UAE national service agent must be appointed 8-12 weeks establishment time usually required Similar to a branch but may not undertake income generating activities 8-12 weeks establishment time usually required Must be 51% owned by UAE national (s) Profits may be shared differently from the capital contributions Capital requirements vary by Emirate Potentially subject to federal and emirate taxes (varies up to 55% in principle) Subject to local laws, including emiratisation Potential for local taxation Governed by own regulatory authorities Activities within zones tend to be industry specific Formation is usually a 2 stage process – initial approval followed by provision of a Trade License May be 100% foreign owned No corporate or personal taxes 100% repatriation of capital Exempt from import and export taxation Access to infrastructure and warehousing 4-6 weeks lead time for establishment Not permitted to do business outside of the Freezone in the UAE Client Entry Strategy UAE Branch Office Representative Office UAE Company (typically LLC) Free zone Entity Other

Important considerations….. 5% Beneficial Ownership requirement –Central Bank requirement –More onerous than most other countries Post Dated Cheques are commonly deployed instruments Capital Account Requirements Wage payments system Non-resident accounts are strongly discouraged and require high level sign off Current interest environment – there is a premium for AED funding Central bank imposes a cap on real estate lending (20% of total deposits)

HSBC Commercial Banking in UAE

Scale of the UAE Commercial Banking Business Our history in the Middle East dates back to 1959, when we acquired The British Bank of the Middle East. Founded in London in 1889, it pioneered banking in the region and for decades was the only bank committed to supporting the area. In addition to Dubai, Deira and Jebel Ali our 8 branches are located in the main centers of commercial activity including Abu Dhabi, Sharjah, Ras Al Khaimah, Fujairah and Al Ain. Additionally we have 3 Corporate Service Centres, conveniently located across the country with a relationship team comprising 350 people.

 Leading Trade Services Bank in the Middle East and North Africa ( )  Best Trade Bank in Middle East (2010)  Best Overall Bank for Cash Management in the Middle East ( )  Best Bank for Payments and Collections in the Middle East ( )  Best Sub-Custodian in Middle East (2010)  Best Debt Bank in Middle East (2010)  Best CLS-Linked Bank Offering in the Middle East ( )  Best Supply Chain Finance Provider in Middle East ( )  Best Trade Finance Bank in the Middle East (2007)  Best Trade Finance Provider in Saudi Arabia (2009)  Best Investment Bank in the Middle East (2010)  Best Domestic Cash Manager in UAE, KSA, Qatar, Bahrain, Jordan, Kuwait & Lebanon (2008)  Best Cash Management House in the Middle East ( , 2009)  Best Domestic Cash Manager in UAE, KSA, Qatar, Egypt, Pakistan, Bahrain, Jordan and Kuwait (2009)  Best Cash Management Bank in KSA  Best Emerging Markets Debt House (2010) Awards  Middle East Logistic Awards Best Trade Finance Bank in Middle East ( )  TMI Awards – Best Cash Management Bank – MENA (2008)

Questions