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Intellectual property, real estate, taxation and anti-corruption laws in The United Arab Emirates

This guide was last updated in December 2012.

Intellectual Property

The UAE has been quick to recognise the importance of the protection of intellectual property to its continued development as a dominant trading hub in the Middle East. To this end, the UAE has developed an intellectual property regime that offers international standards of protection to intellectual property right owners through an extensive set of intellectual property laws, and its accession to a number of key international treaties.

Moreover, local authorities and customs officials are aware of the importance of brand protection and actively take enforcement actions against counterfeiters, and other types of intellectual property infringement, in the region.

Private enforcement in the Courts is also possible, but can be challenging as the Courts continue to develop their familiarity with a relatively new set of laws.

Generally speaking, companies operating (or looking to establish themselves) in the UAE can do so with confidence that the UAE is a territory in which international intellectual property rights are understood and will be protected.

Registration Regimes

The UAE has established registration regimes to recognise and protect various forms of intellectual property.

These are:

  • Trade marks – registered with the Trade Mark Section of the Ministry of Economy;
  • Patents and Utility Certificates – registered with the Administration of Industrial Property at the Ministry of Finance and Industry. It is also possible to register a patent across the GCC by lodging an application with the GCC

Patent Office in Riyadh, Saudi Arabia;

  • Industrial designs and models – registered with the Administration of Industrial Property at the Ministry of Finance and Industry;
  • Copyright – arises automatically, but can be registered with the Ministry of Information and Culture to assist in proving ownership;
  • Domain names – .ae domain names can be registered with a registrar authorised by the administrative body, AEDA (www.aeda.ae). Domain name registration does not give rise to any proprietary rights and domain names should therefore also be registered as trade marks to strengthen the right of the owner to prevent cybersquatting.

Unregistered intellectual property rights and related rights

UAE law also recognises the following rights, which subsist without the need for registration:

  • copyright;
  • moral rights;
  • performer's rights;
  • rights in industrial secrets and know-how.

Treaties

The UAE is a signatory to a range of key international treaties on the recognition and enforcement of intellectual

property rights, including:

  • The WIPO Convention (General);
  • The Gulf Cooperation Council (Trade Marks) Law;
  • The Paris Convention (Patents and Trade Marks);
  • The Patent Cooperation Treaty (Patents);
  • The Berne Convention (Copyrights);
  • The WIPO Copyright Treaty (Copyrights);
  • The WIPO Performances and Phonograms Treaty (Copyrights);
  • The Rome Convention (Copyrights); and
  • TRIPs under WTO.

Enforcement

The UAE's location at the crossroads between East and West means counterfeiting and infringement can be a problem due to the vast amount of goods and trade passing through the region.

Several avenues are available for enforcing intellectual property rights against violators, including administrative and judicial actions.

Administrative Actions

Federal government authorities, as well as local government authorities in several of the Emirates, have jurisdiction to enforce intellectual property laws and have trained personnel ready to carry out raids of shops and warehouses, seize goods and levy fines on offending parties.

Customs authorities also have the right to seize and destroy illegal goods.

Litigation

Owners of intellectual property may wish to file a claim in Court to demand compensation for damages suffered.

The Courts can also order:

  • the seizure or destruction of counterfeit goods and the machinery used to create them;
  • the offending parties to cease their production of counterfeit goods;
  • the suspension of the offending parties' trade licences; and
  • that any judgement made be published in the local press.

Enforcement in the Courts can be difficult. There are no specialist intellectual property Courts in the UAE, and judges, especially in the lower Courts, may not have the expertise to deal adequately with particularly technical issues.

Despite these reservations, however, there are examples of international companies enforcing their rights in the UAE Courts.

Criminal prosecution

Criminal sanctions can include imprisonment for up to five years and/or fines for certain infringing activities.

Police departments in each Emirate have Commercial Crimes Departments who will carry out raids, and are equipped with laboratories to examine counterfeit goods and provide reports on the similarities and differences between genuine and counterfeit products.

Real Estate

Real Estate has played a very significant part in the growth of the UAE generally, and Dubai and Abu Dhabi in particular.

There is no express provision in Federal Law permitting ownership of property by non-UAE/GCC Nationals or foreign owned corporations (Foreign Investors). The Constitution provides that real estate falls within Federal jurisdiction, however, where the Federation does not legislate, the individual Emirates may do so. On that basis, a number of the

Emirates have issued local laws in relation to real estate in their particular Emirate.

UAE Federal Law does contain basic provisions dealing with land ownership, leasing, co-ownership of floors and apartments and the creation and operation of owners' associations.

To keep pace with the development of the UAE, and in view of the significance of the real estate sector to the economy, the laws governing property have had to, and are continuing to, evolve rapidly.

Real Estate & commercial operations

The importance of real estate in the UAE is underlined by the fact that a commercial licence will not be issued until a property is acquired, or a lease is executed, and the applicant can prove that it will carry on its business activities from suitable premises (from commercial premises and not from residential premises, for example).

In principle it is not possible to use the office space of an existing company unless there is a link in the ownership between the existing company and the new company being set up (for example, having the same local sponsor).

Designated Areas

From 2002 onwards, Foreign Investors in Dubai began to purchase property and acquire long-term lease interests within areas designated as allowing property ownership by Foreign Investors ("Designated Areas"). At this time there were no property laws in place to give these purchasers title to their properties. These purchasers relied on contractual commitments from developers and an assurance from the Dubai Government that property laws, allowing

Foreign Investors ownership rights in the Designated Areas (including certain Free Zones), would be introduced.

Since 2006 a number of significant laws which regulate property ownership, registration and property related transactions in the various Emirates have been introduced.

Initially these laws were introduced in Dubai, but Abu Dhabi and the other Emirates quickly followed suit with their own property laws and regulations.

Tax

Corporation & income tax

The UAE is a generally tax-free jurisdiction, with no corporate tax except for the following:

  • Branches of Foreign Banks;
  • Hotels;
  • Courier companies; and
  • Oil, Gas and Petrochemical producers.

However, the UAE government is currently conducting an impact study into the imposition of a corporate income tax.

Subject to these exceptions, companies exclusively formed and operating in the UAE are not subject to any corporate or income taxes in the UAE. However, when forming a corporate vehicle for a foreign company, potential taxation in the country of origin of repatriated profits or dividends should be considered, and taxation advice in those countries of origin should be sought.

There is similarly no withholding tax regime.

Value added tax

There is currently no value added tax. However, at the GCC level, discussions are taking place in connection with the imposition of value added tax across the GCC.

Indirect taxes & fees

Although individuals living, and companies carrying on business, in the UAE are not directly taxed on their earnings and profits, they nevertheless pay hidden or “indirect taxes” and fees.

The main indirect taxes are as follows:

  • Services charges: these are charges levied by the Municipalities on services, food and alcoholic drinks purchased in hotels. The rate is between 10% and 15% of the goods and accommodation purchased. There is a tax of 30% on alcohol purchased at liquor stores.
  • Licence issue fees: the registration of a company and the issue of the required Commercial Licence to undertake any business activities are subject to payment of fees to the relevant government departments involved each year.

In Dubai, in addition to the fixed fees payable to various different government departments, there is also a fee payable every year calculated as 5% of the value of the rent paid for the offices or facilities from which the company is to carry out its activities. This fee is collected by the Department of Economic Development when issuing or renewing Commercial Licences, but is actually levied by the Dubai Municipality.

In Abu Dhabi the fees payable by companies are calculated on a different basis, mainly depending on the type and number of economic activities to be undertaken.

  • Employment & Immigration fees: Fees are payable to the Ministry of Labour and Social Affairs for the processing and approval of employment permits and employment visas for a company’s staff. In addition, bank guarantees are required to be provided for each employee to the competent authorities.
  • Housing fee: In Dubai, since January 2005, tenants have had to pay a yearly tax calculated as 5% of the rent paid, and owners of real estate are required to pay a fee of 5% of the rental revenue attributed to that type and size of property, which is determined by reference to the Annual Rent Index issued by RERA. The housing fee is collected by DEWA (Dubai Electricity and Water Authority) in its water & electricity bills, but it is actually levied by the Dubai Municipality.

It is possible that the other Emirates will implement a similar system in the future.

  • Local sponsor/sleeping partner fees:The UAE Companies Law requirement for a UAE majority shareholder or UAE local agent has the result that fees are payable by foreign investors (either a fixed fee or percentage of profits) to their UAE partner or agent.
  • DEWA / ADWEA bills: DEWA and ADWEA are the local authorities that provide connection & supply services of water, electricity and sewerage to all Dubai and Abu Dhabi property owners and tenants respectively. UAE Nationals have special conditions in this regard and pay lower rates for water & electricity consumption. However, rates applied to expatriates are high compared to other GCC countries.

Customs Duties

January 2003, the UAE, along with 5 other Gulf countries, formed the Gulf Cooperation Council Customs Union

(Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and UAE) with the intention of unifying applicable customs duties. The GCC Customs Union established a standard duty at the rate of 5% (CIF) on almost all products. As an exception to this 5% customs duty, some products, such as alcohol, tobacco and pork, pay higher customs duties. There is also provision for customs duty exemptions.

Given the status of the Custom Union, once a product has entered any of the Union countries, it will in principle be capable of moving freely to the other countries. This freedom is, however, subject to possible protective duties or taxes, which may be levied by other GCC countries from time to time to protect local production of specific goods.

Likewise, there are special regimes applying to products from other Arab Countries in consideration of multilateral or bilateral treaties existing prior to the signature of the Customs Union Agreement.

Finally, it should be noted that products imported and stored within the UAE Free Zones are exempt from customs duties. Products imported and stored in the UAE Free Zones will, however, pay customs duties when they exit the Free Zone to enter the UAE market (through an importer in the UAE) or any other country.

Anti Corruption

On 22 February 2006, the UAE ratified the United Nations ("UN") Convention against Corruption (the "UN Convention").

Article 15 of the UN Convention provides that it is a requirement for signatory states to adopt legislation in respect of acts of bribery involving public officals.

The UAE Framework

The UAE does not have one composite piece of legislation relating to corruption and bribery. Instead, the UAE's historic approach to this issue has been piecemeal, and therefore bribery related provisions are contained in a variety of Federal and Emirate level laws, and Government Departmental rules.

The main sources of UAE legislation include:

  • the United Arab Emirates Federal Constitution;
  • the Penal Code (Law no. 3 of 1987 as amended);
  • the Human Resources Law (Law no. 11 of 2008); and
  • the UAE AML Law (Law no. 4 of 2002).

Whilst not as self contained as the UK Bribery Act (or equivalent European legislation) or the US Foreign Corrupt Practice Act (FCPA), the UAE does have an anti-bribery and corruption regime which is backed up by stiff imprisonment and fines. The provisions and prohibitions are focused specifically at any gift or advantage offered to, or

sought by, a public official in consideration for the performance or non-performance of their public duties, or acts beyond their public duties. Those provisions are reinforced by provisions preventing well connected individuals from using their influence to affect the performance or non-performance of a public officer's public duties.

International Law

In addition to compliance with the UAE framework, many foreign businesses operating in the UAE will have to comply with anti-corruption legislation in force in their home jurisdiction; for example, the UK Bribery Act and FCPA have far reaching consequences in the event of a breach, notwithstanding geographical boundaries. Both the UK Bribery Act and FCPA impose obligations on businesses and individuals to which they apply to actively police the business’ activities in the context of corruption.

Contact

Alison Hubbard, Partner

 alison.hubbard@pinsentmasons.com / + 971 4 373 9693

Björn Gehle, Partner

bjorn.gehle@pinsentmasons.com / +971 4 373 9642


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