Up Again UAE: Government Relief and Tax


1. Legislative changes: are there any additional processes or support which have been introduced as a response to the pandemic which I may not have considered previously?

There have been no legislative changes made to the UAE’s Bankruptcy Law in relation to COVID-19. Generally, the Bankruptcy Law is underused. However, our dialogue with the business community suggests a growing appetite to use the Bankruptcy Law in the future.

2. Is there anything else I should look out for?

No. DLA Piper will provide updates if significant legislative changes are announced.


3. What is the position with respect to the applicability of emergency tax measures, including

a. what they are and apply to;

b. when they are expected to be phased out on or following a return to business; and

c. whether any transitional periods are likely to apply.


The VAT return and payment deadline for the March 2020 VAT Return (for monthly filers) and the Q1 2020 VAT Return (for quarterly filers) has been extended from 28 April to 28 May.

Excise tax

The March Excise Tax return filing and payment was extended from 17 April to 17 May.

Customs duty – Dubai Customs

From 15 March until 30 June 2020, a refund applies of 20% of the customs duty imposed on imported goods sold locally into the UAE that are normally subject to a customs duty rate of 5% (i.e. the net customs duty rate will be 4% between 15 March 2020 and 30 June 2020).

There is also a 90% reduction on the fees imposed on submitted customs documents.

Customs duty – other emirates

Some of the other emirates' customs authorities are also offering some limited reliefs. Customs authorities in each emirate should be contacted directly for details of any reliefs available and how to use them.

4. Are there specific steps that businesses should take to prepare for these tax measures being phased out – for example new timing of

a. payment obligations (and therefore likely pressure on cash flow); and/or

b. filing of returns?

The tax measures are temporary and will phase out after the deadlines. It is possible that the UAE Federal Tax Authority or Customs Authority will introduce further concessions as a response to COVID-19.

5. Should the impact of emergency tax measures be reconsidered by businesses – e.g. are there certain legal transactions (such as sales or reorganisations) that parties should preferably postpone or accelerate?

With respect to the customs duty concessions, advantages may be obtained by appropriately timing the importation of goods into the UAE.

6. Are there any additional measures proposed, in particular any that are targeted at particular sectors (e.g. aviation)?

No further measures are proposed at the moment.

7. Are there any sectors or interest groups that are now putting forward, or may in the near future request, special tax measures?

This is unknown at this stage.

8. Which taxes might be increased to address the financial burden caused by the crisis, for example,

a. are there political commitments or policy trends that might indicate the likely focus of any tax increase in the future (e.g. to maintain low corporation tax, but to increases taxes on personal wealth)

b. measures to broaden the tax base, such as digital services taxation and a pre-emptive response to the OECD/ G20 Inclusive Framework on BEPS (“BEPS 2.0”)

No tax increases have been announced. In particular, in response to Saudi Arabia tripling its standard VAT rate from 5% to 15%, the UAE Minister of Finance emphasised that there are no plans to increase the UAE’s VAT rate of 5%.

9. Are there other actions that ought to be considered by businesses in your country e.g.

a. revisit past tax filings to claim carry back of losses;

b. revise or update preliminary tax assessments;

c. claim bad debt relief for VAT output tax

Businesses in the UAE should consider the new Economic Substance Regulations, under which most businesses will need to notify their Regulatory Authorities by 30 June 2020 about whether they performed Relevant Activities in 2019.


10. What do you need to consider in terms of your funding requirements for returning to business and are there any return to business financial assistance packages being made available by government?

If your business has temporarily closed, there is likely to be a delay between the incurrence of costs to restart your business and the consequent receipt of income. You should consider whether you have sufficient working capital during any interim period. In particular, if you have any credit remaining available under any revolving credit facility, there will likely be a drawstop on new funding if a default (or occasionally event of default) is continuing.

Across the UAE, there have been a number of financial assistance measures introduced to relieve the pressures facing businesses.

For example, the UAE Central Bank has implemented a Targeted Economic Support Scheme (TESS) which includes measures:

  • to relax banks' capital buffers requirements (AED50 billion);
  • to relax banks' liquidity buffers requirements (AED95 billion);
  • to issue collateralised loans at zero cost to all banks in the UAE (AED50 billion); and
  • to reduce cash reserve requirements for demand deposits for all banks from 14% to 7% (AED61 billion).

These measures are designed to encourage UAE banks to lend (or continue lending) in support of the local UAE economy.

To that end, TESS also envisages temporary relief for eligible UAE borrowers from the payments of principal and interest in respect of outstanding loans for UAE private sector companies affected by COVID-19.

TESS is the main financial assistance measure in the UAE, but there are several other measures introduced in individual emirates and free zones. These offer additional concessions to relieve the cost of doing business in the relevant jurisdiction. Generally speaking, these include rent postponements or reductions, waivers or reduced licencing and visa fees and waiver of penalty fees for late payments. The most recent financial assistance to be implemented in the UAE was announced by Dubai on 11 July 2020. The stimulus package, worth AED1.5 billion, includes cancelling certain fines imposed by the government and the customs department, tax reimbursements to hotels and restaurants, financial guarantee refunds to the construction sector, and exonerating private schools from licensing renewal fees.

11. How will funding a return to business, including taking on additional indebtedness, impact on your financial or other covenants?

A borrower should consider:

  • whether any new funding arrangements are permitted under the terms of its existing finance documents and whether any consents or subordination arrangements are required;
  • how any additional indebtedness (and any finance costs associated with it) will be treated in financial covenant calculations and whether any amendments or waivers to financial covenants are required; and
  • whether any equity issuances (and the terms of them) are permitted by its finance documents.

Particular considerations regarding financial covenants include:

  • the decrease in revenue/EBITDA over the lockdown period;
  • any likely tapered increase in revenue/EBITDA as lockdown restrictions are relaxed;
  • costs for restarting the business;
  • payment of any deferred payments (i.e. rental payments, business rates); and
  • incurrence of any additional indebtedness.

Note also, given the negative impact on financial condition on a number of businesses, if the applicable margin you pay under a loan is subject to a ratchet, it will likely increase if your financial condition deteriorates (e.g. as leverage increases), and that margin is usually set at the highest level if an event of default is continuing.

12. Are there any remedies such as equity cure or margin ratchets that you should be checking on to provide liquidity to prevent a default or improve their financial position?

In some circumstances, it may not be possible to agree a waiver or amendment to your financial covenants, so it may be prudent to review now any equity cure rights in your credit agreement.

For example, if you have a net leverage maintenance financial covenant, it might be beneficial to contribute additional shareholder capital ahead of the next testing date, as such additional cash in the business (as at the testing date) will usually be taken into account (sometimes as a pre-cure) when determining net debt for the purpose of testing net leverage.

It’s also worth checking the number of times that a breach of a financial covenant can be cured and the frequency with which the cure right can be exercised by sponsors/shareholders.

13. What practicalities do you need to consider in relation to audit requirements?

Businesses should ensure they can meet the timeframes for delivering audited financial statements to their financiers under their reporting obligations in their finance documents.

Businesses should take into account whether social-distancing/work-from-home measures will hamper the audit process, and constantly engage with lenders on the expected timetable for when the audited financial statements can be published.

In this regard, it should be noted that the Securities and Commodities Authority has provided listed companies in the UAE with an additional 45 days to file their financial statements for 2019 and the first quarter of 2020.

The Dubai Financial Service Authority (DFSA) requires companies operating in the DIFC (a financial free zone) to include the impact of COVID-19 in their year-end financial reports.

14. What is the process if I need any amendments made or waivers given under my loan documentation (including in respect of financial covenants)?

Debtors should engage with their lenders to explore whether they are amenable to waive or amend the terms of existing finance documentation. The documentation will set out the different lender consent thresholds required. Amendments to financial covenants generally require consent of majority lenders (typically 66.6%).

As a practical point, in our experience, lenders tend to be more receptive to requests for amendments and waivers if a borrower presents to them well thought-out and reasoned plans to address any issues in the business, supported by appropriate evidence and relevant forecasts.

If the requisite consent is obtained, the changes can be documented through an amendment and restatement agreement or amendment and waiver letter (depending on the level of changes and their complexity).

15. Dealing with creditors, including amendments and waivers – Bonds

a. If I can’t comply with the terms of my bond covenants who do I need to notify?

If a default has occurred or is likely to occur, communication with bondholders or certificate-holders will often be required through a combination of:

  • public announcements filed on the exchange where the bonds or sukuk are listed and the website of the issuer or obligor;
  • notification to the relevant UAE authorities in case of bonds or sukuk that have been offered to the public;
  • with simultaneous notice to the trustee, delegate or fiscal agent (as determined by the governing document of the bonds or sukuk).

Key default concerns in the near-term for bonds or sukuk, are likely to be:

  • inability to file necessary reports (which may include accounting certifications that may not be made);
  • failure to report timely on any material developments (if the documentation requires such reporting); and
  • inability to pay principal or interest (i.e. coupon or periodic distributions).

b. If I need to ask for a waiver or amendment to the terms of bonds issued by my business what steps do I need to take?

The terms and conditions applicable to the bonds and sukuk will usually have a detailed waiver and amendment procedure spelled out, with the majority applicable to the relevant waivers and amendments.

It should be expected that consent from bondholders/certificateholders representing a simple majority of principal amount outstanding will be required for amendments to non-economic terms (such as ability to incur additional debt), but that economic terms (e.g. maturity, rates of return, payment dates currency) or changes to security package will likely require 90% to 100%, depending on the terms and conditions.

As a priority, an issuer or obligor should have its legal counsel review the amendments and waivers section of the documentation, and obtain legal on prudent public communications under applicable securities laws and regulations.

c. What is the process for contacting bondholders and holding meetings to agree changes in the terms of my bond documents?

Bondholder or certificateholder meetings, if required, will be governed by a combination of the bond or sukuk governing documents, the rules of the relevant clearing systems, and onshore or offshore statutory provisions.

16. Is the availability of any return to business funding or relief either (a) conditioned on the use of proceeds for green or social purposes or (b) linked to sustainability-related outcomes? If so, what are the applicable purposes or outcomes?

There is no return-to-business funding or relief available in the UAE.