Dubai has approved a Dh1.5 billion ($400 million) economic incentive package to support the city’s business and tourism sectors at a time when demand has fallen due to the Iran war.
The raft of measures includes suspending the nightly hotel tax, which is Dh20 ($5.45) in higher-tier hotels, and the 7 per cent municipal tax added to hotel and restaurant bills.
It also sets out a range of exemptions for nurseries and private schools, including deferring fees. It is the second package announced by the government following a Dh1 billion relief fund launched in April.
Overall, the fund includes 33 initiatives relating to tourism, trade and logistics, property, construction, education, and arts and cultural activities. They will be implemented over three to 12 months, Dubai Media Office said on Thursday.
“Dubai has built a distinguished model for adapting to change and turning challenges into opportunities,” said Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, Deputy Prime Minister and Minister of Defence.
“The close partnership between the public and private sectors places people first, and we continue to listen and respond to ideas and proposals that protect our achievements and ensure continued progress.”
The war that began on February 28, with Israel and the United States bombing Iran and Tehran lashing out at its neighbours in retaliation, has disrupted business across the Arabian Gulf.
Energy sites and civilian infrastructure have been hit by waves of Iranian drone and missile attacks. Hospitality, aviation and tourism are among the sectors worst hit.
However, despite the disruption, Gulf economies are expected to grow this year, albeit at a slower rate, the International Monetary Fund said last month.
Navigating ‘muddied terrain’
Naim Maddad, founder and chief executive of Gates Hospitality, which operates popular restaurants such as Dubai’s Reform Social and Grill and Bistro Des Arts, said it was crucial for the government to work closely with the private sector to ease current economic challenges.
But he cautioned against reliance on expenditure deferrals, which he said would not provide a long-term solution for businesses.
“We welcome such initiatives and this is a pure confirmation that the government works with the private sector hand in hand across all sectors making sure we collectively navigate through the muddied terrain we are enduring.
“I look forward to seeing a detailed report of what the relief package includes so we can apply across our portfolio and make necessary adjustments.
“It is also paramount to stipulate that deferrals in a time where there is little economic growth and revenues are not viable, as they merely prolong the issues with a dead end, which will result in many businesses carrying forward further debts and losses.”
Kashif Khan, founder and chief executive of Chocoberry London, which has branches in Dubai and Sharjah, said the relief package is timely.
“This is one of the reasons why I decided to open in the UAE. Not just one branch but two, as I am aware of the countries commitment in supporting businesses especially those operating in hospitality,” he said.
“While our Sharjah branch was doing fairly well during the war there was a bit of stagnation and this news coming during the summer is a breath of fresh air I am sure for all those operating within the industry.”
What does the new package include?
Tourism
Measures include exemptions from collection of the Tourism Dirham and sales fees on hotel rooms and restaurants; from permit and licence fees for holiday homes; and from event permit fees and all postponement and cancellation fees for events, exhibitions and conferences.
Exemptions from fees on sales and commercial promotions, a reduction in fees for tour guides and desert safari activities, and deferral of the e-link fee for tourism companies and of hotel establishment classification fees are included in the package.
Education
Early childhood centres registered with private sector regulator KHDA will be exempted from licence renewal fees, existing fines and Dubai Municipality fees.
They will also benefit from partial rent exemptions and extended rent-free periods for centres currently under construction.
Educational institutions will also receive broader support through partial or full exemptions from guarantee insurance requirements for cancelled contracts, a freeze on scheduled rent increases upon renewal, and deferred rental payments.
Culture and the arts
Benefits for the sector include deferral and instalment of rent payments and financial obligations, as well as reduced rental fees for temporary spaces used to host arts and cultural events.
Business support
The Dubai Department of Finance will reduce the “final retention security” for supply contracts from 10 per cent to 2 per cent for all companies contracted with government entities, and raise the financial threshold for contracts eligible for exemption from final insurance from Dh5 million to Dh10 million.
Companies facing challenges – including desert safari and camping operators, marina-related businesses, aviation-related activities, drone and fireworks companies, and event management companies – will receive a one-time full exemption from certain fees administered by the Dubai Department of Economy and Tourism and Dubai Municipality.
These include market fees, accommodation allowances for employees and licence holders, fees for general cleaning services, and foreign trade name fees.
All businesses registered with the Roads and Transport Authority will also benefit from a deferral of payments for passenger activity sectors and there will be exemptions from penalties for violations related to the vehicle availability index and arrival time index.
Real estate
For the property sector, the validity of building permits for construction projects under Dubai Municipality will be extended. The validity of approvals for housing construction loans for Emiratis under the Mohammed bin Rashid Housing Establishment will be extended by one year.
There will also be a reduction in renewal fees for civil aviation activity permits and a suspension of late-renewal penalty fees for businesses registered with the Dubai Civil Aviation Authority.