The Ministry of Human Resources and Emiratization (MOHRE) in the United Arab Emirates has announced the launch of a Voluntary Savings Scheme that offers a viable alternative to the traditional end-of-service gratuity system for private sector employees.

This new initiative allows companies to invest employee end-of-service benefits in four approved investment funds, promoting both financial growth and employee retention.

The approved funds include the FAB Fund (managed by First Abu Dhabi Bank), Lunate Fund, Waha Capital's Waha Investment Fund, and The National Bonds Sukuk Fund.

This scheme aims to enhance employer reputations, attract talent, and contribute to long-term employee loyalty and productivity.

The financial implications for companies participating in this scheme suggest lower costs compared to the conventional gratuity payout, since employer contributions are based on current salaries rather than the potentially higher salaries at termination.

For employee participants, the scheme provides several advantages including asset growth, reliable returns, and guaranteed gratuity payouts even if an employer faces financial difficulties.

Employees have the option to make additional contributions of up to 25% of their total annual salary to further enhance their savings.

Moreover, skilled workers can choose from a range of investment portfolios, while non-skilled workers will be placed in capital-guaranteed portfolios.

Any employee who transitions to a new employer has the flexibility to either withdraw their savings or keep them invested in the scheme.

This new system of accrued entitlement will apply to all service post-enrollment, while benefits prior to enrollment will still follow traditional labor law calculation methods.

In an extension of eligibility, self-employed individuals, freelance permit holders, non-UAE nationals employed in government roles, and UAE nationals in various sectors can now participate in the scheme, reflecting a broader inclusivity.

Separately, the UAE's Ministry of Finance has issued new directives concerning the taxation of foreign investors under the Corporate Tax Law.

This update replaces earlier Cabinet Decision No. 56 of 2023. Under the new guidelines, a non-resident investor in a Qualifying Investment Fund (QIF) or Real Estate Investment Trust (REIT) may establish a tax nexus in the UAE based on certain conditions, primarily involving the distribution of income.

A nexus will be created when a QIF or REIT distributes 80% or more of its income within nine months from its financial year-end.

Additionally, a lack of compliance with ownership diversity could also result in a taxable presence.

The new provisions aim to alleviate regulatory burdens for foreign investors while maintaining the UAE's attractiveness as an investment hub.

Furthermore, the Ministry emphasizes that compliance measures will be streamlined to facilitate ease of investment operations, supporting the country's goal to cultivate a thriving economic landscape.