UAE Inheritance Laws

Q: Which inheritance laws apply on foreign residents in the UAE? What is your advice in terms of property ownership and bank accounts?
A: Inheritance and property laws are a complex issue and it is worth investing in independent legal advice to be entirely confident about your position.
The rules regarding the form and technical provisions of wills can be confusing for lay people. It's also worth being aware that property laws are changing, which will in turn affect the rules regarding inheritance.
A good local lawyer can help you understand all this. However, there are some basic steps you should take to increase the confidence and security of your family.
Probably the best advice - wherever you reside - is to make sure that you have made a will for all your property and that this will is constituted properly, so that it is recognised under the law of your country of origin and your country of residence.
Almost every lawyer and financial adviser urges their clients to make a will, because the alternative creates so much stress and heartache for bereaved family members.
When people pass away intestate - without a will - it creates a number of issues, particularly if there are multiple claims on a property. It also adds to the uncertainty and upset that surrounds the passing of a loved one.
Legal framework
The UAE has a legal framework in place surrounding the drafting of a will, so there's really no excuse for anyone not to have one.
For Muslim expatriates, typically the courts will apply Sharia law in regard to inheritance and the drafting of a will.
However, even non-Muslims who have a valid resident visa can make a will and have it registered in the UAE.
In the interests of family security, you should itemise all your valuable assets within the document, starting with any properties you might own, but also including bank accounts and disposable assets.
Typically, the will must be typewritten or computer generated, must expressly state that it's your will, and it should be signed and dated.
It will also need to be signed by witnesses - the number may vary depending on the laws of your home country.
It's important that the will is legally approved and attested by authorities in your home country, before it is recognised as legal here in the UAE.
You should also have the document translated into Arabic; particularly if you own property and want to make sure it is passed on in accordance to your wishes.
You should also bear in mind that your will can be structured in such a way as to mitigate the tax burden on your inheritance.
Residents from the UK, in particular, need to consider the potentially steep inheritance taxes that can be levied on international assets. Typically, everything above the so-called "nil band rate" is subject to taxation. However, there are a number of exemptions which allow people to pass on inheritance without incurring tax.
All these issues underline the importance of consulting an expert when you are drafting your will. Ensuring this is in place provides a significant degree of protection to your loved ones.

UAE mortgages likely to grow nine-fold in five years

The UAE's housing mortgage market is projected to grow nine-fold during the next five years to Dh161 billion in 2012, according to a research report by EFG-Hermes, a regional investment bank.
According to central bank statistics, up to the end of the second quarter of 2007, the UAE's financial system had a total of Dh46.3 billion in mortgage assets.
This includes a large amount of commercial mortgages. Residential mortgages are estimated at about half of that figure, with industry sources suggesting they are about Dh20 billion.
EFG-Hermes estimates current housing mortgages at less than Dh18 billion for 2007.
"Going forward, we assume housing purchases of around Dh680 billion over the next five years. If we also assume that 20-40 per cent of properties are mortgaged, and loan-to-value ratios of 70 per cent, this suggests that mortgages disbursed between now and 2012 will be of the order of Dh43 billion, making for a total market of Dh161 billion, implying a compounded annual growth rate (CAGR) of 55 per cent over the next five years," said Raj Madha, an analyst with EFG-Hermes.
In the short term, most of the growth is expected to be focused on Dubai, but towards the end of the five-year period, Abu Dhabi is expected to contribute significantly to the growth, although perhaps not reaching equality between the two emirates. By 2020, based on the same assumption, the report estimates the mortgage market will grow to Dh457 billion.
Over the last two years the real estate mortgage loan market (commercial and residential combined) has been growing at 92 per cent CAGR. Although growing at a high rate, over the next five years, growth is projected to fall to 55 per cent. Beyond 2020, EFG estimates that the market will mature to standard growth rates.
The housing finance sector has been growing rapidly for the last few years. However, unlike the property market, it is clear that the housing finance market is still massively underpenetrated.

PAN procedure eased for NRIs

Like resident investors, NRIs also require Personal Account Numbers to operate accounts and invest in mutual funds and other financial dealings.PANs as they are called are mandatory to file returns such as interest from NRO accounts, capital gains, rents etc, but to obtain a PAN required a menu of proof including identity verification, addresses in India and abroad, designation and code of Assessing Officer of the Income Tax Department and details of a Representative Assessee.
The Representative Assessee was a particularly onerous rquirement because the Tax Act specified that the Assessee is subject to the same duties, responsibilities and liabilities as the NRI, if his client fails to pay his taxes, ipso facto making the Assessee responsible for the NRI's obligations and liabilities.
Simply put, an NRI who does not have a person in India prepared to be responsible as his Representative is not in a position to invest in the stock market.The complicated system has now been revised after representations by NRIs and PIOs and PANs are now issued based on a copy of the NRI's passport, without the necessity to provide a Representative Assessee.

Issue of PAN to persons outside India and foreign citizens

Following guidelines are issued by Income Tax Dept. to facilitate the allotment of PAN to citizens of India residing outside India, foreign citizens and other persons (like companies/trusts/firms) Service provider means company authorized to issue PAN card of behalf of Income Tax department e.g. UTI Technologies, NSDL.

I. Citizens of India residing outside India and foreign citizens Service providers shall accept applications from these categories of natural persons (individuals), without insisting on details of a representative assessee. Details of addresses and proofs required for identity and address in such cases will be as per enclosed below.
II. Other persons (like companies/trusts/firms) having no office of their own in India: Service providers shall accept applications from these categories of applicants, without insisting on details of a representative assessee. Details of addresses and proofs required for identity and address in such cases will be as per enclosed below.

Service providers should advise applicants in the above mentioned categories to clearly indicate the address at which the PAN card and other communication should be sent in column 6 of Form No.49A, and also to invariably mention their email id in column 7 of Form No.49A. Service providers are permitted to charge applicants courier charges for PAN cards required to be delivered abroad, in addition to the application fee of Rs.60 plus applicable service tax. Details of service charges and delivery time shall be put up on the web-sites of the respective service providers

Codes 99 and 999999 should be entered for State and PIN fields respectively for the class of PAN applicants not having Indian address. However, actual foreign ZIP / PIN code should be populated in any of the 5 address fields (preferably last) along with the name of the country.

Service providers should also place on their respective web-sites the available Assessing Officer (AO) codes of International Taxation Directorate and advise the applicants to mention AO code out of these codes. However, if no AO code is mentioned in the application or the AO code mentioned is other than of International Taxation Directorate, then the first international taxation Assessing Officer of Delhi may be used as default AO code.

These guidelines are applicable only for the purpose of allotment of PAN to the categories of persons specified above.

Indian Citizen at the time of application for PAN located: outside India -

• ID Proof - Copy of passport
  
• Address Proof - Copy of passport;copy of bank account in country of residence
  
• 
  

Foreign Citizen - At the time of application for PAN located In India

• ID Proof Copy of passport
  
• Address Proof Copy of passport;copy of bank account in India
  
• 
  

Foreign Citizen - At the time of application for PAN located Outside India

• ID Proof Copy of passport, duly attested by Indian Embassy in the country where applicant is located
  
• Address Proof Copy of passport, duly attested by Indian Embassy in the country where applicant is located; copy of bank account in country of residence
  
• 
  

All the above cases - Photo of Applicant, Signature of Applicant - Required (Representative Assessee Not required)

UAE realty to boom beyond 2015

The UAE, which accounts for more than 60 per cent of the region's real estate development, is projected to experience the boom beyond 2015, according to two recent studies by HSBC and Dubai-based Damac Capital International.
Analysts have forecast that Dubai, which continues to experience robust demand scenario, will continue to outstrip supply for a few more years while the promising Abu Dhabi market is about to take off and is expected to maintain high rental yields in excess of seven per cent until 2013.
The property market in Dubai accounts for 47 per cent of the market in the entire GCC. Abu Dhabi is a distant second, with 14 per cent. Thus, together Dubai and Abu Dhabi account for more than 60 per cent of the real estate market of the GCC. It is estimated that over the next 10 years, real estate investors will pump in almost $300 billion into Dubai's real estate developments.
Land prices in Abu Dhabi have almost doubled (at least 75 per cent growth). Although the market is in its infancy with an almost non-existent secondary market, Abu Dhabi will consolidate credibility through further deregulation.

Why and how to have a PAN Card

Permanent Account Number (PAN) has become a very important tool to the Income Tax Department in tracking high value transactions and ensuring compliance with the tax laws.

Mentioning of PAN has become mandatory in many financial transactions, particularly in the following areas:

• Operating demat accounts
• Deposit of Rs 50,000 and above in the banks
• Investments in shares, mutual funds and post office savings in excess of Rs 50,000 each
• Sale or purchase of motor vehicles, excluding two wheelers
• Sale or purchase of immovable properties valued at Rs 5 lakhs and above.
• Applying for a new telephone connection (landline or mobile)
• Payment of Rs 25,000 or more against hotel bills

Even if you may not fall under these categories you need to file Income Tax Return for which PAN is required.

Benefits of having a PAN card

• If you have a PAN card, it can be used as a proof of your identity, particularly when you have to check-in on the basis of your air tickets purchased online.
• You can check whether the taxes paid by you are updated in the database of the Income Tax Department.
• Further you can now also verify whether your employer or the institution has indeed remitted to the Income Tax Department the tax deducted from the payments made to you.

Is it necessary to file Income Tax return if you have PAN?

Just because you have PAN, it is not necessary to file Income Tax Return. Income Tax Return needs to be filed only when you have taxable income or you need to claim refund of tax deducted by your employer or the institution making payments to you towards interest or professional services or commission or rent or winnings from lottery / game shows or horse races or contracts etc.

However, the converse is true: you need PAN to file an Income Tax Return.

How to get PAN?

It is very simple. You need to submit your details in Form No. 49A to any of the PAN Facilitation centers, located in all cities and major towns, wherever Income Tax offices are located.

The UTI Investors Services Ltd (UTIISL) and National Securities Depository Limited (NSDL) are the authorised agencies to accept and process PAN application forms.

You may also apply for PAN online through UTIISL's web site http://www.utiisll.co.in/pan/ or NSDL's web site http://tin.nsdl.com/. It will normally take about 2 to 3 weeks to get your PAN card delivered at your doorstep. If you need a PAN card urgently, you may also get Tatkal PAN by applying online using your credit card. You will get your PAN on priority basis and the same will be communicated to you through email. The fees payable is only Rs 60 plus service tax presently @ 12.24 per cent, totaling Rs 67.

What are the details to be submitted for applying PAN?

Only very few details like the following need to be given in the case of individuals:

• Name including your other names, if any
• Father's name to be given even in the case of married women
• Date of birth
• Addresses both official and residential
• Main source of your income is salary or professional/ business or any other income
• Designation and code of your assessing officer. You may obtain this information from the facilitation centers of UTIISL or NSDL or from the web site of the income Tax Department at http://incometaxindia.gov.in/ao/Firstlevel.Asp

You need to submit the following documents along with your application:

• Proof of identity
• Proof of address
• A recent colour photograph (3.5 cm X 2.5 cm)

You may submit copies of your passport/credit card/bank statement/voter's identity card/depository account/driving license/ration card/property tax assessment order to establish proof of identity and address. In addition, there are number of other documents like school leaving certificate/ matriculation certificate/ degree of a recognised educational institution/ water bill for proof of identity.

Likewise, you may use electricity bill/telephone bill/employer certificate/ rent receipt for proof of address. Even if you don't have any of these documents, you may obtain a certificate of identity and/or address signed by a MP or MLA or a Municipal Councilor or a Gazette Officer.

How can I obtain PAN if I don't stay in India ?

Non-Resident Indians (NRI) may obtain PAN by applying through their representative assessee, who has to be an individual residing in India. Recently, non-residents are permitted to apply for PAN by giving their present address, even though it is not in India. In such a case, the non-resident individual has to submit copy of passport for proof of identity and address and bank statement for proof of address (if the address mentioned in the passport is different from the present address).

In the case of non-residents, who are foreign citizens, these documents will have to be attested by the Indian embassy in their country. Detailed guidelines are available at the web site http://tin.nsdl.com/downloads/AdditionalguidelinesNRPAN_newPAN.pdf .

Other issues related to PAN

A person can have only one PAN and duplicate PANs, if any, must be surrendered. It is illegal to have duplicate PANs. Even if a PAN is obtained from one place, return of income can be submitted at a different place, in case of change of address or jurisdiction.

If you wish to correct the particulars given in the PAN, you may submit an application for making modifications in the PAN. This will ensure that the information in the database of the Income Tax Department is updated.

For additional information and FAQs, you may visit the following web site:

http://incometaxindia.gov.in/pan/overview.asp

Savings in the time of dollar decline

Q: With the falling dollar's value against major currencies what should expatriates in the UAE do to ensure their savings in dirhams aren't losing more value?
The falling dollar is probably one of the biggest concerns that people are discussing at the moment. With the dirham's interest rates and exchange rate levels tied to the dollar, the fall over the recent years has hit expatriate residents hard.
For people who are sending money home, or are paying for a mortgage or school fees in another currency, the current economic climate is challenging - effectively, people are being forced to stretch their resources further, and there's no sign of a dollar recovery in the near future. Unless your salary and income are rising sufficiently to off-set the fall in the value of your assets, you will have to tighten your belt in the short-term.
It's important not to panic and make rush decisions. We're still privileged to be living and working in one of most dynamic economies in the world today, and the opportunities for advancement are as strong as they have ever been. You need to consider the long-term implications of any decision.
The first potential avenue is to consider moving cash-based assets into higher yielding currencies, such as commodity-related currencies like the Canadian dollar and the Australian dollar. Commodity currencies refer to the currencies of those countries which are heavily involved in the export of raw materials. In the current climate - when commodity prices are high and continuing to rise - they are a good investment opportunity. The Australian dollar, for example, is at an 18-year high, trading at the highest levels since early 1989. All currencies can change in value, however.
Some people believe that investing in real estate within the UAE is also a partial hedge in the current climate. Real estate provides you with an asset that could continue to appreciate in value. Interest rates on mortgages are also likely to continue to go down while the dollar peg is in place. Because of this, buying is becoming more economically attractive than renting. However, you should consider the fact that many other people are investing in property as a hedge, and so prices are rising.
Finally, consider keeping assets in dirhams, rather than US dollars. Economists expect that the dirham will be revalued at some point, meaning that assets in dirhams will also rise. This is an area where many expatriates are hoping for relief in the medium term.
If the dirham is pegged to a basket of currencies, rather than just the dollar, you can anticipate it increasing in value. This is one of the reasons why you should be cautious - if you moved all your assets into another currency before the dirham revalues, you will lose out twice over.
As always, navigating the current challenging economic climate is easier with professional advice. Predicting the changing potential value of different asset investments can be a challenge, so the services of an experienced financial adviser can be helpful. (This is personal opinion of the writer of the article)

Invest in SBI Life UNIT PLUS II Pension Plan

"Unit Plus II Pension Plan" is an innovative scheme launched by SBI Life Insurance, the only new age insurance company to get the coveted "AAA"rating from CRISIL and ranked No.1 in terms of business growth during
2006-07 and also rated as the most transparent insurance brand in the country. The product launched on 15th Feb. 2007 has become flavour of the season among HNIs and NRIs, by virtue of its superlative performance (growth of over 100% in just 9 months from launch date, a splendid market beating performance) & hybrid product features (combines best features of Mutual Fund+Tax Plan+Pension Plan+ (optional)Insurance Plan.
A product ideal for HNIs and NRIs, who are on the look out for an investment avenue which gives them attractive returns with the flexibility of a Mutual Fund and also those who don't have a structured pension plan offered by their employer. For
those who can afford a lump sum investment, SBI Life has "Single Premium
-Pure Pension Plan" , which assure you the highest possible yield.

Product Highlights

An innovative scheme, where life cover is purely optional (entire
funds go to investment kitty).

Investment threshold : Single Premium Option - Rs.25000/- onwards

(Regular Premium Mode : Rs.2000/- pm onwards)

NO PAN CARD REQUIRED. - Hassle free investment option with simple
formalities.

Flexible & customer friendly product- can be withdrawn from 4th
policy years onwards at NAV without any surrender charges Or corpus can be
used to earn a steady pension .

Minimum investment age 18 to 65 years and Minimum term 5 years (with
option to withdraw after 3 years at NAV without any charges).Retirement Age

: 50 years to 70 years

Attractive tax deduction upto Rs.1 lac under Sec.80 (C). Also 1/3rd
of retirement corpus commuted and withdrawn will be absolutely tax free

Guarantee additions at the end of 10th /15th/20th year+ gains from
stock market appreciation

Two unique risk hedging tools (1) basket of 4 funds to choose from
i.e. equity/bond/ balanced/ growth, depending upon your risks appetite (2)
switching option to move your funds from equity to safer avenues like bond
funds, to reduce your risk during market volatility

6 innovative variants to receive pension

Being a fund launched hardly 10 months back, units are still
available at low NAV - thus you get more units on your investments

Benefit of Top Up Investment- to boost your investment kitty by
further investment at regular intervals.

For more details contact nri.lhotri@sbi.co.in.

Market Mania - The Tulip-Bulb Boom

This is an interesting incident which occurred in Holland in 1634-1637. It shows how booms and manias can flare up. It is a useful lesson for one and all.

• In 1593 the Dutch were introduced to Tulips for the first time. These tulips were imported from Turkey were in great demand and traded at fancy prices.
• In due course these tulips were affected by a non-fatal virus known as mosaic, which did not harm the tulips per se but altered them, causing shades of colour to appear on the petals. These colour patterns came in wide varieties and increased the rarity of the original flower.
• So the prices of tulips began to rise depending upon how the markets valued the virus alterations Speculation increased in the tulip market as it started attracting new traders eager to make quick money.
• The true bulb buyers started to stock up bulbs for the growing season thereby depleting the supply further. This increased the demand supply gap. Soon, prices were rising thick and fast encouraging people to trade their cash, gold, land and anything else they could liquidate to buy more tulip bulbs.
• The Dutch held on to their bulbs with a view to selling them to the innocent and uninformed foreigners, thereby reaping enormous profits. Meanwhile the originally overpriced tulips enjoyed a twenty-fold increase in value in one month!
• Since tulips bulbs enjoyed extensive over pricing some smart people decided to sell and lock in into the profits.
• A domino effect of progressively lower prices took people by surprise as everyone tried to sell. As price began to slide people panicked and rushed to sell regardless of the losses.
• When prices fell the participants refused to honour contracts. It suddenly dwelled upon speculators that they traded their homes for a piece of greenery. Chaos and Confusion enveloped the land. Amidst all this the government attempted to halt the crash by offering to honour contracts at 10% of the face value. The market plunged even lower making such restitution impossible.
• No one emerged unscathed from the crash. Even the people who had locked in their profit by getting out early suffered under the following depression. The effects of the tulip craze left the Dutch very hesitant about speculative investments for quite some time.
• At the peak of the market, a person could exchange a single tulip for an entire stretch of land and, at the bottom, that tulip was the price of a few tomatoes.

Investments - Importance of Starting Early

• It is a story of two friends Ram & Shyam.
  
• Ram starts saving when he turns 25 and invests Rs 50,000 every year. At the end of ten years, Ram has been able to accumulate Rs 5 Lakh.
  
• After this, he stops further savings, but does not withdraw his investments. He would have been able to accumulate around Rs 95 Lakh by the time he turns 60. Let us assume that he earns a return of 10% every year.
  
• During the first few years of his life Shyam enjoyed life spending money on all kinds of things rather than invest regularly. At the age of 35 reality suddenly dawns on him and he starts investing Rs 50,000 every year. He invests this amount every year till he turns 60, i.e. for 25 years. Assuming he also earns a return of 10% per year on his investments. At the end Shyam would have managed to accumulate Rs 54.1 Lakh.
  
• Ram has invested only Rs 5 Lakh over the ten years he invested. In comparison, Shyam over the 25 years has invested Rs 12.5 Lakh (Rs 50,000 x 25 years).
  
• Even after investing more than twice, Shyam has managed to accumulate Rs 54.1 Lakh, which is around Rs 41 Lakh less in comparison to Ram.
  
• It not only important to Save but it is equally important to Save Early. It is never too late and it is never too early.
  

Investments - Power of Compounding

• We all know that Manhattan is the costliest place in America for real estate prices. But once upon a time it was a remote place in America occupied by Red Indians.
  
• When a group of Europeans reached Manhattan, they purchased it from the Red Indians. It happened in the year 1626.
  
• Manhattan was sold for 24 Dollars (960 Rupees at today’s rate) in trinkets and beads. Present Value of City – 100 Billion Dollar
  
• For many years the Red Indians have been the subjects of cruel jokes because of this.
  
• Had Red Indians saved this money in say a fixed deposit and earned 8% average Interest per Year compounding. In that case their present bank balance would have been 120,000 Billion US Dollars.
  
• This incident was first narrated in the book “One up on Wall Street”, written by Peter Lynch, one of the most successful mutual fund managers the Wall Street has ever seen
  
• This little story shows the power of compounding.
  

Investments - Apply for PAN Card Online

PAN card which is now must for many financial transactions in India, including Mutual Fund investment, is expected to be made compulsory for more financial transactions. Very few NRIs are aware that PAN card can be applied online thru Internet and it can be received at foreign address. Details of one such facility offered by NSDL is enclosed.

• Visit the following website - https://tin.tin.nsdl.com/pan/index.html
  
• In the Column Named “Apply for a new PAN Card” (bottom of the screen), choose “Individual” and click on ‘Select’ box
• An Online form for PAN is displayed, Please fill. If there are any errors, rectify them and re-submit the form and then confirm.
  
• On confirmation, an acknowledgment will be displayed. The acknowledgment will contain a unique 15-digit acknowledgment number. Print and also save the same in your computer.
  
• 'Individual' applicants should affix a recent colour photograph (size 3.5 cm x 2.5 cm) in the space provided in the acknowledgment. The photograph should not be stapled or clipped to the acknowledgement.
  
• Signature should only be within the box provided in the acknowledgment.
  
• If communication Address is outside India or any of your address as given in application is outside India, the payment can be made only by way of demand draft payable at Mumbai drawn in favour of 'NSDL - PAN' and the acknowledgment number should be mentioned on the reverse of the demand draft. Fee includes postal charges also.
  
• The fee for processing PAN application is Rs.717 for foreign communication address and Rs 67 only if communication address is in India.
  
• At present this facility is available for a 101 countries including – India, US, UK, Middle East (UAE, Bahrain, Kuwait, Oman, Qatar etc.). All major countries covered.
  
• The acknowledgment duly signed, affixed with photograph alongwith Demand Draft, and proof of identity (name in the application should be same as in the proof of identity) & proof of address (as stated in the application) as specified in the application form is to be sent to NSDL at 'Income Tax PAN Services Unit, National Securities Depository Limited, 1st floor,Times Tower, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel (W), Mumbai - 400013'.
  

Investments - LIBERALISED REMITTANCE SCHEMES FOR RESIDENTS

Reserve Bank of India’s liberalised remittance scheme now allows Resident Indians to draw up to $100,000, towards investments, purchases and spending in a foreign country per year. The scheme opens up a range of investment options for Indian residents who have children abroad, as they can purchase property and other assets at places where their children are resident.

• Eligibility
  
• Only resident Indians are eligible for this scheme. "Resident" means any Indian passport-holder living in India.
  
• Transactions Allowed
  
• Both capital account and current account transactions are allowed under this scheme. Generally speaking Capital account transactions create long term assets and liability while Current account transactions create short term assets and liability.
  
• The capital account transactions that can be made under this scheme range from buying stocks in overseas markets to acquiring property and trading in stock/commodity futures overseas.
  
• Current account transactions are also allowed within this $100,000 limit. For instance - gifts and donations abroad. Also residents can open account in foreign countries and transfer this $100,000 to that account.
  
• Certain purposes such as medical treatment, education expenses, travel and business transactions have separate limit over and above this general purpose limit of $100,000.
  
• How one draws funds
  
• The individual should, in the first place, have a sufficient bank balance in Indian rupees in his or her local bank account. The drawal of foreign exchange will be effected from this account and the transfer made abroad.
  
• An application to the authorised dealer (banks) will have to be made by the individual stating the purpose for which the drawal is being made.
  
• The individual will have to declare the income earned from such investments in his income-tax returns.
  
• He may also have to file a tax return in the country where the assets are held, if the local laws so require. He will be eligible for any tax benefits if there is a Double Tax Avoidance Agreement with that country.