In recent years, the UAE has positioned itself as one of the leading destinations for corporate structuring thanks to its versatility of structuring options, favorable operating environment and wide range of government incentives and initiatives.
Versatility of Structuring Options
The UAE offers a diverse range of company structures ranging from fully operational Free Zone or Mainland companies, which meet local and international substance requirements, through to offshore IBC companies or Special Purpose Vehicles (SPVs).
Favorable Operating Environment
According to official figures, there were 14,737 new business setups in Dubai in H1, 2019, representing a 33.25% increase over the same period last year. This rise can be attributed not only to the versatility of structuring options available, but also the favorable operating environment, and in particular, the tax-free environment. While the UAE is not the only tax-free country in the world, what makes it unique is that its tax-free status is located in a developed economy characterized by common markers such as: a highly skilled workforce, sophisticated banking environment, quality infrastructure and real trade through its ports and airports.
Looking past the tax-free headlines, the UAE also offers a raft of favorable characteristics including access to a broad network of double tax treaties, no restriction or levies on the repatriation of capital and profits and no foreign exchange controls.
Further to this, the UAE was recently ranked 11th globally in the World Bank Ease of Doing Business Report for 2019, the most comprehensive report of its kind which covers everything from ease of starting a business, to registering a property, to getting credit.
Government Incentives and Initiatives
The UAE is often praised for its openness and willingness to invest into its own development and improve the ease of doing business and competitiveness of the country. In May 2019, the government announced that they will allow 100% foreign ownership for certain mainland companies, something previously reserved for Free Zone companies only. This landmark ruling will cover 122 different economic activities across 13 sectors including renewable energy, space, agriculture and manufacturing.
In conjunction with the foreign ownership laws, we have also witnessed the introduction of a new visa system providing long term visas (5 and 10 year visas) in exchange for investments of Dh5m or a Dh10m, respectively. There are also long-term visas available for individuals with outstanding academic achievements or specialized talents in the fields of science, knowledge, culture or art. The tandem of increased foreign ownership and availability of long-term visas will encourage businesses owners to up-skill their best employees, which in turn will make it easier to attract and retain top talent from overseas.
The UAE has also launched a range of initiatives aimed at attracting young entrepreneurs. This includes the introduction of 5- and 10-year student visas to help graduates stay and secure employment in the Emirates. Other initiatives include the Expo 2020 YouthConnect engagement platform which provides young people with the opportunity to develop skills and establish connections through a series of motivational speakers, hands-on workshops and events.
A HNWI owns a medium-sized manufacturing business in South-East Asia with a global client base. Their main focus is to setup a tax-efficient corporate structure.
The client is located in a high-tax South-East Asian country with very high levels of personal and corporate taxation. Given that his business operates on a global scale, the owner would like to find a way to reduce his tax liability.
Setting up an independent, Free Zone Trading Company in the UAE which provides the following benefits:
- As owner manager and investor in the Free Zone company, you become a UAE Resident and can avail of the zero tax benefits of the UAE.
- As a UAE Resident, you can open UAE personal and corporate bank accounts and also private bank accounts elsewhere, for example in Singapore or Switzerland.
- The UAE Free Zone Trading company provides geographic diversification. A portion of the home country's manufacturing products are sold at a small margin to the UAE Free Zone company, which are then sold to their global client base at full price.
- Accrued profits flow to the corporate bank account of the UAE Free Zone company.
- Profits will be distributed to the owner, who will achieve a combination of personal and corporate tax efficiency.
- As the client is a UAE Resident, any exchange of financial information is shared to the Central Bank and not with any foreign authority.
How We Can Help
We always invest the time to get to know each and every client before advising them on an appropriate solution or structure. As part of our due diligence process, we conduct thorough research into the most appropriate company structure, business activity and location.
Once this has been agreed upon, we setup the company for the client, look after the entire residency visa process and also assist in opening personal and corporate bank accounts.
In the case study above, the client also consulted us to secure and manage his apartment in Dubai Marina, provide a full turnkey office fit out (furniture, hardware, phone and internet) for their Dubai office, as well as hire local employees to assist with the day-to-day operations of the company.
Our in-house accounting team also provided a range of services, including statutory accounting and annual audit, bookkeeping, VAT registration and quarterly filing and payroll for the owner and his staff.
What are the next steps?
If this article has sparked an interest in how you or your business could benefit from corporate structuring through the UAE, please do not hesitate to contact us for a private consultation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.