- Result: Favorable confidential settlement
Determining benefits from doing business in Dubai
TASK ASSIGNED: provide written consultation on the jurisdictions with comfortable business conditions
CLIENT: private Client
WHITESTANDARD provided detailed written consultation on different jurisdictions. There are several regions in the world that offer loyal conditions for doing business. These are countries and islands in the Caribbean, some Asian countries and countries of the Middle East.
Let look on the aspects of Asian jurisdictions in the example of Hong Kong.
First of all, starting from 2018 Hong Kong began automatic exchange of tax information with many countries, including the Russian Federation. In Hong Kong there is also a resident test.
If you have at least one of the following conditions your company opened in Hong Kong will pay corporate tax at a rate of 16.5%:
– the contract is concluded and signed outside of Hong Kong;
– services were rendered outside of Hong Kong;
– capital was used outside of Hong Kong;
– the names of the goods were recorded outside of Hong Kong;
– sales revenue was received outside of Hong Kong;
– payment of costs incurred in the provision of services or the supply of goods was made outside Hong Kong;
– the place of storage of goods is not in Hong Kong.
The only thing that can be considered as benefit when investing in Hong Kong is one tax at a rate of 16.5%, except for it, there are no other taxes in Hong Kong.
As for the Caribbean countries, the British Virgin Islands were the “pioneer” for de-offshoring.
Historically, the British Virgin Islands is an overseas territory of Great Britain. According to the 4th Anti-Money Laundering Directive (AMLD4), all countries should have a system of data on all owners and beneficiaries of registered companies (analogue of the Russian EGRUL). The difference is that this register is not public, but the state bodies have automatic access to it.
In 2017 the BVI created a system of secure search for beneficial ownership (Beneficial Ownership Secure Search System – BOSS).
Thus, since 2018 the authorities of the BVI plan to regularly respond to requests from tax and law enforcement agencies on the composition of participants and beneficiaries of companies registered in the Islands.
As a consequence, there is a risk of disclosure of information about the beneficial owners of companies, which will allow them to file tax claims, including criminal liability.
Under these conditions, according to our consultants, Dubai in comparison with many other countries has certain advantages. Dubai, ranked the 21st on the convenience of doing business, is the preferred alternative jurisdiction.
The World Bank annually publishes a rating of simplicity and convenience of doing business in a particular country. The government of the UAE over the past two years has made a big step for a comfortable business in the country. Doctor Alexey Goloshapov, Managing Partner of WHITESTANDARD, notes that according to the World Bank, the UAE is on the 21st place among countries where it is simple and safe to do business (for example, Canada is on the 18th place, and Italy is the 46th).
Over the past 10 years, WHITESTANDARD has been providing legal services in Dubai. Recently, our Russian-speaking lawyers in the UAE have noted a large flow of customers who leave Cyprus because of the complexities of doing business. In 2018 Cyprus was listed 53rd in convenience of doing business. Today, our lawyers in Dubai have a large number of requests for the opening of companies in the UAE and legal support of business in Dubai from clients who transfer their business from Cyprus to Dubai.
Why it is convenient for you to start business through Dubai?
First of all, thanks to the preferential taxation system in the UAE:
– tax on income – full exemption from such fees;
– tax on capital gains – also does not exist;
– tax on dividends – this type of income is taxed only on the territory of the states where this income was received, in the UAE – no;
– tax on royalties – full exemption from such fees;
– interest tax – full exemption from such fees;
– taxation is not applied by deduction from wages;
– tax on the export and import of goods is not levied if the activity is conducted through the Free Economic Zones;
– there is also no tax on assets in the UAE. There are also no quotas, trade restrictions and financial controls on most activities in the UAE, that is what attracts more and more foreign investors. For comparison, the following tax rates are set in the EU countries: Germany (14% – 45%) , France (up to 45%), Austria (36.5% – 50%), Sweden (32.7% – 57.7%), Holland (37% – 52%), Great Britain (up to 45%), Bulgaria (10%), Czech Republic, Lithuania (15%), Hungary, Romania (16%), Poland (18 – 32%) are the least demanding in this regard.
Below we list the key advantages over other countries:
-As for legal entities, the minimum corporate tax rate in the EU countries is 10% (in Bulgaria or Cyprus), and the maximum rate is 33.99 in Belgium and up to 35% in Malta. In Germany, income tax is 15%, in Italy – 36%, Sweden – 22%, Holland – up to 25%, Austria – 25%, France – 33.33%, in the Czech Republic and Poland – 19%.
-The local currency in the UAE has been affixed to the US dollar for 20 years and is freely convertible.
– The UAE is not a member of the Organization for Economic Cooperation and Development (OECD), so the exchange of information is minimal.
-The UAE is not included in the “black list” of the OECD tax harbors (and also in the blacklist of FATF).
-The UAE is not a member of the EU and is not subject to EU rules
– do not need to give reports on their activities;
– you can own shares in different UAE and corporations around the world;
– there is no need to rent an office (physical office);
– for certain types of companies there is no need to audit and maintain accounting records;
– the absence of a public register that allows the company’s shareholders to be identified;
– information on the shareholders of companies in Dubai is not publicly available
– a fixed exchange rate of the local currency to the dollar for 20 years in recent years (1 dollar = 3.66 AED)
– developed banking system
– safety of your finances and investments
– personal safety of owners and management of the company
– flights from Moscow takes 4 hours 40 minutes
– possibility of sending goods to any place in the world
Thus, the existence of a fixed exchange rate to the dollar, preferential tax treatment, confidentiality and business security are the key factors that speak of the need to transfer business to the jurisdiction of the UAE