United Arab Emirates

Application / Registration / Licensing:

Same procedure as for a duty-free company except for two additional requirements:

1) the requirement of prior approval by the Investment Authority requiring the approval of the Economic Development Department at the UAE Ministry of Economy,

2) shareholders’ agreement regarding the prohibition of appointing a local entity to the management of the company or regulating its relationship with the company.

Bank accounts (see notes below regarding UAE bank accounts) – same as for tax-free companies.

Possibility of granting residence visa for owners and employees (number of employees depends on the size of the chosen business premises/complex) -same as for tax-free companies.

Fees and costs for small companies with minimal space requirements -except for partner fees and any special conditions/fees that the Investment Authority may impose depending on the project:

First year – $7,950 (our costs for set-up, licensing and first year). Resident Visa – (optional): $5,000 per person = our cost $3,000 + institutional fees $2,000. Cost of business premises determined by the office separately by agreement.

To get a final estimate, we must go through the pre-approval process or request the fees from the authorities, but before approval is given.  A full explanation of your proposed activity including funding is required for a smooth process. For this reason, you must make us aware of all matters in a detailed email. The fee for this our initial work is $950. Once we are able to proceed and our terms are satisfactory to you, the next process can proceed with your approval.

Second and subsequent years – $4,950 (our cost).

4. Bank account opening conditions / facts / useful information mainly related to UAE Offshore companies or accounts of foreign nationals without a resident visa

(Shareholders of offshore companies can obtain a residency visa unlike shareholders of offshore companies, and these shareholders and their companies also do not suffer from the added complexity of the due diligence process when negotiating terms and conditions regarding the establishment of a bank account)

Setting up a UAE bank account for an offshore company is a straightforward process, but in the context of the UAE’s efforts to protect its image as a financial centre, certain conditions must be met in addition to the numerous benefits:

In order to open a business and personal bank account, the client must visit the UAE for a personal meeting with the bank. We can provide bank instructions and other information. The client must assure the bank that his/her intentions are serious and professional and also inform the bank of the specific activities of the companies (it is not recommended to list more than one or two types of activities).

A minimum balance in the bank account is required, for the duration (ranging from $30,000 to $100,000 – the amount depends on the specific bank).

All banks there require a thorough KYC process[2] and due diligence to an international standard as part of the account opening process.

We currently work with two majority state-owned banks, and these banks are also recommended by RAKIA[3]. With their help, we can ensure a successful launch of your business

Habib Bank (hbl.com) – operating since 1841 in many major financial centres such as Switzerland and Luxembourg. A flexible, discreet approach with a focus on offshore business. We maintain very close contact with this bank.

Abu Dhabi Commercial Bank (adcb.com) – one of the world’s largest banks, but with a slower account set-up process than all major banks with a focus on larger deposits and demanding due diligence requirements. However, for tax-free companies, account set-up is much faster.

The bank account is opened about a week after the application and necessary documents are submitted to the bank.

Most clients prefer to submit applications to two banks to minimize the risk of occasional rejection, also because of the possibility of a greater choice of suitable banks.

The fee for setting up and arranging the initial meeting is $345 per bank account. A 25% discount applies if the application is submitted to two banks.

An alternative solution for applicants not requiring a UAE bank account for their offshore company is to set up an account in Cyprus.

5. General information in the context of the comparison between Offshore Companies and Free Zone Limited Liability Companies

Free zone companies are local entities from a tax perspective. They are therefore not under pressure from international organisations (OECD) and are accepted and recognised by them. Setting up a bank account within these companies is naturally easier, quicker and without serious hurdles in the due diligence process. After all, it involves a local company owner and de facto local resident (residence visa and identity card of the partner as well as his presence in the UAE at least twice a year).

The future: a free zone society operating stably for an indefinite period of time, benefiting from the economic stability of the state, or a regional market with a developed infrastructure, where many diverse companies operate.

UAE offshore companies are unconditionally acceptable to local and international entities, or do not appear on lists of banned companies. Exceptionally, there are stricter controls and procedures by local banks.

Practical tax advice information: offshore companies can be used to invoice companies in Cyprus and Malta without risk of being penalised by the local tax authorities. In other EU countries with higher tax burdens for local entities, there may be issues regarding accounting cooperation with offshore companies.

6. Holding activity 

Objective: Elimination or minimisation of, inter alia, dividends, interest, withholding tax and capital gains within the subsidiary, as well as reduction of the tax burden at the subsidiary’s place of residence. In this sense, there is tax optimisation. For this purpose, the holding company (the recipient or owner of the dividends) must be able to avoid double taxation between the country of residence of the holding company and the country of its subsidiary. To achieve double taxation avoidance, the holding company must be a tax resident in the relevant jurisdiction (such as a UAE free zone company) and not a non-tax resident company such as a UAE offshore company.

Only in cases where the subsidiary is resident in a jurisdiction where there are no withholding taxes under the law there, so no further activity is needed to minimise the tax burden, may a UAE offshore company be a suitable entity (such as Cyprus or Malta, where UAE offshore holding companies can operate without any problems).

In addition, a structure (literally a 3-tier structure) can be used in which a UAE offshore company owns companies in Cyprus or Malta and these further own companies within the EU. This structure combines the benefits of mutual treaties and EU directives and eliminates the tax burden within the EU (taxation of parent and subsidiary companies, interest, etc.).

The ideal company for these purposes is therefore a free zone company that is able to obtain a UAE tax residency certificate, provided the owner also has a UAE residency visa and identity card (we are able to easily arrange this on the basis of a short visit to the UAE twice a year). For the above purposes, Cyprus and Malta domiciled companies are recommended, however, if there is no dividend tax or withholding tax in that country, UAE offshore companies can be used as an alternative without any problems.

Note: UAE holding companies with UAE bank accounts are used to mitigate banking and financial risk within the European Union.

UAE international holding companies (refers mainly to companies within Malta, but also to Cyprus and other EU and non-EU companies, e.g. Seychelles companies with EU bank accounts).

Malta

(information on the structure of companies within Cyprus and other EU countries is given below)

Use of a dual structure within Malta (Holding company within Malta and another company based in Malta – necessary to achieve the low 5% corporate tax) – recommendation / proposal to improve the corporate structure in order to, inter alia, avoid the risk of a banking or financial crisis in the EU.

We recommend the establishment of a UAE holding company ($450 formation fee) with an appropriate corporate structure within Malta for the following reasons:

“UAE – Malta” structure = UAE Holding Company and subsidiary in Malta

The UAE-Malta structure is the most popular type of organisation in recent times. The purpose is to avoid unnecessary risks.

1. The Malta-Malta structure is a less optimal solution in terms of tax advantages than the UAE-Malta structure.

2. The Malta-Malta structure is less favourable for information protection purposes as Malta is subject to the EU information exchange regime whereas the UAE is not bound by any such regulation or shares information with any other country.

3. The Malta-Malta structure is problematic in terms of ensuring the safety of funds in Maltese banks, for example in the event of a banking crisis in Malta in the next few years. In contrast, in the case of a UAE holding company with a bank account in the UAE, funds can be transferred very quickly from that account without any suspicion from the bank (if there is a drop in the amount of money in the banks, then they often extend the deadlines for paying out deposits or transferring funds).

4. In the case of a risky period, this is an expedient diversification of the portfolio to limit any losses.

5. Most local providers support the Malta-Malta arrangement purely for commercial reasons as they do not have a presence in other jurisdictions. However, our company is able to offer a better structure given its international background and wealth of expertise.

7. Business activities

A Free Zone Company is a very suitable and proven vehicle for business purposes (please read the notes below carefully).

We highly recommend the following:

Establishment of a Free Zone Company with 100% foreign ownership (but with early UAE resident status by virtue of obtaining a UAE residency visa and UAE identity card).

Note: If VAT (Tax Identification Number) is required for intra-EU trading purposes, this can easily be achieved by setting up a UAE branch of a Free Zone Company in Malta. This solution has virtually no tax implications and in the case of Malta there is a 0% tax burden for branches operating outside Malta (foreign branches in Malta pay taxes at local rates).

8. UAE real estate investment companies

The UAE real estate market offers an attractive opportunity for high rental yields. In terms of capital gains, it is one of the world’s most promising markets, which has already fully recovered from the global financial crisis.

The UAE’s win in the bid to host EXPO 2020 is coupled with expectations of more than 50% GDP growth there (*according to Barclays Investments) over the next seven years. This, together with the government’s pro-growth measures (e.g. low interest rates), should ensure minimal risk of losses.

9. Important legacy or succession information

Property purchases and other investments must be made through UAE offshore companies or companies in free zones. It is not advisable to hold real estate or other assets in personal ownership as this may lead to complications in the event of death or succession (succession).

Holding shares in UAE companies – even anonymous ones – (the RAK registry is under the Common Law system) is risky. Therefore, a free and effective way to avoid all problems is to automatically transfer the shares to successors (heirs) by submitting a will to the Registrar of Companies (alternatively, or in addition, pre-signed transfer documents can be submitted to selected successors).