DUBAI: DUB A AI: TRUE IF

Transcription

1 DUBAI: A TRUE IFC* by Costas George Ioannou Philippides - Director CEO 1

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3 THE PALM DUBAI One of the largest projects of its kind, built in 4 years, 100 million cubic meters of rock and sand. Added 520km of coast to Dubai. The vision of the Ruler of Dubai Mohamed Bin Rasheed Al Maktoum 3

4 BURJ KHALIFAH Tallest building in the world at meters 4

5 UAE Federation of 7 Emirates: Dubai, Abu Dhabi, Sharjah, Fujairah, Ras Al Khaimah, Umm Al Quwain and Ajman Formed in December 1971 after 100 year of British rule ( ) Biggest and wealthiest Emirates are Abu Dhabi and Dubai Dubai has taken the strategic decision to diversify in the 1980s, established Emirates Airlines in 1985, today Dubai s income from oil and gas represents only 3% of the economy Tourism, Travel Hub, Trade centre, Financial Centre Developed Economy Ranked amongst the top 20 countries worldwide for doing business Excellent Infrastructure Private schools, healthcare, entertainment, weather, logistics Dubai was designated to host EXPO

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7 REASONS FOR DOING BUSINESS Rebust, open and competing economy Security and stability Tax efficient business environment Proximity to growth regions Intellectual property protection Multinational human resources Solid infrastructure Efficient government services Future potential for the GCC 7

8 WHAT DUBAI OFFERS UAE is a white listed jurisdiction Secrecy, asset protection and no international exchange of information Tax free environment Excellent network of Double Tax Treaties Ideal as Global headquarters centre Distinguished and unique lifestyle Talented and diverse labour pool World class logistics and IT infrastructure Strategic location on the trade routes of East and West 8

9 TAX INCENTIVES No Corporation Tax No Personal Tax 100% Ownership in Free Zones No foreign exchange controls, trade barriers or quotas No restrictions on repatriation of funds Strong investor incentives and protections Easy access to key decision makers 9

10 TYPES OF UAE ENTITIES Limited Liability Company (LLC) Branch of Foreign Company Free Zone Entity (FZE) Representative Office International Business Company (Offshore) 10

11 LIMITED LIABILITY COMPANIES (LLC) Min 2 and max 50 shareholders Foreign voting rights limited to 49% Benefits from UAE Tax Treaty network No tax Features for risk mitigation: Reduction of profit allocation in favour of local partner in MoA Loan to LLC by Finance Co Management fee Commission for guarantee fee Active involvement of local partner Shareholder s commitment agreement Life insurance policy Holdco FZE as sole beneficiary Power of Attorney in favour of individual designated by Holdco FZE 11

12 BRANCH OF FOREIGN COMPANY Commercial/industrial activities But some professional activities too! Local agent Office premises are required 100% foreign ownership No tax 12

13 FREE ZONE ENTITIES Themes vs Multi-purpose There are more than 30 different Free Zones in the UAE. DMCC, Jebel Ali, Media City Internet City, WTC, Silicon Oasis, RAK Free Trade Zone, DIFC etc Limited Liability (FZE, FZCO, FZLLC) irrespective of activity May be 100% foreign owned Offices premises required UAE trading only through a local distributor May benefit from UAE tax treaty network Possible to own real estate (JAFZA) No tax 13

14 REPRESENTATIVE OFFICE May undertake promotional and marketing activities on behalf of the parent company Not permitted to trade No tax 14

15 INTERNATIONAL BUSINESS COMPANIES (OFFSHORE) Limited Liability (Ltd) Corporate shareholding May be 100% foreign owned Inability to deploy a commercial activity in the UAE No office requirement Nominee structure possible Available through 3 authorities: Ras Al Khaimah Free Trade Zone (RAK FTZ),, Jebel Ali Trade Zone Authority (JAFZA) 15

16 POPULAR OFFSHORE JURISDICTIONS Anguilla Vanuatu Netherlands Antilles San Marino Andorra British Virgin Islands Niue Saint Vincent and the Grenadines Antigua and Barbuda Gibraltar Cayman Islands Saint Kitts and Nevis Aruba Grenada Cook Islands St. Lucia Bahamas Liberia Turks and Caicos Islands Isle of Man Belize Marshall Islands Palau Channel Islands Bermuda Montserrat Panama Seychelles Brunei Darussalam Nauru Samoa Most to join OECD disclosure agreements or blacklisted 16

17 TYPICAL COSTS TO SET UP LLC ,00 (Year 1) Incl. government fees, out-of-pocket expenses, professional fees, local partner fee Branch of Foreign company Government fees, Out-of-pocket expenses, Professional fees, Local sponsor fee Free Zone Company depending on freezone (RAK Freezone JAFZA Freezone) International Business Company (offshore) RAK FTZ or RAKIA company including government fees and out of pocket, corporate nominee shareholder(s) and/or directors possible JAFZA including government fee (can hold UAE property) Nominee services Shareholder, DirectorsX2, Secretary, Registered Office Bank account opening Local companies, 650 Foreign companies 17

18 Statutory Features of Legal Entities STATUTORY FEATURES OF LEGAL ENTITIES Local Limited Liability Company ( Local LLC ) Free Zone Limited Liability Company ( FZE ) International Business Company ( IBC ) Ownership At least 51% of the shares must be held by a UAE national (the local partner ) 100% foreign ownership 100% foreign ownership Minimum number of Shareholders Minimum capital AED 1 AED 10,000-1,000,000, depending from Zone to Zone AED 1 Capital pay-up at Inception Not required Depending from zone to zone Not required Nature of shares Registered Registered Registered Directors: Minimum required: Director(s)location: 1 Not allowed At least one Director must be UAE resident 1-2, depending on zone Not allowed At least one Director must be UAE resident 1 Allowed No restriction Audited accounts Required. To be filed yearly at the time of licence renewal Required. To be filed yearly at the time of licence renewal Not required 18

19 Statutory Features of Legal Entities STATUTORY FEATURES OF LEGAL ENTITIES (Cont d) Local Limited Liability Company ( Local LLC ) Free Zone Limited Liability Company ( FZE ) International Business Company ( IBC ) Name Prior approval required, some wording sensitive. Ends with LLC Prior approval required some wording sensitive. Ends with FZE, FZC or FZ-LLC Prior approval required, some wording sensitive. Ends with Ltd Time frame for incorporation 4 weeks upon receipt of full documentation 2-8 weeks upon receipt of full documentation, depending on the zone 1-3 days upon receipt of full documentation Language Arabic/English English English Legalization process of POA and corporate documents Legalization and super-legalization Legalization and super-legalization Apostille sufficient for RAKIA. Legalization and super-legalization mandatory for JAFZA Registered office Mandatory tenancy agreement Mandatory tenancy agreement Registered Agent Shelf companies Not available Not available Available 19

20 COMPARISON OF LEGAL ENTITIES Limited Liability Company ( LLC ) Free Zone Entity ( FZE ) International Business Company ( IBC ) Briefly Until the introduction of free zones, the most common form of corporate investment vehicle Corporate structure with physical presence allowing 100% foreign ownership Flexible dematerialized corporate vehicle designed on the BVI model, but benefiting from UAE s substance and credibility Mandatory involvement of a local partner Activity Any activity Ability to conduct any authorized commercial activity in the UAE and abroad Any activity as allowed by the Zone No restriction to conduct services Any activity is allowed Ability to conduct any authorized commercial activity aboard Local agent required Hold assets (including real state) abroad and in the UAE Operate a bank account abroad and in UAE Inability to deploy a commercial activity in the UAE Suitability Trading in the UAE and abroad Trading outside the UAE Trading outside the UAE Commercial brokerage in the UAE and abroad Consultancy services head/regional office operation Material assets holding (including real estate) in the UAE and abroad Manufacturing/industrial activities for prime distribution outside the UAE and larger Middle East countries Group structuring Manufacturing/industrial activities for prime distribution outside the UAE and larger Middle East countries Immaterial assets (eg IP) holding in the UAE and abroad Head/regional office operation operating a bank account in the UAE and abroad 20

21 COMPARISON OF LEGAL ENTITIES (Cont d) Limited Liability Company ( LLC ) Free Zone Entity ( FZE ) International Business Company ( IBC ) Advantages Not subject to tax in the UAE Not subject to taxes in the UAE Not subject to taxes in the UAE Credibility in high profile trading operations Credibility in high profile trading operations Flexible legislation Ability to physically trade in the UAE and abroad Stable environment Low annual fees Stable environment White listed jurisdiction Stable jurisdiction White listed jurisdiction Ability to arrange local residence visas White-listed jurisdiction Ability to arrange local residence visas Remarks Accounts must be audited and filed yearly Accounts must be audited and filed yearly Relatively lower credibility Heavier constitution and operating requirements (as opposed to free zones) Heavier administration requirements (as opposed to IBCs) Difficulties to obtain banking facilities Most expensive structuring option Higher constitution and maintenance costs as compared to an offshore entity Inability to arrange local residence visas Have to rely on a duly licensed local agent Tax status Not subject to corporate and withholding tax. Total tax and duty exemption Total tax and duty exemption Double Tax Treaties, special treaties Full benefits of DTT Full benefits of special treaties (eg GAFTA). Full benefits of DTT Considered non-resident for tax purpose, IBCs cannot avail themselves of treaties benefits Disclosure Identity of shareholders and officers is publicly available. Accessibility to information will vary depending on each zone s practice. Information is not public. Court Order required for 21 disclosure

22 From the UAE perspective Physical presence Valid Trade License Paid-up capital QUALIFICATION FOR DTT AND SUBSTANCE SUBSTANTIATION CHALLENGES Effective Management Key decisions are taken in the desired jurisdiction Appropriate board expertise Local professional support Have non-tax reasons for operating out of the jurisdiction 22

23 UAE corporate vehicles can be used as an intermediate holding company in the following circumstances: For groups, investing outside UAE, aiming at dividend income streams To hold overseas subsidiaries UAE CORPORATE STRUCTURES To benefit from favourable withholding tax provisions Where a jurisdiction is required that does not have CFC rules To avail of the favourable repatriation provisions under UAE tax law Suitable for any fund or investment vehicle, as there is no tax on transactions in securities Where it may be important to achieve a tax free unwind in the future To hold real estate companies for a tax free disposal of property To hold intellectual property companies UAE can be used as the location for the ultimate holding company, for instance, for a group that is relocating to a new jurisdiction or on formation of a new publicly-traded corporation with international operations. 23

24 UAE NETWORK OF DTT Recipient Dividends % Interest % Royalties % Algeria Armenia -/3-5 Austria Azerbaijan 5/10 -/*7 5/10 Belarus 5/10 5 5/10 Belgium -/5/10 -/5 -/5 Bosnia & Herzegovina -/5/10-5 Bulgaria -/5 -/2 -/5 Canada 5/10/15 -/10 10 China Cyprus Czech Republic -/5-10 Egypt - 0/10 10 Estonia Finland France Georgia Germany 5/10/15-10 Greece -/5 -/5 -/5 Hong Kong n/a n/a n/a India 10 -/5/ Indonesia 10 -/5 5 24

25 UAE NETWORK OF DTT (Cont d) Recipient Dividends % Interest % Royalties % Ireland Italy 5/15-10 Jordan n/a n/a n/a Kazakhstan Korea, Republic of 5/10 -/10 - Lebanon Libya n/a n/a n/a Luxembourg 5/ Malaysia 10 -/5 10 Malta Mauritius Mongolia Morocco -/5/10 -/10 -/10 Mozambique - - -/5 Netherlands 5/ New Zealand 15 -/10 10 Pakistan 10/15 -/10 12 Philippines -/10/15 -/10 10 Poland -/5 -/5 5 Portugal 5/15 -/10 5 Romania -/3 -/3 3 Seychelles

26 UAE NETWORK OF DTT (Cont d) Recipient Dividends % Interest % Royalties % Singapore 5 -/7 5 Spain 5/ Sri Lanka -/10 -/10 10 Sudan Switzerland 5/ Syria - -/10 18 Tajikistan Thailand 10 10/15 15 Tunisia - 2.5/5/ Turkey 5/10/12 -/10 10 Turkmenistan Ukraine -/5 -/3 -/10 Uzbekistan -/5/15 -/10 10 Venezuela 5/ Vietnam -/5/15 -/10 10 Yemen

27 CONFIDENTIALITY/EXCHANGE OF INFORMATION UAE Central Bank committed to international AML standards limited exchange of information Dubai Financial Services Authority (DFSA) applicable in the DIFC (Regulated Freezone) has established AML, CDD and Data Protection System Entered in exchange of information MoUs with about 20 regulators DIFC laws and regulations based on UK common law, established DIFC courts Mainland UAE and Freezones Deportment of Economic Development (DED) or Freezone Authorities Have strict compliance rules, all shareholders and directors go through KYC checks All Businesses submit business plans and intended activities and projected Turnover and Profits Information held is confidential with the authorities and not shared in any public register 27

28 Total tax exemption for individuals Straight forward procedure HNWI RESIDENCY: AT A GLANCE Ease to maintain and substantiate the Residence Permit Low processing and maintenance costs High standards of living Free Zones or Department of Economic Development able to issue Tax Residency Certificates for Companies and Individuals, certain documents required: incorporation certificate, bank statements for 3-6 months, Audited accounts. Options for obtaining residence: Real Estate Investment Corporate Structure 28

29 REAL ESTATE INVESTMENT Multiple Entry Residence Permit MERP Conditions Property fit for habitation Title deed issued in the name of the applicant Property value > AED 1 Million ( ) Revenues greater than AED 10, / month ( 2.000) Downsides 1 property 1 resident permit rule Discontinued in case of transfer Corporate ownership not allowed 29

30 CORPORATE STRUCTURE Maintenance Licence renewal every 2 years Enter the country once every 6 months Connecting points Tenancy agreement UAE ID card Tax residence certificate Local personal bank account E-gate card Mobile phone subscription 30

31 OUR SERVICES Corporate and Trust Financial Advisory Business Advisory Tax and Legal Global Compliance Family Office PO Box Bayswater Tower Al Burj street South T / F Costas Ioannou, Director: cioannou@oneworldmideast.net George Philippides, CEO: gphilippides@oneworldmideast.net 31

32 SAMPLE TAX PLANNING STRUCTURES A

33 MITIGATING UAE SHAREHOLDING Foreign Company 100% HOLDCO FZE (UAE) Finance Co UAE Shareholder 49% Loan 51% LLC (UAE) B

34 STRUCTURING INVESTMENT WITH UAE INTERMEDIATE COMPANY - 1 Shareholder Outside the UAE No WHT on distribution of dividends by the UAE Co to the shareholders in/outside the UAE UAE Co Participation in Swiss Co Dividend = tax exempt / no WHT Capital gains on share transfer = tax exempt Dividend = reduction of WHT from 35% to 5% UAE Co s dividend income from its investment in Swiss Co is exempt Swiss Co dividends are taxed at 5% in Switzerland When UAE Co transfers shares of Swiss Co, the capital gains are not taxed in Austria or the UAE C

35 STRUCTURING INVESTMENT WITH UAE INTERMEDIATE COMPANY - 2 Shareholder Outside the UAE No WHT on distribution of dividends by the UAE Co to the shareholders in/outside the UAE UAE Co Participation in Austrian Co Dividend = tax exempt / no WHT Capital gains on share transfer = tax exempt Dividend = tax exempt UAE Co s dividends, interest, royalties from Austria Co are exempt Austrian Co dividends and interest are exempt. If not Treaty would be withheld and 25% and 20% rate When UAE Co transfers shares of Austrian Co, the capital gains are not taxed in Austria or the UAE D

36 STRUCTURING IP INVESTMENT WITH UAE INTERMEDIATE COMPANY Parent Company IP assets UAE Co - UAE Co s dividends, interest, royalties and capital gains are 100% tax exempt Licensing Royalties/ Capital Gains Operating Company - Royalty payments are deductable at licensee level - Royalty payments made with applicable withholding tax with tax treaty countries E

37 NOMINEE STRUCTURE WITH UAE INTERMEDIATE COMPANY Nominee Shareholder, Corporate Directors No WHT on distribution of dividends by the UAE Co to the shareholders in/outside the UAE UAE Co (IBC) Dividend = tax exempt / no WHT Capital gains on share transfer = tax exempt UAE Co s dividend income from its investments in operating Co is exempt Company in a Treaty Country Dividend = reduction of WHT as per applicable treaty % Operating Co dividends are exempt When UAE Co transfers shares of Operating Co, the capital gains are not taxed in Operating Co Country or the UAE F