DUBAI: A TRUE IFC*

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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

BURJ KHALIFAH

• Tallest building in the world at 828.9 meters

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SOME FACTS AND FIGURES

• The flow of gold increased from US$6 bn in 2003 to US$70 bn in 2012

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• The UAE is now the world’s largest re-exporter of tea with a 60 per cent share of

the market, valued over US$50 bn annually

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• The annual flow of diamonds increased from US$4bn in 2003 to US$39bn today

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INTRODUCTION

• 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 (1892-1971)

• 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 2020

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REASONS FOR DOING BUSINESS

• Rebust, open and competing economy

• Security and stability

• Tax efficient business environment

• Currency pegged to US dollar

• Proximity to growth regions

• Mature, safe and well regulated banking sector

• Intellectual property protection

• Developed economy with natural resources and reserves

• Multi-national human resources

• Solid infrastructure

• Efficient government services

• Future potential for the GCC

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WHAT UAE OFFERS

• UAE is a white listed jurisdiction

• Pro-business government regulations

• Secrecy, asset protection and no international exchange of information

• Well established infrastructure, strong banking and stable political system

• Tax free environment

• Safe and secure family environment amongst lowest crime rates

• Excellent network of Double Tax Treaties

• Variety of tax efficient legal structures

• 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

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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 protection

• Double tax treaties with 80 countries

• Easy access to key decision-makers

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TYPES OF UAE ENTITIES

• Limited Liability Company (LLC)

• Branch of Foreign Company

• Free Zone Entity (FZE)

• Representative Office

• International Business Company (Offshore)

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LIMITED LIABILITY COMPANY (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

BRANCH

• Commercial/industrial activities

• But some professional activities too!

• Local agent

• Office premises are required

• 100% foreign ownership

• No tax

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• 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

• Office premises required

• UAE trading only through a local distributor

• Benefit from UAE tax treaty network

• Possible to own real estate (JAFZA)

• No taxes

FREE ZONE ENTITY

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REPRESENTATIVE OFFICE

• May undertake promotional and marketing activities on behalf of the parent company

• Not permitted to trade

• No taxes

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• Limited Liability (Ltd)

• Corporate shareholding

• May be 100% foreign owned

• Inability to establish commercial activity in the UAE

• No office requirement

• Nominee structure possible

• No public registry

• Available through 3 Authorities: Ras Al Khaimah Free Trade Zone (RAK FZ), RAKIA and Jebel Ali Trade Zone (JAFZA)

INTERNATIONAL BUSINESS COMPANY (OFFSHORE)

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FEES AND COSTS TO SET UP

• LLC: €40.000 (Year 1) incl. government fees, out of pocket expenses, professional fees, local partner fee

• Branch: €20.000 incl. government fees, out of pocket expenses, professional fees, local sponsor fee

• Free Zone

€7.000 – 15.000 depending on freezone (RAK Freezone – JAFZA Freezone)

• International Business Company (Offshore)

RAK FTZ or RAKIA company €2.400 including government fees and out of pocket, corporate nominee shareholder(s) and/or directors possible

JAFZA €3.400 including government fee (can hold UAE property)

Nominee services – Shareholders, Directors , Secretary, Registered Office: €2.600

Bank account opening: €550 Local companies, €650 Foreign companies

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STATUTORY FEATURES OF LEGAL ENTITIES

LocalLimited Liability Company(“Local LLC”)

Free ZoneLimited 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 2 1 1

Minimum capital AED 1 AED 10,000 - 1,000,000, depending on free 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:

1Not allowed

1-2, depending on zoneNot allowed

1Allowed

Audited accounts Required. To be filed yearly at the time of licence renewal

Varies, depends on free zone Not required

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LocalLimited Liability Company(“Local LLC”)

Free ZoneLimited Liability Company(“FZE”)

International Business Company(“IBC”)

Name Prior approval required. Ends with “LLC” .

Prior approval required .Ends with “FZE”, “FZC” or FZ-LLC”.

Prior approval required.Ends with “Ltd”.

Time frame for incorporation 4 weeks 2-8 weeks 1-3 days

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 Tenancy agreement Tenancy agreement Registered agent

Shelf companies Not available Not available Available

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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

• Mandatory involvement of a local partner

• 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

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

• Local agent required

• Any activity is allowed but not operate in UAE

• Hold assets (including real state) abroad and in the UAE

• Operate a bank account abroad and in UAE

Suitability • Trading in the UAE and abroad

• Commercial brokerage in the UAE and abroad

• Manufacturing/industrial activities for prime distribution outside the UAE and larger Middle East countries

• Trading outside the UAE

• Consultancy services head/regional office operation

• Group structuring

• Manufacturing/industrial activities for prime distribution outside the UAE and larger Middle East countries

• Trading outside the UAE

• Material assets holding (including real estate) in the UAE and abroad

• Immaterial assets (eg IP) holding in the UAE and abroad

• Head/regional office operation operating a bank account in the UAE and abroad

COMPARISON OF LEGAL ENTITIES

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Limited Liability Company (“LLC”) Free Zone Entity (“FZE”) International Business Company (“IBC”)

Advantages • No taxes

• Ability to physically trade in the UAE and abroad

• Stable environment

• Ability to arrange local residence visas

• Take advantage of double tax treaties

• No taxes

• Credibility in high profile trading operations

• Stable environment

• Ability to arrange local residence visas

• No taxes

• Flexible legislation

• Low annual fees

• Stable jurisdiction

• White-listed jurisdiction

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

disclosure

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REDOMICILIATION

• Companies redomicile for a variety of reasons, including:

Benefit from a favourable tax environment

Take advantage of less stringent regulation and scrutiny

Move to an international financial centre

Access to specialist capital markets

• Where an existing company migrates or redomiciles to RAK FZ, the company’s existing legal status, goodwill and operational history is preserved

• Foreign companies can redomicile and enjoy the tax and pertinent benefits provided by the UAE tax free regime

• Ability to migrate companies to RAK FZ opens tax planning dimensions for investors and businessmen

• Within UAE, it is also possible to redomicile in DIFC (Dubai International Financial Centre) and DTMFZA (Dubai Technology and Media Free Zone Authority) which are specialized FZ authorities in financial services and technology, respectively

Andorra Cook Islands Liberia Samoa

Anguilla Costa Rica Liechtenstein Seychelles

Antigua Cyprus Luxembourg St Kitts and Nevis

Aruba Dominica Macao St Lucia

Austria Gibraltar Malaysia (Labuan) St Vincent

Bahamas Grenada Maldives Switzerland

Bahrain Grenadines Malta Turks and Caicos Islands

Barbados Guernsey Marshall Islands UAE

Barbuda Hungary Mauritius Uruguay

Belgium Ireland Montserrat US Virgin Islands

Belize Isle of Man Nauru USA (Delaware)

Bermuda Israel Netherlands Antilles Vanuatu

British Virgin Islands Jersey Panama

Brunei Latvia Philippines

Cayman Islands Lebanon Portugal (Madeira)

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COUNTRIES PERMITTING REDOMICILIATION

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FINANCIAL SERVICES

• UAE has two parallel jurisdictions governing financial services

State of UAE governed by UAE Federal legislation

Dubai International Financial Centre (“DIFC”), a free zone governed by own laws and regulations

• DIFC is a self regulated common law jurisdiction with own system of financial regulation overseen by the Dubai Financial Services Authority (“DFSA”)

• No distinction between banking and other financial services in relation to cross-border activities. The financial regulation is based on the criterion of territoriality and it prohibits from carrying any financial activity without being licensed

• A licence is required for activities undertaken directly or indirectly (through agents) within the UAE via remote means of communication regardless of the status of the prospective or existing client

• Financial promotion and advertisement in the UAE or into the UAE may be considered as a regulatory solicitation of business and therefore forbidden without a full licence

• There is no cross border licence in the UAE allowing foreign banks/financial advisors to offer services to UAE residents without a local presence

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BENEFITS OF SETTING UP IN DIFC

• 100 percent foreign ownership

• no tax on income and profits for a period of 50 years

• Freedom to repatriate capital and profits without restrictions

• A world class, independent regulatory agency working alongside other financial regulatory agencies located in major global jurisdictions

• International legal system based on common law of England and Wales

• No Shariah compliance required

• International stock exchange with primary and secondary listings of debt and equity instruments

• Variety of legal vehicles that may be established with capital structuring flexibility

• Pool of skilled professionals

• Transparent operating environment, complying with global best practices and internationally accepted laws and regulatory processes

• Potential access to the UAE’s wide network of double tax treaties

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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

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

• LLCs and Free Zones

Department of Economic Development (DED) or Free Zone Authorities

Have 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

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WHY RELOCATE IN THE UAE

• Exemption from income tax and wealth tax for individuals

• No quotas on the number of issued residence permits

• No requirement to obtain a fiscal quitus from the foreign country

• No minimum requirement regarding the time spent annually in the jurisdiction other than visiting the UAE at least once every six months

• No requirement to effectively reside in the UAE

• Competitive costs for issuance and renewal of the residence permit

• Competitive costs of ongoing substantiation

• Presence of internationally recognized financial legal and tax services providers

• Primary hub and platform to access international business

• Political stability

• Pleasant climate

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REAL ESTATE INVESTOR/PROPERTY RESIDENCE

• UAE government in June 2011 introduced a new system extending the validity of the visa granted to real estate investors for up to 3 years

• The following rules and conditions govern the issuance of a real estate investor

visa:

The property is built and ready for accommodation

The applicant proves ownership (title deed issued by the Land Registrar)

The property is worth minimum AED 1 million (equivalent to US$300.000) with no

mortgage

The applicant’s income is higher than AED 10.000 (US$3.000) monthly

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CORPORATE RESIDENCE

• The other way to obtain residency is through a corporate structure

• As a general rule, one has to have a sponsor in order to apply for a residence

permit in the jurisdiction. For foreigners, setting up a company is a practical way

of obtaining sponsorship

• As far as the company is concerned, it must have physical presence in the UAE.

In that regard, the most interesting and cost effective options are proposed by

free zones situated in the northern Emirates. Usually, these options consist of

“flexi desks” or “flexi offices”

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OUR SERVICES

PO Box 333641

Bayswater Tower

Office 1812

Al Abraj South street

Business Bay

Dubai

UAE

T+ 971 45515 693

F +971 42767 612

• Corporate and Trust

• Financial Advisory

• Business Advisory

• Tax and Legal

• Global Compliance

• Family Office

Costas Ioannou, Director: cioannou@oneworldmideast.net

George Philippides, CEO: gphilippides@oneworldmideast.net

www.oneworldmideast.net

ADDRESS

Contacts