Did you know that a $10K investment can get you a tax-free company and residency in Dubai ?
Contributed by SFM Offshore
16 August, 2018
Due to recent legislative changes and increased compliance with international tax avoidance regulations, Dubai is no longer just a viable option for incorporating a new business. In fact, compared to others and due to these recent developments, it is fast becoming the destination of choice. Did you know you can set up a business in Dubai much more cheaply and easily than comparable places?
What You Can Get for $10k
Although its economy is built on oil, the banking crisis of 2008 led to many changes in UAE. One of the growth areas was construction, although it was not the only area. Other growth areas include energy, aluminium production, and the motor industry. Ten years of diversification and recent changes to legislation means Dubai is an attractive proposition to start a new business. This applies not just to UAE citizens, but for foreign residents too. One of the most important areas for attracting foreign investment is Dubai. But why?
The geographical location is obviously advantageous; the Middle East brings together business interests in Asian, European and Middle Eastern economies, as well as attracting investment from the Far East.
But there are great business reasons for doing so too. When setting up a business, investors are subject to far fewer stringent measures and the area has a far more liberal approach to foreign residency. In brief:
- You are entitled to apply for a standard 3-year residency in the UAE when incorporating a new business within Dubai or another Emirate. Residents can obtain a Tax Residency Certificate.
- There is no corporate or personal income tax in the UAE.
- All the company owner needs to do to maintain ownership, tax-free status, and their residency is to visit the UAE twice a year
This is attractive, but Dubai has many other advantages over comparable and traditional centres offering similar services.
How Does this Compare to Other Places Around the World?
The most obvious place to begin setting up a tax-free business is Monaco. The principality on the Mediterranean, known as a playground of the rich and famous and centre of one of the world's most famous motor races, certainly has its advantages. However, to enjoy similar privileges in Monaco compared to Dubai you will need far more money than you would in Dubai – €150,000 in some cases which is around $174,000 US at present – 17 times greater capital compared to incorporating in Dubai. There is no personal or income tax to pay in Monaco which is one of its biggest selling points. However, a 33% corporation tax applies when global sales represent more than 25% of total sales. Simply – if you want to operate internationally, you will be subject to tax over a certain threshold. Foreigners seeking residency must spend a minimum of 180 days in the principality which is strictly checked and enforced. For Dubai, that minimum requirement is just 2 days. Also, if you have French citizenship, you are not entitled to tax exemption even if Monaco is your permanent residence. Finally, Monaco is subject to the EU's 20% VAT (Value Added Tax) rate.
Useful for businesses based on the Middle East and Eastern Europe, the country divided between Greek West and Turkish East has, in recent years, become a great base of operations for foreign owned businesses. Although not an EU member, it's application is pending, making it a great place to do business. With low personal and business tax, many people choose Cyprus due to its equal favouring of EU and non-EU citizens. However, these advantages are mitigated by several critical disadvantages. It's incredibly expensive to obtain residency as a foreigner. Taxes are low but not 0%; corporation tax is presently 12.5%, the lowest in the EU but Dubai is still a better choice.
People looking to set up businesses in The Bahamas are drawn to the fact that there is no personal or corporation taxes to pay. Also, at present, it does not hold tax treaties with other countries. Foreigners seeking residency have the flexibility of choosing annual residency (for one year, renewable every year) or permanent (apply one time and receive lifetime residency). The Bahamas are ideal for dealing with North America but not so much for elsewhere. It has a high crime rate and import duties are high, meaning a high cost of living which effectively cancels out any personal tax savings you make, and with a 5-15% tax on multinationals, to save, you need to operate only within The Bahamas. Healthcare is expensive compared to the others and of lower quality for most people. Residency applications are slow; there is a fast track system which costs $1.5m (Bahamian Dollars are the same value as US dollars). The costs keep stacking up too.
Other Advantages of Company Formation in the United Arab Emirates
We have already pointed out several advantages – the low capital requirement ($10,000 US), the liberal approach to residency (arrive in the UAE twice per year) and zero tax rates. But there are other advantages too.
100% foreign ownership in the Free Zones: Unlike many other jurisdictions, company formation in Dubai offers the foreign owner to incorporate with 100% ownership. That means you do not need to bring in partners with a proportion of ownership when incorporating in a "free zone". However, the law can be complicated which is why we recommend using SFM as an agent. You are also permitted 100% full repatriation of profits if you so desire but our easy banking system means this isn't necessary.
It's the cost-effective choice: We've already touched briefly on the zero tax issues within Dubai. This means you are able to plough 100% of your profit back into the business, not hindered by the tax systems that hinder growth. This is great if you're an SME looking to begin trading as you need only minimum capital; the vital first couple of years of trade are not held back by taxes.
Dubai's modern, forward-looking infrastructure: Zero tax on incorporations in Dubai has allowed the Emirate (and others like it) to develop a robust social, industrial and commercial infrastructure. Every business visit to Dubai brings something new. We have some of the best roads, public transport, international transport, communications and emerging technologies anywhere in the Middle East, if not the world.
Low crime, cosmopolitan lifestyle: Unlike some of the other jurisdictions with liberal tax and incorporation approaches to setting up a business discussed here, the UAE is one of the safest countries in the world as far as crime is concerned. Streets are safe and with a cosmopolitan society welcoming peoples from 200 nations, it's also a great place to make new business contacts with a global outreach.
How SFM Can Help
SFM is UAE's leading organisations to helping people just like you set up businesses in Dubai. We have been operating here for many years which means many years of experience negotiating the rules and regulations on company formations, helping foreign investors acquire residence in Dubai, and aiding a smooth transition to company formation. Please contact us to see how we can help you achieve your business aims in Dubai's dynamic and modern business environment.
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