Achieving Economic Substance For Offshore Entities In UAE

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A major problem faced today by trading corporations established in offshore jurisdictions is to satisfy the “economic substance” criterion. This is the case with corporations established in traditional offshore jurisdictions including the BVI, Cayman Islands, Belize, Antigua, Nevis, St Lucia, Vanuatu etc which were set up at a time that regulations and supervision were lax and no questions were raised.

Essentially substance is increasingly necessary to counter the argument that an entity or structure set up solely for tax reasons is artificial, or is not set up for bona fide reasons which can trigger the anti avoidance legislation.

Further, tax authorities are not looking only at the place where central management and control is exercised in order to determine where a company is taxable. In fact, they are also looking at the economic rationale behind a company in a particular country.

More so, if it happens to be a low or no tax country. An increasing number of tax treaties incorporate anti avoidance provisions. Transactions which lack commercial substance or not entered into for bona fide purposes, are caught by the provisions.

By establishing a branch in a FZ or mainland UAE of an existing offshore entity registered outside UAE – be that in BVI, Cayman Islands, Belize etc - and having a flexi office, employing 1-2 local persons, the company is able to:

a) continue unhindered activities from the UAE

b) satisfy the criterion of economic substance and ensure legitimacy/acceptance of activities

c) meet the requirements and satisfy the concerns of authorities and bankers

d) as UAE is a no tax jurisdiction, pay no tax on profits

e) take advantage of UAE’s 70+ double tax treaties

General advantages of setting up a branch in the UAE include:

• 100 percent foreign ownership
• no restriction on profit repatriation
• no exchange controls
• guarantee of no corporate and personal income taxes for 15-50 years and possible renewal
• availability of offices, factory premises and warehouses
• excellent port, airport and road transport infrastructure
• efficient utilities and communication means no recruitment restrictions and assistance in obtaining work permits for expatriate staff

What we can do for you

We can consider your circumstances and proceed to advise you as to the most efficient options suitable to you. We will liaise with you and agree together a workable, tax efficient structure in line with your goals and expectations. Following this, we can set up your structure and assist you to register with government departments and authorities and provide other support services including finding suitable office accommodation, recruitments, banking etc, as to be required. Clients can expect a high degree of personal attention from Oneworld MidEast. We deliver day to day, bespoke services and solutions.

Oneworld MidEast Ltd

Oneworld MidEast ltd (OME) is rendering a wide range of fiduciary and business services to our international clientele. We provide clients the whole spectrum of corporate structures - offshore, international business, free zone, mainland and specialized entities - depending on each client’s circumstances and goals. Free zone and mainland entities benefit from an extensive tax treaty network of the UAE and offshore entities are easy to set-up and flexible to use. Our legal, business succession, accounting and VAT teams serve both local and international clients.

If you want to discuss how we can assist you please contact us here