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The UAE as a Structuring Hub

MATTHIEU DAGUERRE

TTN NICE

25 SEPTEMBER 2015

PART I HIGH LEVEL OVERVIEW

PART II WHICH VEHICLE FOR

WHICH PURPOSE

PART III A COUPLE OF BESTSELLERS

UNDER THE SPOTLIGHT

High Level Overview

A. Accessibility

B. Ease of starting and doing business

C. Low – or no – tax

D. Network of double tax treaties

E. Economical & political weight

F. Recognized financial centre

A. Accessibility

Accessibility (cont’d)

City/Airport Weekly

Paris 168

London 210

Moscow 266

Singapore 308

Abuja (Nigeria) 126

B. Ease of Starting a Business

Source: The World Bank “Doing Business 2015” Ranking

C. Ease of Doing Business

Ease of Doing Business (cont’d)

Source: The World Bank “Doing Business Database 2015

C. Low – or no – tax

…. and the rest of the world Source: The World Bank “Doing Business Database 2015”

Low – or no – tax (cont’d)

The following taxes either do not exist or are not enforced:

• Corporate tax

• Personal income tax

• Withholding tax

• Value-added tax

• Capital gain tax

• Inheritance tax

Low – or no – tax (cont’d)

High tax jurisdictions (France)

• Domestic tax

• Tax treaty benefits

UAE

• In practice, no domestic tax,

but nonetheless…..:

• Tax treaty benefits

No tax jurisdictions (BVI)

• Simply no domestic tax

• No tax treaties

D. Network of double tax treaties List as of 16 August 2015

Albania Algeria Armenia Austria Azerbaijan Bangladesh Belarus Belgium Bosnia and

Herzegovina Brunei Darussalam Bulgaria Canada China Cyprus Czech Republic Egypt Estonia Fiji Finland France Georgia Germany Guinea Hungary India Indonesia Ireland

Italy Japan Kazakhstan Korea Latvia Lebanon Lithuania Luxembourg Malaysia Malta Mauritius Mexico Montenegro Morocco Mozambique Netherlands New Zealand Pakistan Panama Philippines Poland Portugal Romania Russia Serbia Seychelles Singapore Slovenia

Spain Sri Lanka Sudan Switzerland Syria Tajikistan Thailand Tunisia Turkey Turkmenistan Ukraine Uzbekistan Venezuela Vietnam Yemen

Andorra (not in force) Argentina

(negotiations) Australia (negotiations) Barbados (not in force) Benin (ratified) Bermuda (not in force) Comoro Islands (not in

force) Ecuador (negotiations) Ethiopia (not in force) Gambia (not in force) Greece (ratified) Guernsey

(negotiations) Hong Kong (not in

force) Jersey (negotiations) Jordan (not in force) Kenya (ratified) Kyrgyzstan (not in

force) Libya (ratified) Liechtenstein (initialed) Malawi (negotiations) Mongolia

(negotiations) Nigeria (negotiations)

Palestine (ratified) United Kingdom

(negotiations) Uganda (not in force) Uruguay (ratified)

Treaties in force: Treaties in the pipeline:

Network of double tax treaties (cont’d)

Residence clause for entities in UAE tax treaties

EM = effective management; INC = incorporated under the laws of; L to T = liable to tax in

Well regulated jurisdiction

Substantiated structures

Significant economic hub

Acceptable place of residence

Easy to relocate to

E. Economic and political weight

Source: The Global Financial Centres Index 17

F. Recognized Financial Centre

PART II

WHICH VEHICLE

FOR

WHICH PURPOSE

Business Structures in the UAE

A.Mainland • Limited Liability Company • Branch of a foreign company • Others

B.Free Zone Entities

C.International Business Companies

A. Mainland

Commercial/Industrial:

• LLC

• Corporate shareholding permitted

• 51/49 principal, but with exceptions

Professional: • Civil partnership; unlimited responsibility of the partners

• Only natural persons; limited exceptions

• May be 100% foreign owned; local agent

• Branch of a foreign company

• Local agent

Mainland (cont’d)

Ownership

IP licensing (leasing)

Mudharaba (loan) agreement

IP Sub-

Licensing Mudharaba

agreement

Local Partner

Op Co.

UAE Mainland

Hold Co.

49%

Mudharaba

agreement

100%

51%

B. Free Zone Entities

Themed vs. Multipurpose

UAE counts more than 30 Free Zones

• Dubai – in excess of 25 Free Zones

• Abu Dhabi – 5 Free Zones

• Northern Emirates – Sharjah (2 Free Zones), Fujairah (2 Free Zones);

Ras Al Khaimah (3 Free Zones).

Limited Liability (FZE, FZLLC) irrespective of the activity

Restricted geographical scope

C. International Business

Companies (IBCs)

Ability to :

• conduct any authorized commercial activity abroad

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

• operate a bank account abroad and in the UAE

• May be 100% foreign owned

But:

• Relatively lower credibility in high profile trading operations

• Inability to avail themselves of treaties’ benefits

PART III

A COUPLE OF BESTSELLERS

UNDER THE SPOTLIGHT

Business Structures in the UAE

A.Casus 1: UAE Trade Service Co

B.Casus 2: UAE Hold Co

C.Casus 3: Transfer of Headquarters

Casus 1

UAE Trade Co.*

Shareholder

outside the UAE

100%

100%

Company A

Company B

Substance required in the UAE

• Physical premises

• Resident directors

• Use of local providers

• UAE as effective place of management

Trade license

Lease contract

Resident director

Bank Statement for the last 6

months

Audited Financial Statements

Casus 2

UAE Hold Co

Casus 2 (cont’d)

Capital gains on share transfer = tax exempt

No WHT on distribution of dividends by UAE Hold Co.

to the shareholders in or outside the UAE.

UAE Hold Co’s dividends, interests, royalties from foreign co.

are tax exempt.

When UAE Hold Co. transfers shares of Foreign Co, capital

gains are not taxed in the UAE

Foreign Co

UAE Hold Co

100%

Shareholder

outside the UAE

Dividend = tax exempt

100%

Casus 3

Transfer of Headquarters

Operating Co

BVI Co

100%

Operating Co

UAE Co

100%

• No Substance

(Offshore jurisdiction)

• No physical premises

• No DTT benefits

• Substance

(Onshore jurisdiction)

• Physical premises

• DTT Benefits

Relocation

See you in Dubai!