Corporate and Wealth Holding in a Global Environment – Through a UAE Company
By Marios S. Kalochoritis – published in the 9th Annual Company Formation and Funds Guide.
Having worked for over 20 years in the United Arab Emirates, I have always been fascinated by the clarity in direction demonstrated by the country’s leaders and their persistent efforts to execute their strategy in a swift and methodical manner.
During this time, the UAE – like the rest of the world – has gone through economic cycles of growth and contraction. But throughout it all, the country’s clarity in what it stands for and what it aspires to be has prevailed. The resolute focus maintained by the country’s leadership has helped the country to securely move forward by constantly making the necessary changes and taking corrective actions remaining at the forefront of innovation.
The UAE – Offering the ultimate platform for doing business
The current leadership of the country has set out to develop and expand the UAE as a regional hub for business, trade and tourism with an unprecedented modern infrastructure, whether that is in its physical elements (airports, road network, public transportation, etc.), legal framework (rules and regulations, investor protection schemes, etc.), a world class financial establishment or a resilient banking system.
It is clear that this ambitious goal is not just supported by the leadership, but that the vast majority of the Emirati population actively supports it, realizing that the success of their leaders’ vision will create wealth and growth opportunities for all people, particularly Emiratis who have become a minority group in their own country for the last decades, due to the massive influx of foreigners who flock to their country.
This unique drive and vision, combined with the unique nature of the UAE’s political structure, allows for swift decisions, allocation of resources, accountability and the development of ambitious mega projects. To the eyes of the first-time visitor, the cities of Dubai and Abu Dhabi rise from the surrounding desert as miraculous oases. Far from becoming blasé, the returning visitor continues to marvel at the astounding rate of change and growth that took place since their last visit.
Indeed, the UAE has achieved a level of infrastructure that is unprecedented for a country that is only 48 years old and would be extremely expensive and time consuming to replicate, whether the extremely effective airport hubs that manage record numbers of passengers travelling to or transiting through the UAE, to the ever expanding road networks, public transportation methods, all the way to the active promotion of culture and arts, entrepreneurship, gender equality, and adoption of new technologies.
In the UAE, I have witnessed how bank mergers, M&A activity, dispute resolutions and unique business creation have taken place with impressive speed and efficiency. The leadership understands that uncertainty is bad for business and they make sure they resolve and dissolve any ambiguities. I have lived through a swift adaptation of technology touching every angle of one’s activities in the UAE as the country makes sure that it firmly places itself at the cutting edge of innovation in order to maintain its competitiveness.
And the UAE has managed to accomplish myriads of costly changes and innovations, all the while maintaining a 0% corporate and 0% personal income tax. Instead, residents of UAE pay their share of their use of the country’s resources through a system of direct fees and a consumption VAT at a low 5%. This continues to represent a very low cost to investors and residents and continues to encourage lasting growth and profit.
Why setting up a Free Zone Company
This unparalleled focus on continuous growth and economic prosperity, combined with the proven commitment from the country’s leadership to provide a distinctively business friendly environment, makes the UAE a uniquely positioned jurisdiction to set up companies, whether they operate locally, regionally or globally, and to hold assets.
Apart from offering a full exemption from taxes that are so commonplace in all major economies, there are no exchange control restrictions and a full repatriation of income and capital is easily facilitated through the many international banks located in the country.
Establishing a Free Zone company in particular, offers advantages that – when compared to other UAE jurisdictions – makes this option to be the most attractive to foreign investors. As an example, unlike a Mainland company where a local sponsor is needed to hold 51% of the company’s shares, Free Zones, following a liberal foreign investments regime, allow 100% foreign ownership and therefore 100% control over one’s business.
Contrary to the traditional Offshore business, setting up a Free Zone company opens the way for becoming a resident of the UAE, a desirable option for individuals and entrepreneurs alike. Offering a thriving economy, a solid banking system, excellent infrastructure, a cosmopolitan lifestyle and, wrapping it all up with a zero personal tax, it is not surprising that the UAE has established itself as one of the top competitive jurisdictions to live in the world.
A Free Zone has multiple benefits – it can be set up quickly and easily and, given that it can freely operate not only abroad but also within the Free Zone, it adds a real economic benefit to the country. The mere fact that Free Zones issue residency visas and necessitate having a physical office space, gives more substance to the Free Zone setup than using the cheaper but – now more than ever- scrutinized offshore alternative. Free Zones are playing such an important role in international tax and residency planning, they can easily be presented in international trade and transactions as a solid legal and operating entity and demonstrate sufficient substance for domestic and foreign banks and tax authorities. A corporate and personal bank account which can be easily set up following the establishment of the company and the possibility to become a full fiscal resident, these are all invaluable assets to have.
Especially in today’s interconnected world, where people move and live in different countries, where one’s tax information sometimes has to go through multiple hands and systems and where a country’s tax code, more often than not, is unsophisticated or the political system corrupt, it is important that citizens of the world have a choice. A Free Zone company gives you that choice.
Conclusively, I am convinced that the interests of this country are aligned with the interests of the entrepreneurs and business builders, as the success of businesses in the UAE will reflect positively on the country itself. I have faith in the leadership and governance of the country to make the appropriate business friendly decisions to sustain its tax-effective model while still abiding by the global rules of transparency.