RE-DOMICILING IN DUBAI & THE UAE: KEY TAX & COMPLIANCE CONSIDERATIONS

Name: Creation Business Consultants
Address: Office 2102, Cheddar Cheese Tower, O-14 Tower, Marasi Dr, Business Bay, Dubai, Dubai, 00000, United Arab Emirates
Telephone: +971 4 878 6240
Price range: $$$$

International businesses often tend to redomicile or relocate their business to Dubai or the UAE. This process involves changing the location of a company to another county. Re-domiciliation allows businesses to benefit from the change of applicable law of the entity, the structure, and the taxation system without altering the business identity.

THE LEGAL DEFINITION OF RE-DOMICILIATION

Re-domiciliation is the transfer of a company from its place of incorporation to another jurisdiction.
The company will maintain the same legal personality.
The company will have a different address.
The transfer of jurisdiction does not create a new legal entity.

THE LEGAL EFFECTS OF RE-DOMCILIATION

The re-domiciled company maintain all its assets, rights, properties, and privileges acquired before the re-domiciliation.
The re-domiciled company remain liable for all its debts or liabilities incurred before the re-domiciliation.
The re-domiciled company maintains its right to appear before any jurisdiction in any legal proceedings initiated before the re-domiciliation.

JURISDICTIONS FOR RE-DOMICILIATION

ONSHORE LAWS

According to the Dubai Law No. 14 of 2015, the Department of Economic Development (DED) may transfer the entries of the re-domiciled company to the DED’s records and issue a business continuation certificate, subject to the following:

A certificate issued by the competent authority that has licensed it outside the UAE, stating the approval of such authority to transfer its establishment entries into the UAE submitted to the DED.
Provide the DED with its financial position and economic feasibility from transferring their company entries into the UAE, timeline to transfer its establishment place and initiate business practice in the UAE, along with any other information or data required by the DED.
To fulfill all controls and criteria set by the DED.
Articles of Association of the establishment shall be consistent with the provisions of the Commercial Companies Law and the legislation in force in the UAE.
The company enjoys all its rights and is bound by all liabilities towards third parties.

FREE ZONE LAWS

Abu Dhabi Global Market (ADGM): ADGM allows for the relocation and the re-domicile of companies to ADGM from other jurisdictions, subject to the relevant authorisations. ADGM Companies Law contains detailed continuance provisions to this effect. A company which is incorporated outside ADGM may apply under Section 102 (application to the Registrar for continuance within ADGM premises) for the issuance of a certificate confirming that it continues as a company registered under ADGM Companies Regulations. The company must be authorised to make such an application by the laws of the jurisdiction under which it is currently incorporated.

Dubai International Financial Center (DIFC): Re-domiciliation both into and out of DIFC is permissible, subject to the relevant authorizations. Articles 8.1 and 8.2 of the Companies Regulations state:

The DIFC regulations set out a clear process to enable companies to transfer their place of incorporation to the DIFC.
The DIFC will permit the re-domiciliation providing that the laws of the company’s original place of incorporation acknowledge the re-domiciliation.

Dubai Multi Commodities Centre (DMCC): Only inward re-domiciliation is possible subject to the relevant authorisations as per Regulation 106 of the DMCC Company Regulations No. (1) of 2003.

TECOM: Re-domiciliation varies for each case in TECOM.

Jebel Ali Free Zone (JAFZ): A foreign company may be subject to the laws of the jurisdiction in which it is incorporated, (application to the Registrar for the continuation of the foreign company in the Free Zone as a company, FZE, FZCO or PLC) under Articles 88-90 of the Jebel Ali Free Zone Implementing Regulations 2016.

DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC) – RE-DOMICILIATION PROCESS OVERVIEW

A preliminary application form should be submitted to the DIFC Business Development (BD) team along with:
- A business plan.
- 3 years of financial projections.
- 3 years of annual accounts.
- Short biographies and passport copies of management.
Our team will review and forward the application to the Registration and Review Committee (RRC) of the DIFC for review.
The RRC will make the decision if the company should be granted “Initial Approval”. The decision is based on several criteria, including reputability, employee sustainability etc.
All DIFC companies must have a physical presence in the DIFC.
Following the initial approval, the company must submit a formal application to the DIFC Registrar of Companies (ROC) along with the articles of continuation of the company.
If the application is successful, the ROC will issue a “Certificate of Continuation” to the company.
The company will become a DIFC company to which the DIFC laws would apply.

LIMITATIONS AND CHALLENGES

The regulatory environment is not developed enough, and the public authorities are not prepared to accommodate the re-domiciliation process due to the lack of practice and specific regulatory provisions.
Absence of specific statutory provisions leads to uncertainty and discourages Foreign Direct Investment (FDI).
Legislative reforms are required to cater for the increase in demand for re-domiciliation.

TAKEAWAY

The UAE continues to be an attractive tax efficient jurisdiction for company re-domiciliation based on the following reasons:

Companies that are re-domiciled to the UAE from another jurisdiction would be considered incorporated in the UAE from the date of re-domiciliation and should be deemed to be resident and domiciled in the UAE with effect from such date.
Any foreign company may be re-domiciled into the UAE as a company incorporated in the UAE.
Re-domiciliation of an existing company is an alternative to liquidation and effectively allows the transfer of assets and liabilities to an entity incorporated in the UAE.
In some cases, a foreign company can re-domicile out of the country and this exit is not considered to trigger a foreign income tax charge.
The UAE has a larger number of double tax treaties than any other low tax jurisdiction.
The UAE’s double tax treaty network is growing at a faster rate than any other country in the world.
Proximity to Africa and other fast-growing economies is unparalleled.
The introduction of corporate tax in the UAE remains amongst the lowest in the world.
UAE does not tax the receipt of capital gains and dividends from foreign jurisdictions.

For the above reasons, a UAE company remains an excellent tax optimsation solution for re-domiciliation. For more information regarding how Creation Business Consultants could guide you, contact our tax experts, email [email protected] or call +971 4 878 6240 to arrange your free expert consultation.