Re-domiciliation. What is It?

Geopolitical events such as the war and changes in local legislation, such as UK resident non-dom provisions or recently announced French taxation changes, create opportunities for re-domiciliation. Our partner Affinitas DMCC shared with us an increased interest in re-domiciliation projects and have been handling several involving the re-domiciliation of European entities into the UAE. Most notably, it has been observed a flow of entities from Luxembourg, Switzerland, Cyprus, and the UK.

Why the UAE?

The UAE is renowned for its business-friendly policies and stable banking environment, making it an attractive jurisdiction for companies considering re-domiciliation. While the process can be complex, involving various factors such as the current jurisdiction, shareholding structure, and the number of employees, understanding the legal and tax implications is essential.

Reasons for Re-domiciliation

Companies may choose to re-domicile for various reasons, including the desire to operate under more flexible taxation laws and to adapt to regulatory changes in their original jurisdiction. Significant drivers for re-domiciliation include:

1. Tax Efficiency

• Global Tax Policy Shifts: Policies such as Base Erosion and Profit Shifting (BEPS), Economic Substance Regulations (ESR), and the Global Minimum Tax of 15% encourage companies to move from tax-free jurisdictions to low-tax environments like the UAE.

2. Economic Substance

• Taxing Where Activities Occur: BEPS policies aim to tax profits where economic activities occur, prompting many offshore operations to move to onshore or “mid-stream” jurisdictions, such as the UAE.

3. Operational Benefits

• Regulatory Flexibility: The UAE offers flexible regulations, a stable economy, full repatriation of capital, attractive tax benefits, simplified asset protection systems, and access to a wide range of local and international banks.

The Re-domiciliation Process

Re-domiciling a company involves two main stages:

1. Preparation

• Document Gathering: Collecting and preparing all necessary documents to facilitate the transfer from the current jurisdiction.

2. Transfer

• Registration Transfer: Officially transferring the company’s registration to the new jurisdiction.

The process involves the simultaneous processing of the Certificate of Discontinuation in the original jurisdiction and the Certificate of Continuation in the new jurisdiction. This process can take from one month or longer, depending on complexity.

Barriers to Re-domiciliation

While the re-domiciliation process is generally straightforward, certain barriers may arise:

1. Jurisdictional Barriers

• Legal Framework Limitations: Some jurisdictions may lack the legal framework for re-domiciliation or may not support specific business activities or share structures.

2. Banking Barriers

• De-offshorization Trends: Global de-offshorization trends and banking regulations can create obstacles, making re-domiciliation from one offshore jurisdiction to another less feasible.

Benefits of Re-domiciliation

Re-domiciling a company offers several advantages:

1. Maintained Legal Identity

• Preservation of Legal Identity: Companies retain their legal identities and existing banking relations, saving time and costs compared to registering new entities and liquidating existing ones.

2. Compliance with Regulations

• Regulatory Compliance: Ensures compliance with local regulations without the need to novate commercial contracts.

3. Tax and Legal Stability

• Favorable Environment: The UAE provides a stable, growth-oriented environment with professional infrastructure and favorable tax policies.

Tax and Legal Implications

The laws and regulations of the original jurisdiction must allow for re-domiciliation. Companies emigrating to the UAE typically need to demonstrate solvency and assure that shareholders and creditors will not be adversely affected. Tax implications depend on the regime in the emigrating state, with no adverse tax consequences for states without material taxes, such as BVI. However, some tax compliance requirements may still apply.

Why the UAE?

The UAE’s internationally recognized, business-friendly environment, backed by world-class infrastructure and stable banking facilities, makes it an ideal jurisdiction for re-domiciling companies.

Partner with Affinitas DMCC

For advice or assistance on re-domiciliation, contact Affinitas DMCC. We are here to guide you through the process and help your business thrive in the UAE.

Sources:

• UAE Federal Law No. 2 of 2015 on Commercial Companies
• Dubai Law No. 14 of 2015 on the Transfer of Company Registration

This comprehensive guide on re-domiciliation in the UAE was provided by our esteemed partner, Affinitas DMCC. For more detailed information and personalized assistance, feel free to reach out to them.