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Opening an offshore company

BobbyUAE

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Mar 8, 2017
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Hello,

I run a company in digital goods and I have been searching for a solution for months for some problems we are having, I am looking for some advice.

My current company is based in the EU. I have a few websites where I process 1000's of small transactions per day. I do have expenses, but these are all for digital goods, I never touch anything physical.
Because we process small transactions people are not willing to verify their VAT residency as required by EU MOSS.

In the past, fool as I was, I opened up a Hong Kong company, with no knowhow of what I was doing at all. The company I used was one we randomly found on Google. They sold me a banking package. In the small letters it said the opening was not guaranteed, but they told us that we have a very good chance.
I travelled all the way to Hong Kong for a meething which HSBC. Delivered the documents they requested.
As I turned out, the application was denied and only later on I found that it was almost impossible for a foreigner with no actual proof of local trade to open up a bank account in Hong Kong without propper guidance.

Today things have changed a bit. I learned by reading and I have a larger budget for a solution.
The main goal I have right now is a solid and safe construction. Cost is of minor importance, the quality of the structure is what matters.

Many times I read stuff about Dubai, people say it is good but expensive. But not much more. We are now in touch with a local consultant, not a cheap one, but a good one recommended by contact who is an expert tax consultant in Switzerland. Next to that I also contacted several other firms from Google to hear their opinions.

What we got offered is a Freezone company in Dubai Internet City. The initial cost all in including Visa and flexidesk (which is obligated) is 80,000 AED. The renewal would be 65,000 AED every year. I am aware that this is expensive.

Some extra info:
- I am very concerned by CRS.
- I was advised that have a residence visa is always a good way to go. The expert told me that nobody knows what the way around it will be yet because of the lack of details. Others told me that if you get the residence visa and a PO box you can just go to the bank with these details and no CRS will happen.
- I have a strong relation with my family, being out of the country effectively for more than 183 days is not something I consider yet. Creating substance around this usually ends up in endless discussion with the authorities.
- I am also very concerned with VAT MOSS even in Dubai.
- There is no such thing as nominee shareholders in UAE.
- If I go the way for the expensive DIC freezone, I will actually create some substance. I will travel multiple times per year to Dubai. I will actually redirect business from there, meaning daily incoming and outgoing payments from there.
- The incoming payments are not a concern and dealt with.

Do you guys have any advice?
 
What we got offered is a Freezone company in Dubai Internet City. The initial cost all in including Visa and flexidesk (which is obligated) is 80,000 AED. The renewal would be 65,000 AED every year. I am aware that this is expensive.
WoW this is a lot of money EUR 20700 in startup costs and EUR 17000 in maintaing the company. These are estimated figures!

Well well, for less than the half you can register and maintain a Cyprus company! But since you have been doing your homework as I can see from your post, there may be other services you require!
 
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Hello,

Thank you for the replies.

- Payment gateways are mostly dealt with. I could use a Skrill account. PayPal would be nice but is not required.
- I understand that Belize is a cheaper. And we indeed only sell digital goods. I forgot to mention this in OP. It is not my intention to hide a stash of black cash. I own a legit company in my home country and I will have the money come over to my home company with invoices for resold digital goods and consultancy services when I need it. My accountant and me both agree that it is very easy going to Dubai, staying there for a week as a holiday and have the substance for a quite large invoice in the home country. For Belize I find it harder to explain such substance.
- The cost for a DIC freezone is indeed quite large. It is worth mentioning that this is caused by the obligation of renting at least a flexidesk, which is no cheaper than 35,000 AED.
- It relaxes me knowing that I can flee to this country with my relatives the moment the EU goes to hell.

I am uncertain how all of this will turn out for me related to CRS. I don't want any exchange about my foreign bank account with my home country. As long as this money is not in my home country, they have no business with it.
What about substance?
 
Hello,

I run a company in digital goods and I have been searching for a solution for months for some problems we are having, I am looking for some advice.

My current company is based in the EU. I have a few websites where I process 1000's of small transactions per day. I do have expenses, but these are all for digital goods, I never touch anything physical.
Because we process small transactions people are not willing to verify their VAT residency as required by EU MOSS.

In the past, fool as I was, I opened up a Hong Kong company, with no knowhow of what I was doing at all. The company I used was one we randomly found on Google. They sold me a banking package. In the small letters it said the opening was not guaranteed, but they told us that we have a very good chance.
I travelled all the way to Hong Kong for a meething which HSBC. Delivered the documents they requested.
As I turned out, the application was denied and only later on I found that it was almost impossible for a foreigner with no actual proof of local trade to open up a bank account in Hong Kong without propper guidance.

Today things have changed a bit. I learned by reading and I have a larger budget for a solution.
The main goal I have right now is a solid and safe construction. Cost is of minor importance, the quality of the structure is what matters.

Many times I read stuff about Dubai, people say it is good but expensive. But not much more. We are now in touch with a local consultant, not a cheap one, but a good one recommended by contact who is an expert tax consultant in Switzerland. Next to that I also contacted several other firms from Google to hear their opinions.

What we got offered is a Freezone company in Dubai Internet City. The initial cost all in including Visa and flexidesk (which is obligated) is 80,000 AED. The renewal would be 65,000 AED every year. I am aware that this is expensive.

Some extra info:
- I am very concerned by CRS.
- I was advised that have a residence visa is always a good way to go. The expert told me that nobody knows what the way around it will be yet because of the lack of details. Others told me that if you get the residence visa and a PO box you can just go to the bank with these details and no CRS will happen.
- I have a strong relation with my family, being out of the country effectively for more than 183 days is not something I consider yet. Creating substance around this usually ends up in endless discussion with the authorities.
- I am also very concerned with VAT MOSS even in Dubai.
- There is no such thing as nominee shareholders in UAE.
- If I go the way for the expensive DIC freezone, I will actually create some substance. I will travel multiple times per year to Dubai. I will actually redirect business from there, meaning daily incoming and outgoing payments from there.
- The incoming payments are not a concern and dealt with.

Do you guys have any advice?

The cost of a FreeZone Company in Dubai Internet City (DIC) depends on services, office (flexi, Executive and Commercial), Health Insurance, Bank account, Business Plan preparing and other.

What is included in 80,000 AED?
 
Hello,

This costs includes everything:
- Incorporaton fees
- Annual license fee
- Annual flexidesk rental (cheapest option)
- Government fee for a visa
- Agent fee for complete setup of the company (including business plan), opening of the bank account and the obtaining of the visa. (25,000 AED)

Many of these costs seem fixed for this zone.
Also I am aware that this agent is not cheap. I have been burned in the past by using a bad agency. I am refered to this person by someone nearby that I really trust and who has a lot of experience in international tax matters. Furthermore this agent is honest, he doesn't tell me what I want to hear, but he does tell me the truth.
 
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Hello,

This costs includes everything:
- Incorporaton fees
- Annual license fee
- Annual flexidesk rental (cheapest option)
- Government fee for a visa
- Agent fee for complete setup of the company (including business plan), opening of the bank account and the obtaining of the visa. (25,000 AED)

Many of these costs seem fixed for this zone.
Also I am aware that this agent is not cheap. I have been burned in the past by using a bad agency. I am refered to this person by someone nearby that I really trust and who has a lot of experience in international tax matters. Furthermore this agent is honest, he doesn't tell me what I want to hear, but he does tell me the truth.

The problem is that a FreeZone company is NOT cheap, but a very important structure.
 
Can you explain why you find it an important structure?
Also, I read sometimes that people are saying, the only solution for CRS is having a second residency. So this is all then? And expensive UAE company and resident visa and you're good to go?
The only solutions for AEOI are:
- new residency in Panama;
- FreeZone Company with residency VISA in UAE.
 
I'm still look for an answer why this is a solution to CRS.

In fact this place offer an office and you can make holidays there.
This is expensive. But there is no place on earth that you can send legit invoices to and have an office with staff for 20k a year.
 
This is expensive. But there is no place on earth that you can send legit invoices to and have an office with staff for 20k a year.
I totally agree with you. I don't believe that you will be subject to any CRS if you stay out of the management and any "public register" I'm sure it is possible to setup your UAE company with office etc. in a way that no one will know that you own it or even control it as long as you don't live there! Otherwise you could simply move there and live a life without taxes and worries.
 
I wonder what your trusted CPA has to say to all of this and what the reason is that you look for an answer here? Not that I don't like your post or find it interesting, but with that money available I would think that you will have all experts at your hand and they will even be able to give you a detailed explanation about CRS and why it is important to think in your plans!
 
Now that you mention the registers in UAE, is this public? I know some people with a freezone company but I can't seem to find any registry with them in it.
Moving would indeed be a great option, I don't really consider it right now as I cannot leave my family behind.

The CPA is quite straightforward admitting that nobody can officially say what will happen with CRS yet. He says the have had meetings with banks and got incomplete or different stories about it. I know this sounds like a lot of money and it is, but I consulted a local tax lawyer in my country. 3 meetings of 4 hours + statement with possible optimalisations + a file of 500 pages which I can't get my hands on = 14.000 euros. Perhaps one of the many mistakes I made in this case.

Currently I don't really know where to look for advice so I decided to get into it myself, reading and posting a lot. Since the local CPA is of great value and trust to me I will probably still use him, but if you or a CPA that you recommend can help me, I can gladly pay you per hour for consultancy services. I think it's best if both are split, I don't want advise that convinces me to open a Dubai firm, I want independent advice giving me the truth about the risk and how to avoid them.

The thing is I can probably make a great story for this structure that might perhaps just get it legal as my country is all about 'substance'. I just don't know how to explain it.
 
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Yes but why does that stop CRS?
Because for example, for a German customer with a FreeZone Company and bank account in UAE + Residency VISA in UAE (with real Utility Bill), the AEOI will be between UAE and UAE and not between UAE and Germany.
If the FreeZone Company has a bank account outside UAE (for example in Belize), the AEOI will be between Belize and UAE .
The AEOI is between the bank and the Tax Authority except for US citizens (FATCA).

Please read the Common Reporting Standards.
 

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