Moving from Cyprus to UAE

[JimBeam]

I have a company setup in Cyprus for more than 2 years now.
It's a VAT registered company with nominee directors and shareholders and bank account in BoC.
Everything works fine so far.

The company receives money from Google AdSense and some well known affiliate programs.
The company income is much higher than our costs so we are paying tax on more than two thirds of what we earn at a rate of 13.75% (12.5% + extra 1% on that rate for not having audits twice a year!?!?).
When you add company basic operational costs there (filing vat returns, company renewal fee, banking costs, accounting and auditing) it's a quite a sum that we're paying every year.

In order to get the dividends I would have to pay another 15% of local capital gains tax on the amount.
(I really have no idea how to justify the withdrawal of money from the account so it's considered as a business expense - so some tips here are well accepted)

So I'm thinking of setting up another company i UAE since there the taxes are 0%.
The offer I got for the UAE RAK company and setup and bank opening was over 20k EUR.
That price includes plane tickets to UAE, hotel stays, medical check and everything but still seems too high.

Even at that price with about the same company operational costs (renewals etc) only on lower tax it should pay of itself in a year or less.

My questions are:

1. Is there a better way to utilize my Cyprus company (get the money out other way than dividends) ?
2. Is the price (20k+) okay for RAK company setup + bank account opening ?
3. How much should the cost running a company per year (company renewal, banking fees, license renewal etc) ?
4. How many times per year will I have to travel to UAE (I was told at least twice a year) ?
5. Does RAK company needs to do accounting and auditing (and what's a price for that, we currently have less than 5 incoming and outgoing invoices per month) ?
6. Can I withdraw the money from RAK company without a need to justify the withdrawal as business expense ?

I would like to talk to someone who has setup RAK company for his business to her his experiences (especially if it's related to AdSense payments).

Thank you all in advance!

 

[Sols]

The company income is much higher than our costs so we are paying tax on more than two thirds of what we earn at a rate of 13.75% (12.5% + extra 1% on that rate for not having audits twice a year!?!?).

That sounds strange. Audits are required by law in Cyprus. I'm not aware of any exemptions, unless the company is owned by a public company. But I haven't read every letter of the law on this topic, so maybe there is.

Have you compared this 1% fee to the cost of just doing an audit?

In order to get the dividends I would have to pay another 15% of local capital gains tax on the amount.
(I really have no idea how to justify the withdrawal of money from the account so it's considered as a business expense - so some tips here are well accepted)

Assuming you're not a Cypriot citizen by birth, you would usually be exempt from dividends tax even as a resident. Read up on the tax benefits for being a non-domiciled resident in Cyprus.

Fortunately, Cyprus is crawling with tax advisers who can help you with this, including several reputable international firms. Speak to one of them.

Many foreigners in Cyprus want to avoid even the 12.50% corporate tax, so they set up companies elsewhere and either ensure they are tax resident there (think Isle of Man, Curaçao, and other jurisdictions where it's common for corporate service provider to help you establish tax residence) or just go for something like BVI and hope no one asks too many questions.

 

[JimBeam]

That sounds strange. Audits are required by law in Cyprus. I'm not aware of any exemptions, unless the company is owned by a public company. But I haven't read every letter of the law on this topic, so maybe there is.

Have you compared this 1% fee to the cost of just doing an audit?

We're doing audit once a year.
Currently, it's not worth for us doing it twice (financial statement + audit = 2k + vat) but it maybe will next year...

Assuming you're not a Cypriot citizen by birth, you would usually be exempt from dividends tax even as a resident. Read up on the tax benefits for being a non-domiciled resident in Cyprus.

Fortunately, Cyprus is crawling with tax advisers who can help you with this, including several reputable international firms. Speak to one of them.

Many foreigners in Cyprus want to avoid even the 12.50% corporate tax, so they set up companies elsewhere and either ensure they are tax resident there (think Isle of Man, Curaçao, and other jurisdictions where it's common for corporate service provider to help you establish tax residence) or just go for something like BVI and hope no one asks too many questions.

I'm not Cypriot citizen. And I was told that since there the dividend tax is 0% our tax men will say "well you haven't paid tax there so you have to do it here" so I would have to pay additional 15% here.
So they make "real" off-shore company. Do they use that other company to invoice the Cyprus one or they sell their shares in Cyprus company to that other one so that the dividends go there?

Do you think we should make the move to UAE or just find a better solution to optimize what we have right now on Cyprus?

 

[Sols]

We're doing audit once a year.
Currently, it's not worth for us doing it twice (financial statement + audit = 2k + vat) but it maybe will next year...

I can't comment for sure and I could be wrong or misunderstanding something but this sounds dodgy... If I were you, I'd think about approaching another corporate service provider and tax adviser.

I'm not Cypriot citizen. And I was told that since there the dividend tax is 0% our tax men will say "well you haven't paid tax ther so you have to do it here" so I would have to pay additional 15% here.

That hasn't been my experience or the experience of other non-domiciled residents in Cyprus I've known. I'm not a tax adviser, but I get the feeling yours isn't looking at all available options.

So they make "real" off-shore company. Do they use that other company to invoice the Cyprus one or they sell their shares in Cyprus company to that other one so that the dividends go there?

If we're talking about the Isle of Man/Curaçao-style of offshore companies, people use all sorts of different arrangements. Some pay themselves dividends, some act as contractors for their offshore company, and some pay themselves a salary from the offshore company. Cyprus is full of tax incentives to make it work at low or no tax.

Do you think we should make the move to UAE or just find a better solution to optimize what we have right now on Cyprus?

I think that if I were in your shoes, I would set up an appointment with a reputable tax adviser in Cyprus. Explain to them how your business works (make sure they understand it) and ask them for recommendations for corporate and personal tax. If you go to an international firm (which I prefer), also discuss the option of using them to set up an overseas company tax residents in another zero-tax jurisdiction.

It's possible there is something about your business that makes it incompatible with the usual Cyprus non-dom residents setup – can't think of what that'd be, though.

 

[HKS]

Hi Jim,

I was in UAE for 13 years, and also have a company in Cyprus.
The advice you have been given on Cyprus is correct. You need a better more up to date advisor as you should not have encountered the situation you have.

Regarding the options and set up in UAE. In reality its more in-depth and complex than you are always led to believe.
I would use a local based UAE company and Not an international one as they still have to go through a local entity to finalise the work, adding more time and and more cost to you.

A company which is able to help you is Business without Borders based out of Sharjah. They can set you up on many locations in UAE. Ask to speak to a lady called Fairoza if you choose to make contact. I don't have any commercial connection with them, I have used them many times and they are professional. I know Fairoza for 13 years as she was working in the Government offices for Freezones. Very helpful then and still today.
You will get an impartial view from her and nothing hidden.

Wish you the best.

Regards

HK

 

[HKS]

Forgot to mention, just to a google search for that company in sharjah. Its the 1st listing under the Ads..

 

[JimBeam]

I can't comment for sure and I could be wrong or misunderstanding something but this sounds dodgy... If I were you, I'd think about approaching another corporate service provider and tax adviser.

Yeah looks doggy to me that additional 1% on top of 12.5...
Don't know where and how to check that...

Also, we issue 3-4 invoices a month and pay 6-8 bills per month on average. Yet our accounting and auditing cost is 2.200 EUR + VAT (totaling to about 2.600 EUR).
Can you comment on that price. Seems a lot to me since we're not a big company and don't have to many things going on.

e're talking about the Isle of Man/Curaçao-style of offshore companies, people use all sorts of different arrangements. Some pay themselves dividends, some act as contractors for their offshore company, and some pay themselves a salary from the offshore company. Cyprus is full of tax incentives to make it work at low or no tax.

We wanted to setup a Panama company so we could invoice services to Company at Cyprus and transfer money out so we end up paying less corporate tax at the end of the year.

I think that if I were in your shoes, I would set up an appointment with a reputable tax adviser in Cyprus. Explain to them how your business works (make sure they understand it) and ask them for recommendations for corporate and personal tax. If you go to an international firm (which I prefer), also discuss the option of using them to set up an overseas company tax residents in another zero-tax jurisdiction.

It's possible there is something about your business that makes it incompatible with the usual Cyprus non-dom residents setup – can't think of what that'd be, though.

Got anyone to recommend?

 

[JimBeam]

I was in UAE for 13 years, and also have a company in Cyprus.
The advice you have been given on Cyprus is correct. You need a better more up to date advisor as you should not have encountered the situation you have.

If you've got anyone to recommend.
How would you compare these two?

Regarding the options and set up in UAE. In reality its more in-depth and complex than you are always led to believe.
I would use a local based UAE company and Not an international one as they still have to go through a local entity to finalise the work, adding more time and and more cost to you.

A company which is able to help you is Business without Borders based out of Sharjah. They can set you up on many locations in UAE. Ask to speak to a lady called Fairoza if you choose to make contact. I don't have any commercial connection with them, I have used them many times and they are professional. I know Fairoza for 13 years as she was working in the Government offices for Freezones. Very helpful then and still today.
You will get an impartial view from her and nothing hidden.

Thanks for the contact.
I might give them a call.

But, UAE companies look quite complicated to setup...
I'm also worried about later running and renewal costs.
I was suggested to setup a company with Rakez in a free zone.

But that opens more question than it solves:
1. Do we need to have accounting and auditing?
2. There is no tax - but can I withdraw the funds from the account as I please?
3. In the case we incorporate there - we would get payments from Google in AED and it fluctuates a lot compared to USD/EUR (almost 10%) so we're exposed to exchange-rate risk.
4. I was told I'll have to go twice a year to renew visa/licenses/permits or whatever... (that's also pain in the a*s).

I'm just worried that I don't make things myself even more complicated (and expensive) as they are now.

 

[HKS]

But, UAE companies look quite complicated to setup...
I'm also worried about later running and renewal costs.
I was suggested to setup a company with Rakez in a free zone.

If you open and Rakez ( UAE offshore) company, getting a bank account is harder, unless you deposit and lock in 30-50 USD. It deposited to your account and you cannot use it. So if you have that level of liquidity to store away then its OK. UAE banks will assist you. They may still ask you for details and record of a onshore company out of UAE where they can gain more verification about you.

All UAE companies including Freezone ones are expected to have an annual audit on their licence renewal time. its a Joke as this never gets looked at and the audit is Mikey Mouse, they use 2-3 months of banks statements and work a 12 month factoring from that.. I have had this done many times. You still pay up to $800 USD for that for a small company.

Renewal costs are transparent and differ for Freezone companies and Offshore companies. Offshore having lower costs.
Each Freezone has different fees so they have to be checked out. RAK is one of the lower ones, Ajman is lower cost. Don't even think about UAQ, its low but you get No reputation and credibility for any further assistance from banks and other institutions.

If you take a Freezone licence you need a visa which means you travel about 6-8 months for a few days. Its more flexible that the written 6 month rule, but beyond 8 months is risky.

our banking options are flexible and no you dont face the issues as you have described with Cyprus.

 

[Sols]

Yeah looks doggy to me that additional 1% on top of 12.5...
Don't know where and how to check that...

Best would be to check with other corporate service providers. There might be a legitimate reason for the extra 1%. I'm just not aware of any.

Also, we issue 3-4 invoices a month and pay 6-8 bills per month on average. Yet our accounting and auditing cost is 2.200 EUR + VAT (totaling to about 2.600 EUR).
Can you comment on that price. Seems a lot to me since we're not a big company and don't have to many things going on.

If that's per month, you can hire a full-time accountant for less than that.

If it's per year, it's pretty reasonable. You might be able to find cheaper but it's common for accounting firms to have a minimum commitment which starts around the 2-3,000 EUR/year range for a VAT registered company. Being VAT registered does add some extra complexity to accounting and filing.

Got anyone to recommend?

Cyprus is full of reputable international firms such as Vistra, Grant Thornton, Appleby, and Baker Tilly. In Cyprus, I've had better experience with international firms than with local ones.

 

[JimBeam]

If you open and Rakez ( UAE offshore) company, getting a bank account is harder, unless you deposit and lock in 30-50 USD. It deposited to your account and you cannot use it. So if you have that level of liquidity to store away then its OK. UAE banks will assist you. They may still ask you for details and record of a onshore company out of UAE where they can gain more verification about you.

We were generally looking into free-zone company (not the offshore one) and we need the company to have bank account in UAE.
Does that 30-50k rule applies to any type of company (freezone, offshore, local)?
Asking since no-one so far mentioned that bank will lock 30-50k.
(They told me that they usually apply in couple banks and usually they get at least one bank account open)

All UAE companies including Freezone ones are expected to have an annual audit on their licence renewal time. its a Joke as this never gets looked at and the audit is Mikey Mouse, they use 2-3 months of banks statements and work a 12 month factoring from that.. I have had this done many times. You still pay up to $800 USD for that for a small company.

Renewal costs are transparent and differ for Freezone companies and Offshore companies. Offshore having lower costs.
Each Freezone has different fees so they have to be checked out. RAK is one of the lower ones, Ajman is lower cost. Don't even think about UAQ, its low but you get No reputation and credibility for any further assistance from banks and other institutions.

If you take a Freezone licence you need a visa which means you travel about 6-8 months for a few days. Its more flexible that the written 6 month rule, but beyond 8 months is risky.

our banking options are flexible and no you dont face the issues as you have described with Cyprus.

Thanks for all the details. We heard only about RAK but I'll check other too...

 

[JimBeam]

If that's per month, you can hire a full-time accountant for less than that.

If it's per year, it's pretty reasonable. You might be able to find cheaper but it's common for accounting firms to have a minimum commitment which starts around the 2-3,000 EUR/year range for a VAT registered company. Being VAT registered does add some extra complexity to accounting and filing.

For example in previous year we issued 36 invoices (3 per month) and have paid 61 bills. Our company is VAT registered but we don't do any business with local companies (except paying for accounting services), so we don't charge any VAT and do pay that little VAT. They submit the VAT returns for us and also submit invoices we issue for some VIES stuff at the beginning of every month for the previous.

Cyprus is full of reputable international firms such as Vistra, Grant Thornton, Appleby, and Baker Tilly. In Cyprus, I've had better experience with international firms than with local ones.

Thanks!
I'll take a look.

 

[TurnedToRobot]

I think that if I were in your shoes, I would set up an appointment with a reputable tax adviser in Cyprus. Explain to them how your business works (make sure they understand it) and ask them for recommendations for corporate and personal tax. If you go to an international firm (which I prefer), also discuss the option of using them to set up an overseas company tax residents in another zero-tax jurisdiction.

That is exactly what you should do, best advise someone can give you here in your situation.

 

[Nicholas Van Orton]

@JimBeam - Notwithstanding @darkster and @Sols 's advice, if you think UAE -which is a very good option if done properly- and have the pocket for it, I'd definitely suggest going for a LLC company (onshore), regardless of any business being done within the Emirates. @Hanif 's suggested corporate broker in Sharjah will be a very good help given the profile of its directors (I recommend going with a firm that employs someone who's got first-hand experience within the intricate bureaucracy of government paperwork), but even then I'd refrain from a Freezone setup. Offshore and freezone setups are under far more scrutiny these days (offshore setups are actually blacklisted by some banks in order to do business with them, as it's been pointed out before in this forum). Even legit FZ/FZE setups are required these days to park some substantial capital (some up to 75K) in order to prove their muscle and reliability; corporate brokers pointing at 'easy bank account opening process' deals are rather misleading and it isn't as rosy a picture as they paint it, let alone the multiple Qs you will face, and the usually longer length of time before your bank acc is opened (regular timespan is about 7-8 days, for FZ/FZE setups it can be over 1 month). It used to be easy and fun, but not anymore. I guess being a former UK protectorate, the UAE has to cave in when it comes to tackling tax evasion following its 'masters' orders', and as the UK/EUSSR get even hungrier for their citizens' money, things need to be water-tight in order to be viable in the long run.
You appear to have a lgitimate business with a decent turnover and bill count. With all that, best to go with an LLC (total cost around $65K), become a shareholder and get a resident visa. You'll find yourself in a 0% PIT and CT (the 4-5% VAT is not applicable to you, I understand) environemnt I think you'll quite enjoy.
I personally believe the UAE trumps many other jurisdictions and setups (Cyprus included -after all, it's part of the EUSSR and the one that set the nice bail-in example of what's to come-), so I wouldn't spare a dime doing it the right way there.

 

[JohnLocke]

Are there any major differences between UAE and Cyprus when it comes to privacy?

 

[Sols]

Are there any major differences between UAE and Cyprus when it comes to privacy?

Cyprus has completely public company information (directors, shareholders, financial statements), whereas UAE does not. It is a bit cumbersome to obtain the documents in Cyprus since you need to identify yourself in person or via an agent to complete the otherwise electronic registration. They're trying to make it as difficult as possible while still being EU compliant. You can of course get your name out of the public eye by using nominees, but that doesn't solve the financials being public.

In UAE, with its many different Emirati and other subnational jurisdictions (free zones), it is much easier to hide this information.

 

[JimBeam]

@JimBeam - Notwithstanding @darkster and @Sols 's advice, if you think UAE -which is a very good option if done properly- and have the pocket for it, I'd definitely suggest going for a LLC company (onshore), regardless of any business being done within the Emirates. @Hanif 's suggested corporate broker in Sharjah will be a very good help given the profile of its directors (I recommend going with a firm that employs someone who's got first-hand experience within the intricate bureaucracy of government paperwork), but even then I'd refrain from a Freezone setup. Offshore and freezone setups are under far more scrutiny these days (offshore setups are actually blacklisted by some banks in order to do business with them, as it's been pointed out before in this forum). Even legit FZ/FZE setups are required these days to park some substantial capital (some up to 75K) in order to prove their muscle and reliability; corporate brokers pointing at 'easy bank account opening process' deals are rather misleading and it isn't as rosy a picture as they paint it, let alone the multiple Qs you will face, and the usually longer length of time before your bank acc is opened (regular timespan is about 7-8 days, for FZ/FZE setups it can be over 1 month). It used to be easy and fun, but not anymore. I guess being a former UK protectorate, the UAE has to cave in when it comes to tackling tax evasion following its 'masters' orders', and as the UK/EUSSR get even hungrier for their citizens' money, things need to be water-tight in order to be viable in the long run.
You appear to have a lgitimate business with a decent turnover and bill count. With all that, best to go with an LLC (total cost around $65K), become a shareholder and get a resident visa. You'll find yourself in a 0% PIT and CT (the 4-5% VAT is not applicable to you, I understand) environemnt I think you'll quite enjoy.
I personally believe the UAE trumps many other jurisdictions and setups (Cyprus included -after all, it's part of the EUSSR and the one that set the nice bail-in example of what's to come-), so I wouldn't spare a dime doing it the right way there.

Nicholas thank you for your input. Again I was suggested a free-zone company. The person will help us open bank account. I'm more concerned about the costs of running the show and since I have no experience with that company - tips on how to actually use it. Also one thing I'm interested is what are the chances some things get changed there like: their goverment introduces corporate tax as they need more money (oil running out and they are used to lavish lifestyle), bank closing or freezing our account for any reason possible, company requirements change for eg. that I need to have someone actually working there or local employee (that would suck since I do business online and don't need anyone actually doing any kind of work there.

Cyprus has completely public company information (directors, shareholders, financial statements), whereas UAE does not. It is a bit cumbersome to obtain the documents in Cyprus since you need to identify yourself in person or via an agent to complete the otherwise electronic registration. They're trying to make it as difficult as possible while still being EU compliant. You can of course get your name out of the public eye by using nominees, but that doesn't solve the financials being public.

In UAE, with its many different Emirati and other subnational jurisdictions (free zones), it is much easier to hide this information.

So I would say both are pretty good with hiding your identity (on their own way). I'm more interested in differences in taxation and running costs. These are important to see if UAE is worth the hustle. Also,
since there's no corporate tax in UAE can you then use company money as your own (payout dividends as you please) ? Do you need to maintain books, have invoices, have a real accountant?

 

[Sols]

So I would say both are pretty good with hiding your identity (on their own way). I'm more interested in differences in taxation and running costs. These are important to see if UAE is worth the hustle. Also,
since there's no corporate tax in UAE can you then use company money as your own (payout dividends as you please) ? Do you need to maintain books, have invoices, have a real accountant?

You are required to maintain books and have invoices. I'm not aware of any jurisdiction where this isn't a requirement. Having an accountant usually isn't stipulated in the law, but it's usually easier than doing it yourself. However, with filing and audits being effectively optional due to the lack of control, many (lazy) business owners opt to not do any kind of accounting.

If you start treating a company's coffers as your own wallet, you're opening yourself up to liabilities outside of taxation. The "LL" part of "LLC" stands for Limited Liability, and that limitation is conditioned on the company effectively operating as a separate legal person. Basically, make sure that you move the money out of the company before you go grocery shopping. You can pay yourself a salary, dividends, and other means of disbursement. Just check what the personal taxation implications are for doing so (usually none for a place like UAE).

 

[HKS]

Jim,

Can I suggest a completely different approach?
Take min 5 working days to travel to the UAE. Reach there on a Friday so you have 1 day of rest as work starts on a Sunday.
See the place, to get a 'real' sense of the way things are.
1. Go and interview banks about your business. Keep the descriptions simple and ask If you open a LLC or FZC what they feel. Go to ALL the major banks
2. Make appointments with 2-3 formation companies and see what they can suggest and prove with a recent reference of who they have assisted in the past 2-3 months.
3. Try to meet some possible local partners for an LLC.
There are some adverts running in the Gulf News classifieds section from local Emiratis who have existing business licences and will offer offices, bank account support etc etc if you take up their offer as 'sponsor' for the LLC.

Its worth the trip and many of the grey areas you are facing will be clearer.
Be focussed and be aware that they are excellent in Marketing and giving you a pitch that makes you truly believe they have the 'golden key' to your answers, that the wold their is perfect and rosy, with everything being simple and easy..
Its not and its the same as the rest of world, with paperwork and processes.

Go in with a sense of reality and open eyes and you can find you will be able to make the right choices.

I dont make any suggestion to start a business on this trip . Quite the opposite.. Its purely fact finding.. So treat it this way and you will learn a great deal to direct you forward.

Best of luck..

HK

 

[rowena]

Of course, go and setup FZC in a reputable zone(DWTC, DIC, Dubai South, DMCC). LLC will be only a waste of money. $15K will be enough for setup.

If you are paying more than $15K than it is rip off.