Question Moving to Dubai to sell overseas company?

[Luxxxtino]

Hi all,

I'm currently a UK tax-resident but will soon be selling a HK-based company of which I'm the sole shareholder.

Of course, if possible, I'd like to (eventually) get this money back into a UK bank account while minimising my UK CGT liability.

I'm being advised that the way to do this would be to sell the company while I'm a tax resident in a country in which income tax is 0, so for example, living in Dubai for a tax year, during which I sell the company and transfer the proceeds from the HK business bank account to a British bank account (but not declaring it to HMRC as I'm no longer a UK tax resident).

I'm aware that, at some point, I'll probably have to hire a professional to advise me on an exact plan, but first wanted your guys' opinion on whether or not I'm looking at the right kind of rough plan.

Many thanks!

 

[Fred]

Hi,

The first step is to setup a company in Dubai that grants you the residence visa for the 0% tax residence. With the resoidence visa we setup bank accounts in local UAE banks for your company and for your personal use. As the bank accounts are opened with the residence visa the local banks consider you fully as UAE resident - therefore no reporting of your financial statements under the CRS. It's called residence by investment see the link below:

https://www.oecd.org/tax/automatic-...sistance/residence-citizenship-by-investment/
So selling the HK company and receiving the payment either to your company bank account or your personal bank account would be enough to have the funds offshore at 0% tax rate without moving ASAP.

Don't use your existing UK bank account that has still your UK residence on file. If you don't want the deposit to your bank accounts in the UAE use at least a bank account outside the UK that you verify with your new residence in the UAE.

CIM Bank in Switzerland would be a suggestion for private bank account. We have some workarounds with them so that you don't need a permanent apartment in the UAE to get the bank account opened.

However beside of that your UK bank account has still your UK residence on file the UK bank account can be count as substance by the HMRC to proof your tax liablity in the UK.

After the funds are place into an bank account outside the UK (local UAE bank is our suggestion for this) you can prepare yourself to move maybe on the 1st January of 2022 to Dubai and live there at least 6 Months with a flat to get your tax residence certificate so that you cut your ties and tax liability finally from the UK. Depending on the amount we talk about I suggest to add another year 2023 you get the tax certificate of the UAE as well.

After that time the funds are 100% legit taxed at 0% tax rate and ready to be remitted back to the UK. At this point I suggest to consult a lawyer and tax advisor in the UK that do the conversation with HMRC upfront to avoid any bad surprise.

That's it.

 

[Luxxxtino]

Hi,

The first step is to setup a company in Dubai that grants you the residence visa for the 0% tax residence. With the resoidence visa we setup bank accounts in local UAE banks for your company and for your personal use. As the bank accounts are opened with the residence visa the local banks consider you fully as UAE resident - therefore no reporting of your financial statements under the CRS. It's called residence by investment see the link below:

https://www.oecd.org/tax/automatic-...sistance/residence-citizenship-by-investment/
So selling the HK company and receiving the payment either to your company bank account or your personal bank account would be enough to have the funds offshore at 0% tax rate without moving ASAP.

Don't use your existing UK bank account that has still your UK residence on file. If you don't want the deposit to your bank accounts in the UAE use at least a bank account outside the UK that you verify with your new residence in the UAE.

CIM Bank in Switzerland would be a suggestion for private bank account. We have some workarounds with them so that you don't need a permanent apartment in the UAE to get the bank account opened.

However beside of that your UK bank account has still your UK residence on file the UK bank account can be count as substance by the HMRC to proof your tax liablity in the UK.

After the funds are place into an bank account outside the UK (local UAE bank is our suggestion for this) you can prepare yourself to move maybe on the 1st January of 2022 to Dubai and live there at least 6 Months with a flat to get your tax residence certificate so that you cut your ties and tax liability finally from the UK. Depending on the amount we talk about I suggest to add another year 2023 you get the tax certificate of the UAE as well.

After that time the funds are 100% legit taxed at 0% tax rate and ready to be remitted back to the UK. At this point I suggest to consult a lawyer and tax advisor in the UK that do the conversation with HMRC upfront to avoid any bad surprise.

That's it.

Hi there,

Thanks for the comprehensive response, Fred.

A few follow-up questions if I may:

1) Would this whole plan also work exactly the same if it was a Uk-based LTD company that I'm selling rather than a HK-based one as mentioned in my initial post?

2) Roughly at what kind of 'amount' would it be advisable to stay there for 18 months rather than just the 6?

3) So you're essentially advising that before enacting any of this, I get written approval from HMRC themselves (or just a certified lawyer/accountant?) saying that this will be fine to do?

My ultimate concern is that the HK structure I'm setting up currently will cost roughly £4k per year to run, which is worthwhile when running a company out of it, but less so once I've sold it, I'll be paying a few grand a year just to have money sitting in an account so I need some way of getting it back into a UK account (as optimally tax-wise as possible) so I can then shut down the HK structure.

Thanks again

 

[Gediminas]

Hi all,

I'm currently a UK tax-resident but will soon be selling a HK-based company of which I'm the sole shareholder.

Of course, if possible, I'd like to (eventually) get this money back into a UK bank account while minimising my UK CGT liability.

I'm being advised that the way to do this would be to sell the company while I'm a tax resident in a country in which income tax is 0, so for example, living in Dubai for a tax year, during which I sell the company and transfer the proceeds from the HK business bank account to a British bank account (but not declaring it to HMRC as I'm no longer a UK tax resident).

I'm aware that, at some point, I'll probably have to hire a professional to advise me on an exact plan, but first wanted your guys' opinion on whether or not I'm looking at the right kind of rough plan.

Many thanks!

Hey,

Overall the proposed plan is based on the fact that UK tax authorities will not be aware that you sold a company (under CRS UAE bank will not exchange information with the UK, since you are identified in the bank account as UAE resident). But if they are aware of this, most likely you would be liable to pay taxes in the UK, since at that time from a tax perspective you are still a UK tax resident. It is important to understand that when opening a bank account you need to disclose your all residencies, so giving only UAE-related information might also be questionable from a banking regulation perspective. Don't forget the banks will always ask what is the address in your homeland.

In any case, if in the future (as it was mentioned when your tax residency is already "strong" in UAE), you plan to remit funds to the UK, local tax authorities might investigate the path of the funds (as for all bank statements, etc.), and might discover that you received them while you are still UK tax resident. I mean a taxable moment of the income when you sold HK company, but not when you transferred funds from UAE to the UK.

Probably an option might be to contribute current shares of HK to holding company and then holding might sell the shares without taxes. But first UK tax advisor should advise on the way how to contribute these shares without negative tax implications. Plus that holding company should be in the country which does not apply dividends withholding tax when dividends are paid to the individual. Then you might change your tax residency to Cyprus or another country that does not apply taxes on received dividends for example. In any case, the involvement of the UK tax advisor is a must already at this stage.

I hope this helps.

 

[Gediminas]

p.s. maybe @James Turner would advise something there as well.

 

[Fred]

Hi there,

Thanks for the comprehensive response, Fred.

A few follow-up questions if I may:

1) Would this whole plan also work exactly the same if it was a Uk-based LTD company that I'm selling rather than a HK-based one as mentioned in my initial post?

2) Roughly at what kind of 'amount' would it be advisable to stay there for 18 months rather than just the 6?

3) So you're essentially advising that before enacting any of this, I get written approval from HMRC themselves (or just a certified lawyer/accountant?) saying that this will be fine to do?

My ultimate concern is that the HK structure I'm setting up currently will cost roughly £4k per year to run, which is worthwhile when running a company out of it, but less so once I've sold it, I'll be paying a few grand a year just to have money sitting in an account so I need some way of getting it back into a UK account (as optimally tax-wise as possible) so I can then shut down the HK structure.

Thanks again

@Gediminas mentioned everything. To be on the safe side you should have no substance in the UK like already canceled your UK resident, closed UK bank accounts etc. If you still have to stay physical there you have to make sure that you go with an AirBnb instead of renting an apartment the whole year in your name etc.

Your questions indicate you are very new to all the offshore stuff - your plan wouldn't work with a UK LTD.

In short - you have to reduce substance in the UK and build substance abroad everything else will lead to be taxable in the UK - same for your question regarding if the process would work with UK LTD - it wouldn't work because the UK LTD is additional substance in the UK and not abroad.

 

[Luxxxtino]

Hey,

Overall the proposed plan is based on the fact that UK tax authorities will not be aware that you sold a company (under CRS UAE bank will not exchange information with the UK, since you are identified in the bank account as UAE resident). But if they are aware of this, most likely you would be liable to pay taxes in the UK, since at that time from a tax perspective you are still a UK tax resident. It is important to understand that when opening a bank account you need to disclose your all residencies, so giving only UAE-related information might also be questionable from a banking regulation perspective. Don't forget the banks will always ask what is the address in your homeland.

In any case, if in the future (as it was mentioned when your tax residency is already "strong" in UAE), you plan to remit funds to the UK, local tax authorities might investigate the path of the funds (as for all bank statements, etc.), and might discover that you received them while you are still UK tax resident. I mean a taxable moment of the income when you sold HK company, but not when you transferred funds from UAE to the UK.

Probably an option might be to contribute current shares of HK to holding company and then holding might sell the shares without taxes. But first UK tax advisor should advise on the way how to contribute these shares without negative tax implications. Plus that holding company should be in the country which does not apply dividends withholding tax when dividends are paid to the individual. Then you might change your tax residency to Cyprus or another country that does not apply taxes on received dividends for example. In any case, the involvement of the UK tax advisor is a must already at this stage.

I hope this helps.

Hi,

Thanks for this. Are you saying that, due to CRS, if I were to sell an asset owned by the HK co. (of which I'm not a director but the sole shareholder), I'll still be liable for UK CGT on that sale if I'm currently a UK tax resident, even if the proceeds stay in HK inside the company's bank account?

If so, I assume the smarter move for me at this point (still in the process of setting up HK co.) would be to set the company up in a non-CRS country?

Thanks again.

 

[Gediminas]

Hey,

I think it is at least a risk that UK tax authorities might apply CFC or other "anti-tax avoidance rules" based on such income. If HK company had economic substance and would be HK resident company it should not be an issue (HK and UK have a treaty for the avoidance of double taxation), but as you probably understand this is not very easy to achieve.

 

[Fred]

Hi,

Thanks for this. Are you saying that, due to CRS, if I were to sell an asset owned by the HK co. (of which I'm not a director but the sole shareholder), I'll still be liable for UK CGT on that sale if I'm currently a UK tax resident, even if the proceeds stay in HK inside the company's bank account?

If so, I assume the smarter move for me at this point (still in the process of setting up HK co.) would be to set the company up in a non-CRS country?

Thanks again.

If you didn't setup the HK company and don't want to spend much more money on a HK residence company - go with a Dubai non-CRS setup that grants you easier and cheaper the residence visa. Let alone the flights from UK to HK will be double to the costs of flying from UK to UAE.

 

[Gediminas]

go with a Dubai non-CRS setup

This might be a little misleading because UAE is a member of CRS. Bay saying non-CRS setup, you are just betting that there won't be any triggers and the tax office won't know about you. It's not always the case hehe.

Yes, if you become a resident in UAE it won't trigger CRS at that time, but it won't be the case in the future if the UK tax office will sit on it and investigate.

It's all about how much risk you are willing to take. Either to cut some costs at your setup and then open yourself for risk, or do it well planned and stay not worried in the future.

 

[Gediminas]

some offshore service providers want just to sell you their services. But be carefull. Just having a UAE residence permit will not be enough.

Exactly. If you are unsure about your tax situation, it's always better to have relations with the service providers that could also consult you on legal matters (including taxation). We have a lawyer in our team who is a guru in international taxation.

@Luxxxtino let me know if you wish to schedule a complimentary call with me and my partner, so we could speak more in detail about your current situation and goals.

 

[LoveMyLife]

Exactly. If you are unsure about your tax situation, it's always better to have relations with the service providers that could also consult you on legal matters (including taxation). We have a lawyer in our team who is a guru in international taxation.

@Luxxxtino let me know if you wish to schedule a complimentary call with me and my partner, so we could speak more in detail about your current situation and goals.

I do not say you should not use service of Gediminas. I just warn you. Beware of all offshore resellers. Use service of licensed specialists in a countries involved. Using offshore resellers service does not make any sense. Their added value is low or none. You do not need anyone just to bill you 2-3 higher prices for emails and mail forwarding in real.

 

[Luxxxtino]

I do not say you should not use service of Gediminas. I just warn you. Beware of all offshore resellers. Use service of licensed specialists in a countries involved. Using offshore resellers service does not make any sense. Their added value is low or none. You do not need anyone just to bill you 2-3 higher prices for emails and mail forwarding in real.

Yep, understood and agreed. I'm working with a pretty reputable company to get the HK setup done properly (nominee directors etc.). I'm looking at $11k first-year and then roughly $5k per year for everything. I'm still experiencing some sticker shock from these numbers but am reconciling those feelings with the logic that the savings tax-wise make it worth it. I also know that this company is very experienced in these setups so will substantially reduce the risk on my side (vs me trying on my own or using a Hk-based corp services company for the setup). Does this logic seem sound or would you say I'm getting fleeced here? Thanks

 

[Gediminas]

Yep, understood and agreed. I'm working with a pretty reputable company to get the HK setup done properly (nominee directors etc.). I'm looking at $11k first-year and then roughly $5k per year for everything. I'm still experiencing some sticker shock from these numbers but am reconciling those feelings with the logic that the savings tax-wise make it worth it. I also know that this company is very experienced in these setups so will substantially reduce the risk on my side (vs me trying on my own or using a Hk-based corp services company for the setup). Does this logic seem sound or would you say I'm getting fleeced here? Thanks

You want to speak with UK legal advisors as well. As I mentioned earlier, maybe @James Turner could help with that.

 

[LoveMyLife]

Yep, understood and agreed. I'm working with a pretty reputable company to get the HK setup done properly (nominee directors etc.). I'm looking at $11k first-year and then roughly $5k per year for everything. I'm still experiencing some sticker shock from these numbers but am reconciling those feelings with the logic that the savings tax-wise make it worth it. I also know that this company is very experienced in these setups so will substantially reduce the risk on my side (vs me trying on my own or using a Hk-based corp services company for the setup). Does this logic seem sound or would you say I'm getting fleeced here? Thanks

You need to talk to people who understand UK tax law as well as foundation law in at least few foreign countries..

 

[Fred]

This might be a little misleading because UAE is a member of CRS. Bay saying non-CRS setup, you are just betting that there won't be any triggers and the tax office won't know about you. It's not always the case hehe.

Yes, if you become a resident in UAE it won't trigger CRS at that time, but it won't be the case in the future if the UK tax office will sit on it and investigate.

It's all about how much risk you are willing to take. Either to cut some costs at your setup and then open yourself for risk, or do it well planned and stay not worried in the future.

Exactly. That's why I mention all the time that a tax residence certificate is necessary once you want to relocate back to your home country or in this case the UK. I can't see an issue with the above mentioned setup when @Luxxxtino cancel his UK residence start with a Dubai setup that grants him the residence visa and therefore don't trigger any CRS. When the sale is done and he already has the residence visa in the UAE and canceled his residence in the UK as well as other substance - I really can't see any issue. Of course it's not a permanent solution but moving out of the country from one day to another isn't that easy for most people.

 

[Luxxxtino]

You need to talk to people who understand UK tax law as well as foundation law in at least few foreign countries..

The company I'm using are certainly well-versed in UK law. Apologies for my ignorance here, but what does 'foundation' mean in this use-case? Thanks again.

 

[LoveMyLife]

The company I'm using are certainly well-versed in UK law. Apologies for my ignorance here, but what does 'foundation' mean in this use-case? Thanks again.

Foundation as entity for holding assets. See for exsmple Panamian Private Interest Foundation, etc.. Just google it..

 

[Luxxxtino]

Perfect, thanks for the link. I've done further reading today and it appears I'd have to spend, in fact, 5 years as UK non-resident to become CGT exempt, a period of time I'm not quite comfortable committing to right now. A possible workaround may be to go out for a year as an 'employee' of the company, during which one of the company's main assets is sold and the proceeds are then disbursed to the shareholders (I'm the sole shareholder) as dividends. In this case, I believe we're only looking at dividend/income tax rather than CGT, meaning I'd only need to go abroad for a single year. Regardless, this is probably outside my risk comfort zone so I'll hold off on anything until I'm comfortable committing to 5 years outside the UK. Thanks again, all!