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Suggestion for Tax free Jurisdiction for Software company....Dubai Freezone Alternative

troubled soul

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Aug 23, 2020
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As Dubai Free zone is best solution for zero tax ...As it become complicated...What are the good alterative for tax saving ? Simple solution not complex...
What are your suggestion ? Singapore, HK or any other

@Martin Everson What will be your advice for this ? Dump Dubai and Pay tax in some reputable country.....or You can still take risk of using Dubai free zone....
 
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@Martin Everson What will be your advice for this ? Dump Dubai and Pay tax in some reputable country.....or You can still take risk of using Dubai free zone....

Hummmm......

Unless you like the lifestyle in Dubai and hate lifestyle in Malta why would anyone want to pay 9% in Dubai when you can pay 5% in Malta? However EU is not an option for many without an EU passport due to residency requirements, EU laws etc etc.

Alternatively you got Bermuda, Cayman Islands and a few other Caribbean countries plus many freezones around the world like in Kazakhstan etc.

In any case lets see how this plays out with UAE? UAE maybe playing on fact that there maybe lower corporate tax places but they are not so easy to get residency, not so developed and not so easy to travel to.
 
Simple solution not complex...

Didn't I answer the same question a little more than a week ago?

If you want simple the first that comes to mind is Georgia.

Right now is the only place where you could achieve 0% CIT with relatively low cost by forming a virtual zone company combined with a UAE holding (holding of shares is a qualifying activity)

Now that Paysera got a Georgia banking license international payments should be easier.
 
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Alternatively you got Bermuda, Cayman Islands and a few other Caribbean countries plus many freezones around the world like in Kazakhstan etc.
Thanks for reply....
Yes Cayman islands seems nice option....and many major International bank like Barclay, BNP Paribas etc have branch there......Even Barclay international accept customer resident of Cayman Island.....They almost ban all Caribbean island except Cayman Island ....
 
US LLC and you live where this is tax free or low tax.

US LLC for a software company could work only if:

1. you are a one man show with tax residency in a territorial taxation country that doesn't care you working from there like Panama or tax free country like Cayamn.

2. your tax residency is a territorial taxation country or tax free country AND you don't hire anybody but work with freelancers because the moment you hire people in other jurisdictions you run the risk of creating a PE in that jurisdiction.

If you need people on the ground working for you, right now, Georgia is the only place where you could achieve 0% CIT
 
US LLC for a software company could work only if:

1. you are a one man show with tax residency in a territorial taxation country that doesn't care you working from there like Panama or tax free country like Cayamn.

2. your tax residency is a territorial taxation country or tax free country AND you don't hire anybody but work with freelancers because the moment you hire people in other jurisdictions you run the risk of creating a PE in that jurisdiction.

If you need people on the ground working for you, right now, Georgia is the only place where you could achieve 0% CIT
Georgia works well, indeed. However, to avoid a 5% dividend withholding tax, you probably need to set up a holding (e.g., in UAE, Estonia).

Since UAE is 9%, you can as well expand your scope to 10% CIT countries with better currencies like Kosovo (EUR), and Timor Leste (USD).
 
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However, to avoid a 5% dividend withholding tax, you probably need to set up a holding (e.g., in UAE, Estonia).

Yes, i said so here and didn't include Estonia as a holding location because of the neverending EU directives that the company will have to obey to.

Since UAE is 9%, you can as well expand your scope to 10% CIT countries with better currencies like Kosovo (EUR), and Timor Leste (USD).

If you consider how unstable is the situation is in the balcans i don't know if i would move there but i agree, it's an option.
 
Hummmm......

Unless you like the lifestyle in Dubai and hate lifestyle in Malta why would anyone want to pay 9% in Dubai when you can pay 5% in Malta? However EU is not an option for many without an EU passport due to residency requirements, EU laws etc etc.

Alternatively you got Bermuda, Cayman Islands and a few other Caribbean countries plus many freezones around the world like in Kazakhstan etc.

In any case lets see how this plays out with UAE? UAE maybe playing on fact that there maybe lower corporate tax places but they are not so easy to get residency, not so developed and not so easy to travel to.

Unfortunately they say that the full imputation system will be removed. Maybe it will last a few more years... who knows.
 
Didn't I answer the same question a little more than a week ago?

If you want simple the first that comes to mind is Georgia.

Right now is the only place where you could achieve 0% CIT with relatively low cost by forming a virtual zone company combined with a UAE holding (holding of shares is a qualifying activity)

Now that Paysera got a Georgia banking license international payments should be easier.
Have you heard about Tbilisi Free Zone?

Because this sounds too good to be true in terms of tax and eligibility.
 
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Have you heard about Tbilisi Free Zone?

Because this sounds too good to be true in terms of tax and eligibility.

Feel free to reach out if you want to get started in Georgia.
The country offers vast benefits and special tax zones/regimes:
STC (Special Trade Company)

STC regime is designed for Georgian companies dealing with international trade. The company is structured in the same way as the local LLC and the STC license issued by the Revenue Service.

The condition for obtaining the STC certificate is trading outside Georgia.

Example: a company established in Georgia buying goods from China and selling them to Poland. Taxation: exemption from corporate income tax in Georgia.

International Company (IC)

IC regime is designed for Georgian companies dealing with IT services and/or commercial and maintenance services by a shipowner and/or services related to ship ownership. The company is structured in the same way as the local LLC and the IC license issued by the Revenue Service.

The condition of obtaining the IC certificate is for the LLC which has at least two years of experience in carrying out the permitted activities or which is a representative of a non-resident enterprise in Georgia; if the non-resident enterprise has at least two years of experience or more than 50% of shares are owned by partner enterprises independently (each partner separately), and which has at least two years of experience.

Example: a company established in Georgia performing IT or vessel maintenance services

Taxation: exemption from Dividend tax, VAT and property tax; Reduced tax for CIT and PIT in Georgia.


IT VIRTUAL ZONE (VZ)

VZ regime is designed for Georgian companies dealing with IT (information technology) services exported outside Georgia. The company is structured in the same way as the local LLC and the VZ license issued by the Revenue Service.

The condition of obtaining the VZ certificate is performing IT services to entities located outside Georgia.

Example: Georgian company performing software development services to a Polish company. Taxation: exemption from corporate income tax in Georgia.


FREEZONES:
All Free Zones provide generous investment incentives such as the possibility of 100% foreign ownership, no corporate taxation, no restriction on repatriation of capital and profits, no exchange control, and no restrictions on investment in any industrial sectors.

Important considerations:
  • Importing goods from Georgia to Free Zone is exempt from all taxes except 4% duty
  • Importing goods from countries other than Georgia is exempt from all taxes
  • Exporting goods abroad are exempt from all taxes
  • Exported products to the territory of Georgia should include VAT and 4%
 
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Georgia works well, indeed. However, to avoid a 5% dividend withholding tax, you probably need to set up a holding (e.g., in UAE, Estonia).

Estonia would not work as they have a "subject to tax" rule similar to what Singapore has. Dividends paid out from the Estonian holding would be subject to 20% tax.
Also if you sell the company in Georgia, the profit would be subject to 20% tax in Estonia once you pay them out from the holding company.
Cyprus would be a better place for a holding company, or the UAE.

Other solutions that come to mind:

Cyprus with the 90-day foreign employment rule (if it works):

Cyprus with a local company:
12.5% corporate income tax, but you could use company expenses to reduce that further - I've heard that the tax authorities are very flexible in what they allow.
Some minimum tax/social security on dividends, otherwise no capital gains tax.

Estonia:
20% CIT only applicable to dividends. Strong tax treaty network.
Rent a cheap apartment and declare tax residency in Estonia. Live as a nomad. As long as you don't stay more than 183 days in another country or have an apartment there, Estonia's tax treaties should give you good protection. Good reputation - unlike Cyprus, Estonia wouldn't immediately raise questions for tax authorities in other countries.
You can save your money in the company and invest it tax free. Use company expenses to pay for most of your life. Say you need 100k for personal expenses - that would cost you 25k in taxes per year.
If you make 1M in profits per year, that's only 2.5% effective tax and you can travel freely in the Schengen zone (no passport checks within Schengen, unlike with e.g. Cyprus).

UAE with offshore company:
Use an offshore company with some substance abroad. Could be a US LLC with a manager in a territorial tax country. Someone mentioned the Philippines would be a good fit for this (and salaries in the Philippines are very low). Pay out dividends to yourself. Even transparent entities like US LLCs are only taxed in the UAE if there is a PE - and enforcement will be very weak for years to come. There's no requirement to declare anything in the UAE if there is no PE. With a manager outside the UAE, you can explain there's no PE in the UAE. That would be substantiated further if you don't have UAE clients and don't spend a lot of time in the UAE.
Or just use the above mentioned Georgian VZ company - Georgia has no WHT on dividends paid out to the UAE.
If you can't get a UAE Golden Visa (there are many ways to obtain one), you would still need a company for the visa. But that shouldn't be an issue, just invoice your offshore company for 100k per year, so you stay below the CIT threshold. That would even lower the risk of a UAE PE further. Or use the UAE for a holding company (since holding companies don't have to pay corporate income tax).

Portugal NHR with a company in Cyprus or Malta:
Low corporate income tax, no tax on dividends in Portugal. But there is some risk of a taxable PE in Portugal. However, so far, enforcement is weak. But there's always a risk that this could change.

@Martin Everson Do you have a bit more info about Kazakhstan?

How easy is it to find good developers in Georgia or Kazakhstan? What are typical salary ranges there?

IT VIRTUAL ZONE (VZ)

What would be typical setup and running costs of such a company?
 
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It virtual zone does not generate any extra costs per se, but you need substance (hire real employees).
 
No cost at all to incorporate the company? I guess you would need accounting services?
State fee is 32 EUR, rest of the fees are very much dependent on the service provider and services required. You can get a package with accounting, local directors and substance from like 5k euros/year.
 
according to https://virtualzonegeorgia.com they say
No legal requirements to employ staff in Georgia.
is this true?

why would you have UAE holding owning georgia company to avoid 5%? how is that possible? is there something in DTT agreement?
the same web site says this
In case of dividends payment (to a physical person or non-resident legal entity shareholder), the only Georgian tax on dividends payable is rated at 5% and is paid by the company to the state budget at the moment of dividends paid.
 

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