UAE (Dubai) / Andorra Dividends

[ironhide]

Hi all,
I have an Andorra residency and operational company in UAE.
Planning to set up a holding company in Andorra to distribute dividends from UAE company. Found this info:

The investee companies must be subject, without the possibility of exemption, to a minimum taxation of 4% or be resident in a country with which Andorra has signed a DTAA.

Since Andorra has DTAA with UAE, it seems like it is possible to pay 0% tax in Dubai, distribute dividends to Andorra and get it with 0% also.
But also read some info that I will need to provide documents to Andorra about paid taxes.
Do they need it for UAE? Maybe somebody has a similar experience?

 

[Martin Everson]

I have an Andorra residency and operational company in UAE.

Firstly does your UAE company meet UAE Economic Substance rules to be tax resident there?

I ask as Andorra introduced draft CFC rules to end use of offshore structures and zero tax schemes to comply with OECD rules? Plus UAE is one of 12 countries now reporting effective shell companies.

Since Andorra has DTAA with UAE, it seems like it is possible to pay 0% tax in Dubai, distribute dividends to Andorra and get it with 0% also.

Correct but see above.

Do they need it for UAE? Maybe somebody has a similar experience?

I would get real tax advice here. But in any case your tax liability is not exactly going to be high in worst case.

 

[ironhide]

Firstly does your UAE company meet UAE Economic Substance rules to be tax resident there?

Seems like yes. The company provides IT services (out of the list of substance-regulated activities). Also, my partner lives in the UAE, so it's not like I'm using this company only to lower my taxes.
But I'm holding 50% of the shares and maybe it hits CFC and I'm missing something?

But in any case your tax liability is not exactly going to be high in worst case.

It's true

 

[bedouin]

Firstly does your UAE company meet UAE Economic Substance rules to be tax resident there?

Hi. Can you cite these requirements? Thank you.

 

[Fred]

Seems like yes. The company provides IT services (out of the list of substance-regulated activities). Also, my partner lives in the UAE, so it's not like I'm using this company only to lower my taxes.
But I'm holding 50% of the shares and maybe it hits CFC and I'm missing something?


It's true

In this case you are all set as it's most likely a Freezone Company which grants your Partner actually living in the UAE full time the Dubai Residence Visa anyway - further you can if not already done - structure the positions that your partner in the UAE has all operational positions like Director, Secretary while you are "just" 50% shareholder - in this case you can claime the effetive place of management is the UAE and not Andorra.

Hi. Can you cite these requirements? Thank you.

If you have a old school Offshore Company let's say in RAK like a RAK ICC which doesn't grant you a Residence Visa and doesn't have any other substance - just using the registered agents office as registered address - it's a shell company and according to some articles getting reported by the UAE since last year - what I personal again doubt just based on the work behind who would need to be done - unrealistic to me seeing how they act in other areas.

 

[Mda]

For many, such setup would see fixed costs adding up for little gain to nothing : Dubai FRZ company + travel expenses + holding in Andorra + additional accounting / admin fees
Better become freelance in Andorra under IRPF ? No more local company tax (800), personal tax rebates versus company (0% until 40k if in civil union or married), less misc fees (say 1500 minimum), savings on maintenance of bank accounts & transfers in the hundreds (personal at Myandbank & in EEA versus Business accounts in Dubai & buffed up in EEA eventually)
Estimated delta of possibly 12k+ /yr to not have to earn back.

Exploit the discounted CIT regimes at 2% of Andorra when possible, or royaltees at 5%. Immigrate with a circuit in the right order to not pay the foreign investment (15k, soon 50k), less not even talk of passive residency which is a waste of financials. Often, Andorra does not need a topping to be flavoured

 

[Marzio]

Exploit the discounted CIT regimes at 2% of Andorra when possible

How do you get access to the 2% regime? What are the requirements / limits?

Do you have any link?

Immigrate with a circuit

What do you mean?

 

[Mda]

How do you get access to the 2% regime? What are the requirements / limits?

Do you have any link?



What do you mean?

Software, brands, patents, managing intellectual property. I can recommend PI Advocats if in need to doublecheck the eligibility / imagine a configuration based on personal situation, since it's their specialty.

Get a job during 6 months (seek it or have a contact established on the ground create such position or a gestoria sell you such package). Once resident, mutate as freelance or create own company freely. This path will save you 50k to 800k very soon compared to direct residency formats, while taking less procedural time.

 

[Fred]

For many, such setup would see fixed costs adding up for little gain to nothing : Dubai FRZ company + travel expenses + holding in Andorra + additional accounting / admin fees
Better become freelance in Andorra under IRPF ? No more local company tax (800), personal tax rebates versus company (0% until 40k if in civil union or married), less misc fees (say 1500 minimum), savings on maintenance of bank accounts & transfers in the hundreds (personal at Myandbank & in EEA versus Business accounts in Dubai & buffed up in EEA eventually)
Estimated delta of possibly 12k+ /yr to not have to earn back.

Exploit the discounted CIT regimes at 2% of Andorra when possible, or royaltees at 5%. Immigrate with a circuit in the right order to not pay the foreign investment (15k, soon 50k), less not even talk of passive residency which is a waste of financials. Often, Andorra does not need a topping to be flavoured

You mentioned something like this already in another thread were I missed it to respond.

Don't get me wrong but people looking for simplicity and clear frameworks while in jurisdictions like Andorra you approach 5 Corporate Service Provider and each tells you something different - same goes for Cyprus and Malta.

You really need to have the time looking in all potential loopholes and ways of structuring while you get in Dubai a flat 0% Tax on everything (except local Business startingh 2023) along with a 0% Residence for less then 10.000 USD initial and 5.000 USD ongoing.

That's what the OP sees and now try to utilise in Andorra as well - 0% Tax is and will remain the Gold Standard.

 

[Martin Everson]

Hi. Can you cite these requirements? Thank you.

Sure....

Government:


https://mof.gov.ae/economic-substance-regulations/

KPMG:

https://home.kpmg/ae/en/home/servic...conomic-substance-regulations-in-the-uae.html

 

[Mda]

Let's not discriminate the real situation of the country. I've just screened a good chunk of the list of possible advisors because I'm maintaining several projects at disposal of associations without a business orientation to suspect my integrity.

It's possible to receive reliable advice that will only differ lightly with inconsistency towards gestorias notably (improvised unlicenced CSPs, which are not all worthless for having a terrain experience of running operations, some are competent), but almost never with lawyers which are very often cheaper anyway (gestorias can charge you 2 fold, seen almost 3 even 5 times more once).

If in doubt, crosscheck facts by applying willpower plus common sense. Initial consultations and remote ones are always free (never paid once and was never turned down for asking silly advice).

Also turn yourself towards the governmental initiatives & business clusters supporting orientation. There are phone lines and physical offices servicing as points of information to assist companies in their prospection through extensive support. Same at coworking spaces which can happen to have partnerships with the best gestorias then offering free counseling. Finally, speak to the community of expats already established. All blur will be cleared.

We're not talking of an intricated bureaucratic country like France but Andorra where the rules are stripped down and not a mind f**k to understand.



I've compared all available prices. Andorra should cost you no more than 6700 € for the initial setup (outside of the corporate capital), company plus residency paperwork & all official fees paid, including the assistance of the best lawyers or gestorias, then once in cruise mode, 200 € per annum in the specific case I described or 1000 € with a company (slightly more if numerous activities ran). Qualified accountants can be found starting at 30 € per hour at the lowest.

All things considered, adding Dubai should offer no financial edge until 100k or 150k (depending on the scenarios), then additional % benefits will start to climb up. Below with no perspectives of scaling, do not bother. In case of fluctuating revenues though, Andorra supporting less fixed expenses but some modulating tax arrangements will be more flexible with adaptibility than 0% : never an overpayment on this side of extreme.

Things evolve. Local multi-currency accounts can be free when feeding it with income with now free SEPA transfers or just at 13 € limitless of amount. The reputation of our banks appears to be half justified as old fashioned but also to receive more bad press than deserved, based on past appreciations. I have friends who tried UAE just to find out they were excluded from the PSPs of their choice targeted in EU, local banks found having cumbersome processes not exactly cheap, just to come back to Andorra and establish a side corp in UK or EEA instead. Globally, Andorra as center of operations is competitive. Only in rare circumstances, you'll be lacking, then you fix it with a patch.

-----

Re OP, about CFC applied in Andorra outside the scope of DTA :

"Dividends and capital gains are exempt of taxation in Andorra provided the profits of the subsidiary were subject to at least 4% tax (not the dividend) in its domiciled country, the share holding is a minimum 5%, and held for at least 1 year. If exemption rules do not apply, taxes paid abroad will be deductible against Andorra tax liability.

Also, a special tax regime can be obtained, which allows you to pay 0% tax on dividends and CGT, independently of the share % held by the subsidiary, provided the subsidiary has nominal shares (not bearer) and the subsidiary has paid at least 4% tax on profits."

 

[ironhide]

For many, such setup would see fixed costs adding up for little gain to nothing : Dubai FRZ company + travel expenses + holding in Andorra + additional accounting / admin fees
Better become freelance in Andorra under IRPF ? No more local company tax (800), personal tax rebates versus company (0% until 40k if in civil union or married), less misc fees (say 1500 minimum), savings on maintenance of bank accounts & transfers in the hundreds (personal at Myandbank & in EEA versus Business accounts in Dubai & buffed up in EEA eventually)
Estimated delta of possibly 12k+ /yr to not have to earn back.

Exploit the discounted CIT regimes at 2% of Andorra when possible, or royaltees at 5%. Immigrate with a circuit in the right order to not pay the foreign investment (15k, soon 50k), less not even talk of passive residency which is a waste of financials. Often, Andorra does not need a topping to be flavoured

You're right, two companies come with extra cost and extra headache. But in our case, my partner wants to live in UAE, and I want to live in Europe. And the Andorra-UAE bundle makes sense because savings on dividend taxes will cover setup expenses.

Re OP, about CFC applied in Andorra outside the scope of DTA :

"Dividends and capital gains are exempt of taxation in Andorra provided the profits of the subsidiary were subject to at least 4% tax (not the dividend) in its domiciled country, the share holding is a minimum 5%, and held for at least 1 year. If exemption rules do not apply, taxes paid abroad will be deductible against Andorra tax liability.

Also, a special tax regime can be obtained, which allows you to pay 0% tax on dividends and CGT, independently of the share % held by the subsidiary, provided the subsidiary has nominal shares (not bearer) and the subsidiary has paid at least 4% tax on profits."

Does this mean that if Dubai company pays 0% taxes, then I can't use 0% on dividends?
Or is this for countries outside the DTA and not applicable to UAE?

 

[Mda]

These are the general rules outside of a DTA, which state a foreign company controlled from Andorra can be exempt from corporate tax in Andorra if paying at least 4% abroad, otherwise it'll be fully liable of 10% as if tax resident in the country
Like pointed by others, your main stake is the residency control of the UAE company that you could prove
Consult a lawyer preferably. I suggest a few
https://www.virtusadvocats.comhttps://valentimarti.comhttps://advocats-andorra.comhttps://www.pi-advocats.com
I've attached the DTA translated from catalan to english as reference

 

[ironhide]

Thanks a lot for your thoughts and suggestions!

 

[Bill D]

I've compared all available prices. Andorra should cost you no more than 6700 € for the initial setup (outside of the corporate capital), company plus residency paperwork & all official fees paid, including the assistance of the best lawyers or gestorias, then once in cruise mode, 200 € per annum in the specific case I described or 1000 € with a company (slightly more if numerous activities ran). Qualified accountants can be found starting at 30 € per hour at the lowest.

how would you setup in andorra as a day trader (not only securities, crypto, maybe future, swaps, options etc) ?
It seems the 400k RE investment (or 500k depending the sites) or 50k Bond "this is a residence permit without the right to work you cannot work in the country using it and all income must come from abroad", but if you operate from there how does it work ?
I have seen that the 50k eur bonds is only if you come in as a targetted entrepreneur field, so not applied to traders.

 

[cyprustoomuch]

Hey @ironhide I am looking at andorra residency + a local company and additionally a 0% CIT offshore company too. How relaxed is andorra about offshore companies and what are their general substance requirements abroad? I would be interested in an US LLC, do you know how they tread indistributed income from such entities?

Can you tell me a bit about their banking options too? How easy are banks in Andorra about giving loans to newly established companies inside the country? What other banking options are available for you?

Cyprus is such a pain when it comes to banking...

 

[Konstanz]

Hey @ironhide I am looking at andorra residency + a local company and additionally a 0% CIT offshore company too. How relaxed is andorra about offshore companies and what are their general substance requirements abroad? I would be interested in an US LLC, do you know how they tread indistributed income from such entities?

Can you tell me a bit about their banking options too? How easy are banks in Andorra about giving loans to newly established companies inside the country? What other banking options are available for you?

Cyprus is such a pain when it comes to banking...

Andorra don't have CFC rulings. Also I dont think Andorra would care much about someone controlling foreign companies.
However, it's better to hear from people who have real experience with Andorra