UAE Freezone and Ultimate Overseas Beneficiary

[MrDeddy]

Hi All,

I have been researching into setting up a freezone company to act as a brokerage for buying and selling IT hardware.

My original idea was to set the company up as a freezone company and purchase from factories then sell on to local partners - these would be partners not in the UAE - mainly SE Asia.

I was hoping for some advice re Ultimate Overseas Beneficiary and UAE reporting. a*s I understand it, UAE requires a registry of UOB for all company's - even freezone company's?

• Main questions is what is done with this information - is it automatically shared with the relevant authority in my country of residence?
• Let's say I was resident in UK - the UAE authorities would automatically share this information with the UK authority / HMRC?

My plan was initially to take UAE residency with the company setup and move to the UAE only after the company was profitable. This would mean technically I will be tax resident elsewhere and I am worried that this would cause issues and it is likely I would be reported to the local tax authority if I did not declare the earnings of the freezone copany.

If anyone has any insight or experience of this it would be great to understand more.

Thanks,

 

[CaptK]

Hi All,

I have been researching into setting up a freezone company to act as a brokerage for buying and selling IT hardware.

My original idea was to set the company up as a freezone company and purchase from factories then sell on to local partners - these would be partners not in the UAE - mainly SE Asia.

I was hoping for some advice re Ultimate Overseas Beneficiary and UAE reporting. a*s I understand it, UAE requires a registry of UOB for all company's - even freezone company's?

• Main questions is what is done with this information - is it automatically shared with the relevant authority in my country of residence?
• Let's say I was resident in UK - the UAE authorities would automatically share this information with the UK authority / HMRC?

My plan was initially to take UAE residency with the company setup and move to the UAE only after the company was profitable. This would mean technically I will be tax resident elsewhere and I am worried that this would cause issues and it is likely I would be reported to the local tax authority if I did not declare the earnings of the freezone copany.

If anyone has any insight or experience of this it would be great to understand more.

Thanks,

What is your citizenship and residency currently.

 

[2diamondsaday]

As I know UAE is not in CRS, correct me if I am wrong

 

[Helkins]

As I know UAE is not in CRS, correct me if I am wrong

People really confuse this fact. Theoretically the UAE signed CRS and when you google it or visit wiki page it'll say the UAE is amongst the CRS countries although when you read the MOF document, ever since it says

"The UAE Competent Authority shall not exchange information under the CRS until it is satisfied that a reportable partner jurisdiction has in place adequate measures to ensure the required confidentiality and data security. These confidentiality obligations are evaluated by the Global Forum on Transparency and Exchange of Information for Tax Purposes through its implementation monitoring programme."

Meaning the UAE does NOT share details as of now but might opt to share it in the future.

 

[CounselRep]

Here are two links that give you information about:

1) which countries are committed to CRS; and

2) who they have then gone on and activated exchange relationships with.

1. The UAE has signed up to CRS/AEOI (look under 2018):

https://www.oecd.org/tax/transparency/AEOI-commitments.pdf

2. After signing up to AEOI, the UAE has then gone on to activate exchange relationships with 69 other CRS countries (just select "UAE" in the "From Jurisdiction" box for a list of who those 69 countries are):

https://www.oecd.org/tax/automatic-...framework-for-the-crs/exchange-relationships/
I'm not sure what happens in practice, but in theory at least, this second link suggests that the UAE is satisfied the 69 countries it has activated exchange relationship with have sufficient confidentiality and data security systems in place to share information with now (they wouldn't have added them to the list of 69 otherwise).

So it would be worth asking whether the details your UAE bank has links the account holder (or links the UBO, if the account holder is a Passive NFE registered in a non-CRS jurisdiction) back to one of those 69 countries.

 

[Helkins]

Here are two links that give you information about:

1) which countries are committed to CRS; and

2) who they have then gone on and activated exchange relationships with.

1. The UAE has signed up to CRS/AEOI (look under 2018):

https://www.oecd.org/tax/transparency/AEOI-commitments.pdf
View attachment 1895


2. After signing up to AEOI, the UAE has then gone on to activate exchange relationships with 69 other CRS countries (just select "UAE" in the "From Jurisdiction" box for a list of who those 69 countries are):

https://www.oecd.org/tax/automatic-...framework-for-the-crs/exchange-relationships/
I'm not sure what happens in practice, but in theory at least, this second link suggests that the UAE is satisfied the 69 countries it has activated exchange relationship with have sufficient confidentiality and data security systems in place to share information with now (they wouldn't have added them to the list of 69 otherwise).

So it would be worth asking whether the details your UAE bank has links the account holder (or links the UBO, if the account holder is a Passive NFE registered in a non-CRS jurisdiction) back to one of those 69 countries.

View attachment 1896

Based on what you’re quoting it’d seem like the UAE participates in the CRS, while that might be true I’d say it’s only in theory. I’ve had experiences with the tax office and strong prosecution with one of the EU countries UAE supposedly shares the information with and since 2007 till now they haven’t shared nor replied to any of the inquires of the national Tax bureau, DA office, MOFA or even judicial subpoenas.

 

[CounselRep]

Based on what you’re quoting it’d seem like the UAE participates in the CRS, while that might be true I’d say it’s only in theory. I’ve had experiences with the tax office and strong prosecution with one of the EU countries UAE supposedly shares the information with and since 2007 till now they haven’t shared nor replied to any of the inquires of the national Tax bureau, DA office, MOFA or even judicial subpoenas.

That's really interesting feedback about your experience, thank you.

You often see replies on this forum that are based on the "strict letter of the law". I'm not judging that approach at all - in fact if you can achieve that, for obvious reasons that's the best way to go. But it's also good to get an idea of what is more likely to happen in practice in addition to the strict view. Hearing about both can help make an informed decision.

 

[CaptK]

Let's be honest the only thing attracting the use of the UAE is the tax benefits. They will use every excuse under the sun untill they can no longer sustain it.

I have clients who are bankrupt in Europe and have all their cash in the UAE. Their respective governments know they are there but the UAE has not shared any information. One of them has had his company in the UAE since 2009 and went bankrupt in 2017 in his home country. He still fly's back to his home country.

 

[Helkins]

That's really interesting feedback about your experience, thank you.

You're most welcome

You often see replies on this forum that are based on the "strict letter of the law"

Although I don't think such approach is entirely wrong I believe that these people think of the world in a wrong way. The law might state one thing but reality might be totally different and we see it in examples from each corner of the world. A side note and another example from my personal experience might be that I've always followed the rule of law to the fullest which didn't stop any government from putting a freeze on the assets for 12 years, doesn't matter if you're living in a democracy, communism or dictatorship, if the government wants to screw you they will. Very few people in the world have the resources to fight the authority as the State has unlimited money, manpower and the law (which they can change) on their side, while you're limited to what you've earned and protected.

They will use every excuse under the sun untill they can no longer sustain it.

Gladly the sun is shining in the UAE all year long and hopefully no cloudy days come.

I have clients who are bankrupt in Europe and have all their cash in the UAE. Their respective governments know they are there but the UAE has not shared any information. One of them has had his company in the UAE since 2009 and went bankrupt in 2017 in his home country. He still fly's back to his home country.

As long as the UAE doesn't see any benefit in sharing information why would they. The wealthy flee there to protect their money and stay and spend tons on entertainment and luxuries of which the UAE is famous for. European countries don't have the leverage on the GCC countries as they control the natural resources and hold a big stake in European investments, provided you're not some big time international criminal you're safe there.

All in all the rules apply only to the common folk.

 

[JackAlabama]

You're most welcome

Although I don't think such approach is entirely wrong I believe that these people think of the world in a wrong way. The law might state one thing but reality might be totally different and we see it in examples from each corner of the world. A side note and another example from my personal experience might be that I've always followed the rule of law to the fullest which didn't stop any government from putting a freeze on the assets for 12 years, doesn't matter if you're living in a democracy, communism or dictatorship, if the government wants to screw you they will. Very few people in the world have the resources to fight the authority as the State has unlimited money, manpower and the law (which they can change) on their side, while you're limited to what you've earned and protected.

Gladly the sun is shining in the UAE all year long and hopefully no cloudy days come.

As long as the UAE doesn't see any benefit in sharing information why would they. The wealthy flee there to protect their money and stay and spend tons on entertainment and luxuries of which the UAE is famous for. European countries don't have the leverage on the GCC countries as they control the natural resources and hold a big stake in European investments, provided you're not some big time international criminal you're safe there.

All in all the rules apply only to the common folk.

"might be that I've always followed the rule of law to the fullest which didn't stop any government from putting a freeze on the assets for 12 years, doesn't matter if you're living in a democracy, communism or dictatorship, if the government wants to screw you they will."
well said.

With the green new deal the euro commies want to escape from the natural resources.
I hope the GCC can pull it through and resist the pressure from the global commies.

 

[Davis123]

"might be that I've always followed the rule of law to the fullest which didn't stop any government from putting a freeze on the assets for 12 years, doesn't matter if you're living in a democracy, communism or dictatorship, if the government wants to screw you they will."
well said.

With the green new deal the euro commies want to escape from the natural resources.
I hope the GCC can pull it through and resist the pressure from the global commies.

Actually they cannot resist the pressure as the EU/US the five eye countries are forcing every country to be transparent. They use different measures all the time. FATF is one approach there are others. I think if I am not mistaken a few years ago, EU had suspended all euro transactions from UAE due to this. This is an ongoing problem that came as a result of Obama/OECD measures that resulted in FATCA and global FATCA (CRS) that followed.

 

[JackAlabama]

Actually they cannot resist the pressure as the EU/US the five eye countries are forcing every country to be transparent. They use different measures all the time. FATF is one approach there are others. I think if I am not mistaken a few years ago, EU had suspended all euro transactions from UAE due to this. This is an ongoing problem that came as a result of Obama/OECD measures that resulted in FATCA and global FATCA (CRS) that followed.

a reason they should use crypto instead of swift network. then eu can not block euro transfers.

 

[Helkins]

Actually they cannot resist the pressure as the EU/US the five eye countries are forcing every country to be transparent. They use different measures all the time. FATF is one approach there are others. I think if I am not mistaken a few years ago, EU had suspended all euro transactions from UAE due to this. This is an ongoing problem that came as a result of Obama/OECD measures that resulted in FATCA and global FATCA (CRS) that followed.

Forcing countries to be transparent and actually enforcing it are two different things. All those lax countries can say they'll do something and sign whatever decree but as long as they don't enforce it nothing changes. In a cash based societies where no reporting is present you have no way of keeping a strict control of the market. And I believe you're mistaken as I do such transfers/transactions regularly.

a reason they should use crypto instead of swift network. then eu can not block euro transfers.

I agree people should use crypto more but as long as it's not widely accepted and known about and still connected to the traditional banking and regulations it usually does no good. It works only in some circumstances.

 

[JackAlabama]

Forcing countries to be transparent and actually enforcing it are two different things. All those lax countries can say they'll do something and sign whatever decree but as long as they don't enforce it nothing changes. In a cash based societies where no reporting is present you have no way of keeping a strict control of the market. And I believe you're mistaken as I do such transfers/transactions regularly.


I agree people should use crypto more but as long as it's not widely accepted and known about and still connected to the traditional banking and regulations it usually does no good. It works only in some circumstances.

that is good thing. UAE as a bastion of freedom and free markets also considering the insane lockdowns in eurohell. Who would have said that in 2019.

 

[Davis123]

Forcing countries to be transparent and actually enforcing it are two different things. All those lax countries can say they'll do something and sign whatever decree but as long as they don't enforce it nothing changes. In a cash based societies where no reporting is present you have no way of keeping a strict control of the market. And I believe you're mistaken as I do such transfers/transactions regularly.


I agree people should use crypto more but as long as it's not widely accepted and known about and still connected to the traditional banking and regulations it usually does no good. It works only in some circumstances.

Banks in UAE as per my sources in banks do collect FATCA/CRS info on every account. Bank officers don't like to deal with FATCA especially (since I am from US) and have to report on some IRS portal about the account holders info as they collect FATCA/CRS forms from everyone. Some banks and brokerages simply avoid US citizens even if UAE residents. They report all account info to UAE central bank and for FATCA they have to sign up at IRS portal too. This info is from the compliance teams that I know personally. However, I would love to know all conflicting information as well.

 

[Helkins]

Banks in UAE as per my sources in banks do collect FATCA/CRS info on every account. Bank officers don't like to deal with FATCA especially (since I am from US) and have to report on some IRS portal about the account holders info as they collect FATCA/CRS forms from everyone. Some banks and brokerages simply avoid US citizens even if UAE residents. They report all account info to UAE central bank and for FATCA they have to sign up at IRS portal too. This info is from the compliance teams that I know personally. However, I would love to know all conflicting information as well.

They do collect those documents in the KYC procedure, I however haven't done mine since early 2019 and my account is still operational - might be a matter of time before they get to me in this specific bank though. Anyway I'm not a citizen of the USA so FACTA itself doesn't bother me. I've been a resident of the UAE on paper since the dawn of time, you can simply rent a condo for like 1000AED/mth and get a tax residency certificate if any authority/bank bothers to ask for it - I however haven't had that issue. Furthermore I refuse to own anything in my name, use only cash, gold and crypto and fly under the radar.
I do feel sorry for all the Americans trying to escape the IRS and FACTA because it's close to impossible these days.

 

[Davis123]

They do collect those documents in the KYC procedure, I however haven't done mine since early 2019 and my account is still operational - might be a matter of time before they get to me in this specific bank though. Anyway I'm not a citizen of the USA so FACTA itself doesn't bother me. I've been a resident of the UAE on paper since the dawn of time, you can simply rent a condo for like 1000AED/mth and get a tax residency certificate if any authority/bank bothers to ask for it - I however haven't had that issue. Furthermore I refuse to own anything in my name, use only cash, gold and crypto and fly under the radar.
I do feel sorry for all the Americans trying to escape the IRS and FACTA because it's close to impossible these days.

Which bank is it that you have an account with ? As far as I know I received CRS letter from all the accounts I had from 2016 which is when CRS officially started in UAE. My clients also received their letters from their UAE banks who were living in other countries and they flew to UAE to specifically close their accounts as they had received their CRS letters too. It's interesting to know some banks were ignoring CRS. Actually I didn't have problems with FATCA either as I was complying with everything. But a few brokerages and banks did tell me they can't keep US citizens anymore so I had to close those accounts even though I showed them all my tax paperwork. Some banks, brokerages and investment funds are denied to US citizens (even residents of UAE which I am too) purposely by FATCA. I have lived in UAE for more than a decade now.

 

[Davis123]

They do collect those documents in the KYC procedure, I however haven't done mine since early 2019 and my account is still operational - might be a matter of time before they get to me in this specific bank though. Anyway I'm not a citizen of the USA so FACTA itself doesn't bother me. I've been a resident of the UAE on paper since the dawn of time, you can simply rent a condo for like 1000AED/mth and get a tax residency certificate if any authority/bank bothers to ask for it - I however haven't had that issue. Furthermore I refuse to own anything in my name, use only cash, gold and crypto and fly under the radar.
I do feel sorry for all the Americans trying to escape the IRS and FACTA because it's close to impossible these days.

You could own a small studio apt for cheap in Dubai nowadays and use this for your tax residency too instead of paying rent every month. You could rent it on booking,com and any of those websites later and make money on the side and use it whenever you visit here.

 

[Helkins]

Which bank is it that you have an account with ? As far as I know I received CRS letter from all the accounts I had from 2016 which is when CRS officially started in UAE. My clients also received their letters from their UAE banks who were living in other countries and they flew to UAE to specifically close their accounts as they had received their CRS letters too. It's interesting to know some banks were ignoring CRS. Actually I didn't have problems with FATCA either as I was complying with everything. But a few brokerages and banks did tell me they can't keep US citizens anymore so I had to close those accounts even though I showed them all my tax paperwork. Some banks, brokerages and investment funds are denied to US citizens (even residents of UAE which I am too) purposely by FATCA. I have lived in UAE for more than a decade now.

Since the account of mine is still operational I'd like to withhold sharing the information about the bank name not to attract any unnecessary interest. To me CRS and all those declarations have always been a bit funny because nobody checks the information you provide, to everybody's knowledge I've always lived in the UAE and never been subject to any tax residency outside of it since the day I turned 18, truth is I've lived in numerous countries throughout the years, whether in EU, ASEAN or MEA never had I any issues. As I mentioned I don't hold any personal wealth so even if my EU country were to go after me I'm pretty sure they wouldn't even get a penny.

Banks and other financial institutions just don't want to deal with any US citizens and are notorious in closing down the accounts or not opening them at all, I feel for anybody from US who is just starting out.

You could own a small studio apt for cheap in Dubai nowadays and use this for your tax residency too instead of paying rent every month. You could rent it on booking,com and any of those websites later and make money on the side and use it whenever you visit here.

I used to pay monthly for the condo and list it on Airbnb so it covered the bills, since then my situation improved, now I own and live permanently in the UAE because all those rules and regulations in the world just keep getting stricter.

 

[Davis123]

Since the account of mine is still operational I'd like to withhold sharing the information about the bank name not to attract any unnecessary interest. To me CRS and all those declarations have always been a bit funny because nobody checks the information you provide, to everybody's knowledge I've always lived in the UAE and never been subject to any tax residency outside of it since the day I turned 18, truth is I've lived in numerous countries throughout the years, whether in EU, ASEAN or MEA never had I any issues. As I mentioned I don't hold any personal wealth so even if my EU country were to go after me I'm pretty sure they wouldn't even get a penny.

Banks and other financial institutions just don't want to deal with any US citizens and are notorious in closing down the accounts or not opening them at all, I feel for anybody from US who is just starting out.


I used to pay monthly for the condo and list it on Airbnb so it covered the bills, since then my situation improved, now I own and live permanently in the UAE because all those rules and regulations in the world just keep getting stricter.

I fully understand your concerns. They even closed down a forum where some fool was simply advertising a few things which shouldn't be discussed openly at all.