Existing geopolitical events such as the Ukrainian war, or changes in the local legislation such as UK resident non-dom provisions or French announced taxation changes, tend to create re-domiciliation opportunities. 

At Affinitas DMCC we have detected an increase interest in re-domiciliation project and we have been handling projects involving the re-domiciliation of several European entities into the UAE: most notably and frequently we have noticed a flow of entities from: Luxembourg, Switzerland, Cyprus and UK. 

The UAE is famous for its business-friendly policies and a stable banking environment. This makes it a highly attractive jurisdiction for companies considering re-domiciliation. While the process can be complex, involving various factors such as the current jurisdiction, shareholding structure, and the number of employees, it is essential to understand the legal and tax implications.

Reasons for Re-domiciliation

Companies may choose to re-domicile for various reasons, including the desire to operate under more flexible taxation laws and to adapt to regulatory changes in their original jurisdiction. Significant drivers for re-domiciliation include:

  • Tax Efficiency: Shifts in global tax policies, such as Base Erosion and Profit Shifting (BEPS), Economic Substance Regulations (ESR), and the Global Minimum Tax of 15%, encourage companies to move from tax-free jurisdictions to low-tax environments like the UAE.
  • Economic Substance: BEPS policies aim to tax profits where economic activities occur. As a result, many offshore operations have moved to onshore or "mid-stream" jurisdictions, such as the UAE.
  • Operational Benefits: The UAE offers flexible regulations, a stable economy, full repatriation of capital, attractive tax benefits, simplified asset protection systems, and access to a wide range of local and international banks.

The Re-domiciliation Process

Re-domiciling a company involves two main stages:

  1. Preparation: Gathering and preparing all necessary documents to facilitate the transfer from the current jurisdiction.
  2. Transfer: Officially transferring the company's registration to the new jurisdiction.

The process involves simultaneous processing of the Certificate of Discontinuation in the original jurisdiction and the Certificate of Continuation in the new jurisdiction. This process can take from one month or longer, depending on the complexity.

Re-domiciliation

Barriers to Re-domiciliation

While the re-domiciliation process is generally straightforward, certain barriers may arise:

  • Jurisdictional Barriers: Some jurisdictions may lack the legal framework for re-domiciliation or may not support specific business activities or share structures.
  • Banking Barriers: Global de-offshorization trends and banking regulations can create obstacles, making re-domiciliation from one offshore jurisdiction to another less feasible.

Benefits of Re-domiciliation

Re-domiciling a company offers several advantages:

  • Maintained Legal Identity: Companies retain their legal identities and existing banking relations, saving time and costs compared to registering new entities and liquidating existing ones.
  • Compliance with Regulations: Ensures compliance with local regulations without the need to novate commercial contracts.
  • Tax and Legal Stability: The UAE provides a stable, growth-oriented environment with professional infrastructure and favorable tax policies.

Tax and Legal Implications

The laws and regulations of the original jurisdiction must allow for re-domiciliation. Companies emigrating to the UAE typically need to demonstrate solvency and assure that shareholders and creditors will not be adversely affected. Tax implications depend on the regime in the emigrating state, with no adverse tax consequences for states without material taxes, such as BVI. However, some tax compliance requirements may still apply. More about Taxation system in the UAE

The UAE's internationally recognized, business-friendly environment, backed by world-class infrastructure and stable banking facilities, makes it an ideal jurisdiction for re-domiciling companies. 

For advice or assistance on re-domiciliation, contact Affinitas DMCC. We are here to guide you through the process and help your business thrive in the UAE.

Sources: