Is Dubai an Offshore Tax Haven?

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Dubai tax haven

Dubai tax haven is becoming an increasingly popular destination for those seeking tax-free income, global business expansion, and access to UAE visas and permanent residency.

Until 2023, Dubai served as the best tax haven, not only for individuals but also for companies. However, as of June 1, 2023, amendments have been made to the tax legislation of the Emirates, and the current corporate tax rate stands at 9% or 0% (subject to certain conditions).

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Is Dubai tax free?

Is Dubai an offshore tax haven? To determine this, you can explore the following features of taxes in Dubai:

  • Dubai does not levy a personal income tax.
  • The capital gains tax rate is 0%.
  • There is no inheritance tax.
  • The VAT rate for individuals is 5%.
  • The corporate tax rate for companies with an annual income of up to 375,000 dirhams remains 0%. In other cases, the tax is paid at a rate of 9% (on general grounds) or up to 55% (for certain types of activities).
  • Corporate tax is not imposed on the personal income of individuals from employment (salary), real estate investments, or stock investments.
  • Companies registered in Dubai free zones are exempt from paying corporate tax for a period ranging from 15 to 50 years, regardless of their net annual profit. This creates favorable conditions for foreign businesses and the opportunity to use Dubai as a tax haven.
  • Dubai offshore zone is on the OECD’s white list.

Nowadays, Dubai competes successfully with the best tax havens. In addition to zero taxes for individuals, the emirate has over 50 double tax avoidance agreements, allowing residents of respective countries to work in the UAE freely and pay no taxes.

Offshore company formation in Dubai

In addition to the tax advantages for individuals, Dubai tax-free haven is becoming increasingly attractive for registering offshore companies. However, opening an offshore structure in Dubai is by no means a cheap endeavor. The registration of such an entity will cost a minimum of USD 5,000, and annual business maintenance fees will amount to additional few thousand USD.

The benefits of this choice are zero taxes and a lack of claims from global regulators.

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How to open an offshore company in Dubai in 2023?

The entire procedure can be broken down into the following stages:

  1. Choosing a free zone for registering an offshore company, with around 50 options available in 2023. Each free zone is suitable for specific types of activities and grants the right to zero taxes in Dubai or another emirate if the profit is not generated from sources within the UAE or does not exceed the maximum profit threshold (375,000 dirhams per year).
  2. Registering the trade name of the future company and preparing the constitutional documents.
  3. Business licensing, which is a mandatory requirement for all types of companies (local and offshore) in the UAE. The license is issued for one year and can be renewed subsequently.
  4. Opening a bank account, which requires document preparation and compliance with all requirements of the financial institution. In the UAE, local bank accounts can only be opened by offshore companies established directly in the country (including free zones). Foreign offshore entities can access banking in the Emirates only through their branches, subsidiaries or by registering an offshore company in the UAE in accordance with the requirements.
  5. Office space rental, which is a complex procedure no less intricate than opening a bank account in the UAE. It is essential to choose the right property, and our agents and experienced experts can assist you in this regard.

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Purchasing real estate in Dubai with an opportunity to obtain a residence permit

Luxury real estate prices in Dubai have been steadily increasing since 2022. In the past year, sales growth reached +130%, and in 2023, it further increased by 14.5%. Regarding property prices in Dubai, apartments and villas can be purchased in both the primary and secondary markets. However, foreign investors tend to prefer off-plan properties, especially during the construction phase.

In 2023, the conditions of the UAE investment program have changed. To obtain a residency visa and become a permanent resident of the Emirates, a foreigner needs to fulfill one of the following conditions:

  • Purchase UAE real estate valued at a minimum of 2 million dirhams (USD 545,000) and obtain a Golden Visa (another name for a residence permit by investment) valid for ten years.
  • Invest in property worth at least 750,000 dirhams (USD 204,000) with the right to a resident visa valid for two years.
  • For foreign retirees aged 55 or above, purchase real estate in Dubai or another emirate with a minimum value of 2 million dirhams. This grants the right to obtain a residency visa for up to five years.

It is permissible to acquire real estate using cash, credit, or a mortgage. Dubai non-residents can only purchase properties in special zones, typically allocated for off-plan developments (approximately 50 special zones in 2023).

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Tax haven Dubai: who pays taxes and how much?

If you are seeking a country where you can safely, quickly, and inexpensively relocate from any other state without becoming a hostage to taxes in the future, the United Arab Emirates is one of the best options.

  • Among the advantages of the UAE and the emirate of Dubai are:
  • Dubai residents (individuals) are exempt from income taxes, capital gains tax, and wealth tax.
  • The property tax in Dubai is 5% of the annual rental amount.
  • The business tax rate can be either 9% or 0%, depending on the legal entity’s status (local or offshore company) and the annual profit amount. Local entrepreneurs will pay a tax of 9% if their annual income exceeds 375,000 dirhams. Dubai offshore companies are exempt from corporate tax for up to 50 years.
  • VAT in the emirate of Dubai is 5%.
  • There is no export tax in the UAE, while the import tax is variable and ranges from 5% (default rate) to 100% (for specific goods, including tobacco and alcoholic products).

Despite recent changes in the UAE tax system, Dubai remains a tax haven for offshore companies and foreigners planning to relocate to Dubai and obtain residency.

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