International tax planning – its essence and definition. Taxes in the Dubai, UAE
Choosing the most appropriate system of state taxation is among the main tasks, which has to be solved with tax planning. As a rule, choosing a favorable taxation scheme provides available opportunities for tax optimization within the fiscal legislation of the country. International tax planning involves the development and implementation of such solutions in economic and entrepreneurial activities, which enable to reduce the existing tax levies.
It should be noted that tax planning is an important aspect of the general financing activities of the company or enterprise. The UAE and the city of Dubai are among the best places in the world for doing business, first of all regarding the local taxation system. There are zero income tax rates in Dubai and the UAE in general, which along with other benefits and possibilities makes this jurisdiction very favorable for foreign investors.
Types and classes of taxation schemes are made not only on a time basis (periodicity) but also on the basis of area of implementation.
We can mention the following tools among the most popular and fundamental tools of taxation planning:
- Monitoring and analysis of the current tax legislation for the proper use of special preferential taxation schemes;
- Choosing the optimal legal status and form of legal entity;
- Carrying out the revaluation of the major assets of the company or enterprise;
- Choosing optimal market for entrepreneurial activity and jurisdiction for company incorporation.
Our site is devoted to the features of Dubai taxes. There are more than 20 free zones in the city of Dubai, each of them offers its unique opportunities for businesses of various kinds. So you will find out how and where to register a company considering specifics of taxation in Dubai.
Advantages and opportunities of international tax planning, benefits of taxation in Dubai, UAE
Among the main advantages of tax planning at the international level we can highlight the following opportunities:
- Choosing a jurisdiction which is relatively stable in the economic and political terms;
- Possibilities to optimize the taxable base in some industries and sectors;
- Simplified regulations of company registration and subsequent financial reporting;
- Preferential access to the international financial market.
The best option when all these legal and tax advantages are in a single jurisdiction. And there some places in the world, where you can find all this, for example, in Dubai.
At the same time, for the efficient, and what is most important, economically feasible tax planning, it is important to consider some objective factors, among which there are following:
- Structural components of the company – the number of shareholders, the presence of resident status for the owners, the confidentiality of information, etc.;
- Limitations related to the absence of the resident status – the amount of the authorized capital, licensed types of activity, types of securities, etc.;
- Current tax law – ability to use zero or preferential tax treatment;
- Opportunities for international planning – the presence of bilateral state agreements aimed at avoiding double taxation;
- Conditions for business relocation or transfer the financial assets – availability of the infrastructure which is required for transferring business and restrictions on the withdrawal of assets.
And again, Dubai and its taxation system provide all the above-listed preferences.
Tax optimization and reducing of the existing tax level can be achieved with the help of:
- Reduction of taxes;
- Use of the preferential tax rates;
- Obtaining the status of a tax resident for using the investment incentives;
- Registration of business in specialized trade zones (tax and customs privileges).
The modern business world offers entrepreneurs a wide range of tools which enable tax optimization at the international level. The following methods of optimization are the most popular ones:
- Carrying out entrepreneurial and economic activities in the jurisdictions, which provide preferential terms of taxation (tax havens and free trade zones);
- Investment activity on the territory of the countries, which provide preferential or zero taxation, including taxation of the source of payments, interests, royalties, dividends, etc.;
- Company registration in the jurisdictions, which provide advantages for different operations (insurance and financial transactions, shipping and construction, tourism and small business);
- Obtaining a residential status for participation in international agreements aimed at avoiding double taxation;
- Distribution of the gained income and applying the optimized pricing in the territory of countries with a comfortable tax climate.
According to all the specified parameters, the city of Dubai, is the ideal jurisdiction for effective international tax planning. Here you will find the perfect combination of the methods and tools, which make the business profitable and competitive both on the local and international market. Unlike the majority of other world jurisdictions, the tax rates in Dubai are equal to zero. The preferable taxation is the main feature that makes Dubai so attractive to foreigners.
Specialized free trade zones – choosing the best taxation in Dubai
The registration of the company or enterprise in the specialized free trade zones in Dubai is the most typical solution for the optimization of the taxation base. These free zones have a special economic status, which includes a specific taxation system. Such free zones are in most of the Emirates, but most of them are located in Dubai.
In fact, a special economic free zone is the area within the country, with a preferential tax base (with reduced tax rates or even tax-free jurisdiction) for companies and enterprises which are involved in local and foreign investment projects. In addition to attracting direct investment into the national economy such free zones, provide a set of favorable conditions for business development. In particular, they are improvement and development of the export potential and the introduction of the advanced developments and technologies, as well as management and business experience. And all this is provided by the free zones of Dubai.
The jurisdiction of Dubai, the UAE, where the tax incentives are provided not only for the offshore but also for the onshore companies, can be singled out as the unique area (both onshore and offshore companies are free from taxes). Various international and local companies can count on the customs privileges and tax incentives in the jurisdiction of Dubai.
Why is Dubai the best jurisdiction regarding the taxation system?
The choice of the best jurisdiction depends on each particular case. The goals which are set by the entrepreneur, while creating a company, largely affect the choice of the appropriate jurisdiction, including taxes. They distinguish several basic types of legal jurisdictions, depending on the methods of optimization and protection of the investment assets, in particular, they are:
- Classic offshore jurisdictions – offshore companies, in the territory of such countries, are exempted from taxation, as they do not conduct any economic activities within the country. The British Virgin Islands, Seychelles, Bahamas, Belize, Panama, Mauritius, Nevis, and the Marshall Islands are among those. There are also several classical offshore areas in the UAE and Dubai in particular;
- Jurisdictions with a preferential taxation scheme – a preferential taxation scheme is often provided for certain types and forms of companies. The UAE (most of the Emirates, and Dubai, in particular), Liechtenstein, Hong Kong, Sweden, and Luxembourg are examples of such jurisdictions for tax planning;
- Jurisdictions with the status of the respective territories with certain benefits – the tax incentives are provided for the companies that meet high requirements and do not come under the status of the offshore formations. Great Britain, the Netherlands, and Switzerland are examples of such jurisdictions. There are also some jurisdictions of this kind in Dubai.
We must say that the UAE and Dubai, in particular, offer a fairly wide range of possibilities regarding taxation and legal regulations. Here you can find both classic offshore jurisdictions with zero taxes, and zones, where you can register so-called onshore companies, with some specific features, and the mainland, where tax privileges are also available, and all this in a single city – in Dubai.
Among the traditional factors which influence the choice of the appropriate legal jurisdiction, there are the following conditions:
- Cost of registration of the company and its subsequent administration;
- Registration procedure (conditions and time costs);
- Image of the country in political and economic terms;
- Availability of the well-developed banking and financial infrastructure.
In this respect, the jurisdiction of Dubai remains the most optimal for the various types of entrepreneurial activities. This area provides the opportunities for tax optimization, increasing the profitability of the company or enterprise in Dubai, the UAE via reducing tax payments and applying other business benefits available.
About Dubai taxes on Atton-Consulting.com website
On this website, you can find the most topical and full information about the taxation system of the UAE and Dubai, in particular. Considering legal norms and taxes operating in the country, the UAE is a heterogeneous area, several dozen free zones are offering unique conditions for a particular type of business. Here you can learn more about Dubai taxes and taxation in UAE in general. Also on our website, you will learn how to open a company with the maximum tax minimization taking into account the taxation in Dubai. You can read more about how to open a company in Dubai here. On our website, you will also find the latest information on how to open an account in one of the local banks, both for individuals and for legal entities (see here for details). Here you will find detailed information on how to become a tax resident of the UAE and how to get an Investor visa and Family visa.