Foreign businesses registered in the United Arab Emirates (UAE) have long enjoyed a beneficial business environment, including virtually no taxes, 100% foreign ownership, and full repatriation of company profits and capital. The UAE remains a strong location for business, but a new corporate tax law is causing some businesses to consider relocating to more favorable shores.
On December 9th, 2022, the Ministry of Finance of the UAE released the introduction of a federal Corporate Tax of 9% on business profits.
Here’s what the new law could mean for your business, and why relocating to the AZUR Special Economic Zone (SEZ) in Anguilla might be a viable alternative if you’re hoping to retain more of your business profits.
Changes to the UAE Corporate Income Tax System
The Corporate Tax Rate in the United Arab Emirates is currently 0%. That will change when The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses goes into effect on June 1st, 2023.
The 9% tax rate will only be levied against corporations that make a taxable income exceeding AED 375,000 (about $102,100 US).
The tax targets business income only and does not affect “Taxable Persons.” This is to avoid situations of “double taxation.” However, the UAE does stipulate that “Taxable Persons who earn exempt income will remain subject to Corporate Tax on their Taxable Income.”
There are some exemptions for companies operating in strategic sectors. However, these exemptions are mostly carved out for government-controlled entities, public benefit entities, and non-extractive natural resource businesses.
This means that most mid-to-large-sized businesses will have to pay a 9% tax on all their business income, save for those in exempt sectors and considering deductible expenses.
The UAE does operate some “Free Zones” where the corporate tax rate will stay at 0%. However, to qualify for a Free Zone, businesses must “maintain adequate substance in the UAE,” which means they must have a physical presence in the county. These businesses may be subject to other conditions as well.
Why Anguilla is a Viable Alternative for Businesses
Anguilla is an attractive offshore jurisdiction for businesses due to its low taxes and simple regulations. The island is already a popular business location, and the changes to the UAE tax code make it a viable alternative for companies hoping to offshore in more favorable conditions.
The island has a straightforward tax system, regardless of size or sector. There are no capital gains taxes or value-added taxes in Anguilla.
Furthermore, setting up a business in the country is easy and inexpensive; the government offers fast and easy registration for both local and foreign-based companies.
AZUR Chairman Jason Blick commented
“AZUR SEZ provides tax exemption for companies established within it, as well as 100% capital repatriation. Our benefits include 0% Income Tax, Corporate Tax, Import Duties, Export Duties and Value Added Tax, while at the same time offering 100% Foreign Ownership, Capital Repatriation, and Global banking services.”
The Benefits of the AZUR SEZ
If those benefits aren’t enough, companies planning to register in Anguilla can also take advantage of Anguilla’s Special Economic Zone, AZUR.
Businesses registered in the AZUR SEZ enjoy a 0% corporate tax rate, a 0% income tax rate, 0% import and export duties, and a 0% value-added tax. The AZUR SEZ also provides 100% foreign ownership for businesses hoping to register from abroad, as well as 100% capital repatriation, so you can keep more of your business income.
Businesses registered in the Anguilla AZUE SEZ even enjoy residence rights and a permanent establishment on the island. They also get access to global banking services, financing services, and other infrastructure. This makes it an ideal choice, not only for tax purposes but also for establishing legitimacy and building capital.
The AZUR Virtual City
Furthermore, one of the biggest benefits of the AZUR SEZ is the AZUR Virtual City. It’s also one capability the AZUR SEZ offers that makes it a perfect alternative to the UAE.
The AZUR Virtual City was founded on the principle that your business idea shouldn’t be limited to where you work or live. It provides you with the opportunity to register and manage your business online without the need to be a resident of Anguilla.
For legal and tax purposes, the Virtual City operates in the same manner as a physical city. Businesses that maintain a digital presence there are considered entities registered in the AZUR SEZ, even if they don’t maintain offices or other physical infrastructure in the zone.
This is a stark difference from the UAE, which requires businesses to maintain “adequate substance” in the country to qualify for registration. It means transferring your registration to the AZUR SEZ is fast, easy, and cost-effective.
Discussing the upcoming changes to the UAE system, Blick confirmed that “AZUR SEZ is perfectly positioned to offer special tax advantages and incentives to most companies affected by changes in the UAE corporate income tax system.”
Register Your Business with AZUR Today
Businesses currently registered in the UAE have an opportunity to maintain their income and leverage more of their capital for growth. To learn more about the AZUR SEZ in Anguilla, contact AZUR today.
Featured image credit: edited from Unsplash