Dubai – the ideal place for international business
For many countries of the «Old world», which have a high tax level, the issue of the preservation of human and investment capital of their country became acute. Such necessity is caused by the attractiveness of the international jurisdictions which allow to implement the working and entrepreneurial activities without paying the high tax contributions. Practice shows that the countries with high level of taxation, more and more often deal with the outflow of labor and investment capital, and suffer from a budget deficit, which steadily increases the debt of the country and weakens its economy.
Preventive measures on the local and global scale
In an effort to safeguard tax payments of its citizens, companies and enterprises, and also due to the lack of the competitive advantages in the international arena, such countries have to use a range of tools, which prevent the outflow of the capital, among which there are:
- Policy of limited opportunities for changing the tax residency and resident status;
- Corporate restrictions in terms of opening the bank accounts outside of the country in the foreign banking institutions;
- No opportunities to optimize the taxable base at the international level, including the bilateral international agreements on the avoidance of the double taxation.
Moreover, the countries with the tough fiscal policy, in order to preserve the capitals, exert a certain pressure on the existing international tax-free jurisdictions. The following methods can serve as the examples of such influence:
- Conclusion of the international agreements on the information exchange - on banking and tax information;
- Exertion of the pressure and enforcement of the suppliers of the corporate and trust services, and also the banking institutions to comply with the legislation in the field of the fight against money laundering;
- Development and implementation of the legal framework aimed at the prevention of the tax optimization and tax evasion by the assets transfer outside of the jurisdiction;
- Development of a list of the countries which are not aimed at the international cooperation, and the introduction of the appropriate economic sanctions against such, etc.
It should be noted that this is only a small part of all the measures and methods which are used by the powerful countries in the international arena in the fight against the tax-free jurisdictions. What is attractive for the taxpayers of the jurisdictions which possess a special economic status? We will try to understand.
Tax-free jurisdictions: what is their attractiveness
Speaking about the main characteristics of the modern tax-free havens which attract the potential investors, it is necessary to single out some key features, in particular:
- Availability of the profitable and favorable tax treatment with the possibility of 100% repatriation of the investment assets and gained profits;
- Ensuring the confidentiality of the information about business and keeping the banking secrecy;
- Healthy and actively developing economy, and also the high liquidity of the country reserves and the long-term development prospects;
- Modern banking sector, which provides a full range of banking services;
- Availability of the reliable local banks which do not depend on the international financial institutions;
- Stable exchange rate of the national currency, which allows to reduce the existing currency risks;
- A high standard of living and minimal crime rates;
- Availability of the residential properties of different categories and with all necessary social infrastructure;
- Perfect infrastructure and effective solutions in the field of international logistics for carrying out the entrepreneurial activity;
- National health care system that meets the highest international standards;
- Availability of the educational institutions and universities of different profiles and levels;
- Modern telecommunications and communications facilities;
- Accessibility of the region from air and water;
- Convenient strategic location;
- Favorable climatic conditions and comfortable weather;
- Stable political situation in the country and in the region.
It is a brief overview of the qualities, which should be possessed by country, which intend to attract the direct foreign investments and skilled labor. And now let's think, whether there is such a country that satisfies all these criteria? The answer is positive. It is the Dubai Emirate of the United Arab Emirates.
Dubai, the UAE – the best place for the international business
The United Arab Emirates, and in particular the Dubai Emirate is the only international jurisdiction, which possess all of the abovementioned criteria of the attractiveness. And taking into account the closure of the activities of the number of traditional offshore jurisdictions, Dubai is an excellent alternative for the implementation of the economic and commercial activity, which is not liable to the local taxes.
That is why many international experts predict the rapid growth in the investment demand in this region. Today, almost all the building construction projects on the territory of the Emirate are sold out already at the design stage, what indicates the high consumer demand and the extremely high investment activity.
Evaluating the situation from the statistics point, it can be noted that the population of the country increases constantly with the amazing progression. At the beginning of 1963, the population of the country was about 96 thousand people, today such indicators has long ago exceeded the millions marks (more than 8.5 million). It also speaks in favor of the attractiveness of this jurisdiction for the foreign investment projects.
Prospects and future for the tax-free havens
The international financial analysts and experts anticipate the increase in the number of international companies registered in the UAE. The United Arab Emirates more and more often serve as the main base for the development of the regional markets in the Middle East. Such tendencies of the development have already become common and do not cause hesitations in the international business community.
The experts also predict an increase in the demand for the tax-free jurisdictions of the various levels – from small island countries, to the developed countries with specialized economic zones. But at the same time, one should expect the increase of the measures from the countries which have the high taxes. It is for this objective reason, the international companies, offshore, onshore and holding structures will find the active use in the UAE for ensuring the maximal privacy and confidentiality of the information.
Considering as the basis the existing international practice, several rules that will be promoted and implemented by the countries with high tax rate, can be enforced, in particular:
- The effective and prompt exchange of information about the beneficiaries and financial transactions will be established;
- Ability to open a personal or corporate bank account abroad is available only upon the confirmation of the personal interests (acquisition of the immovable property, etc.).
So, let’s try to visualize the prospects of the various tax havens and to highlight the main points:
- Existing risks for the tax-free jurisdictions in Europe (guaranteed limit of the bank balance, cutting the deposit accounts, exchange of the tax and financial information and etc.);
- Decline of the international financial centers in the Far East, Hong Kong and Singapore (accounts for foreigners are closed, the countries are under the pressure from the EU and the USA);
- Decline of the European financial centers, such as, Monaco, Switzerland, Liechtenstein, Andorra and San Marino (a number of agreements on automated information exchange are already signed, there is a pressure from the Eurozone and the USA);
- Rapid decline in the number of the tax-free havens, as a result of the increased activities of the international organizations such as Organization for Economic Co-operation and Development (OECD) and Financial Action Task Force on Money Laundering (FATF).
Now ask yourself, what the jurisdiction has the potential to hold out against such an active struggles and exerted pressure. Only a country with a strong national economy and long-term development prospects will be able to remain faithful to the tax-free regime. And here we are talking about the United Arab Emirates.
What do the United Arab Emirates can offer to the potential investors and the foreign entrepreneurs?
First of all, these are:
- Exemption from the corporate and income taxation;
- No restrictions from the state on the withdrawal of the assets and distribution of the gained profits;
- Healthy banking system that does not depend on the western banking institutions;
- Steady growing economy and the loyal public policy;
- Maximal confidentiality of data and protection of the banking secrecy at the legislative level;
- No international agreements on the information exchange.
Taking into account the existing situation and the negative effects of the financial crisis worldwide, it is prudent to focus on the competitive advantages and business opportunities in the United Arab Emirates. By simple reasoning, we were able to come to the conclusion that the UAE, and in particularly Dubai, is an ideal platform for the optimization of the taxable base both now and in the future. Do not wait until the demand for this jurisdiction will reach its peak, and create the effective business solution via the company in the United Arab Emirates today.