Switching from Freezone to Mainland issues

[MillionCents]

I currently own a freezone company in Dubai but am planning to expand with employees and office space. To achieve this, transitioning to a mainland company is necessary. After extensive discussions with my freezone authority, including visits and multiple phone calls, I’ve confirmed that it's not possible to switch my existing freezone company to a mainland entity.

As a result, I plan to establish a mainland company and have my clients transfer payments to the new mainland bank account. This will lead to the cessation of income in the freezone account, as I will no longer engage in business activities there, with the eventual goal of liquidating the freezone company. However, the freezone bank account holds a low seven-figure amount (AED), and I’m exploring the best way to handle these funds.

Would selling the company and receiving the funds in my personal account be a viable and legal option? What are the alternatives? Ideally, I could transfer the funds directly from the freezone account to the mainland account, but this may create complications with bookkeeping and auditing. What are your thoughts?

 

[FZSAAS]

Max your salary (~55% of incoming revenue), pay the 9% CT then take the remaining funds out as a dividend tax free.

 

[lory]

However, the freezone bank account holds a low seven-figure amount (AED), and I’m exploring the best way to handle these funds.

don't you agent has a good solution on how to mage the transformation ?

 

[Checkmelater]

Max your salary (~55% of incoming revenue), pay the 9% CT then take the remaining funds out as a dividend tax free.

Why 55 % ?

 

[FZSAAS]

Tax consultant advised this as a max of revenue to take as salary. Worked for kpmg previously

 

[AlicaFunk]

Tax consultant advised this as a max of revenue to take as salary. Worked for kpmg previously

Are you running a hidden advertising campaign here?

 

[FZSAAS]

Are you running a hidden advertising campaign here?

Not at all just sharing what I paid for

 

[letstalk]

Not at all just sharing what I paid for

the 55% seems like an arbitrary number, but thank you for sharing. can you share more insights as to the reasoning?

are you expecting to claim small business relief or will your business be going beyond the AED 3M revenue threshold?

 

[Uniquelyunique]

Have you looked at having a mainland branch of your free-zone company?

Being a branch it would act as an extension of your FZ company, but theoretically would still be one entity, and I think it would even use the same uae tax registration.

I was thinking of doing something like this but haven’t researched it extensively

 

[openlaw]

the 55% seems like an arbitrary number, but thank you for sharing. can you share more insights as to the reasoning?

I'd add this is arbitrary as anti-abuse rules (that excessive salary cannot be deducted as expenses) are just some months enacted in legislation. So there is no any precedent case law, moreover no any public tax check results.

 

[FZSAAS]

Accountant and tax consultant confirm this is ok