UAE company and living in Cyprus

[Gediminas]

Hello everyone,

I'm delighted to join this wonderful community.

As an EU citizen, I've been considering the possibility of establishing a UAE offshore company and relocating to live in Cyprus. My plan involves appointing a nominee director in the UAE to create the appearance that the company's operations are conducted from the UAE. The ultimate goal is to receive dividends in Cyprus from the foreign company, thereby taking advantage of a 0% tax rate.

Is this a feasible strategy, or does it sound too good to be true?

Yes, generally as long as you don’t create a Permanent establishment for a UAE company in Cyprus, such a simple structure will work.

UAE company would be subject to 9% tax (provided that annual income exceeds AED 3,000,000). Or 0% if annual income does not exceed AED 3,000,000.

UAE does not apply dividend withholding tax. In Cyprus, you would be subject only to GESY contributions (2.65%), but the maximum amount of GESY is approx. EUR 4800.

If Cypriot tax authorities could prove that you are managing a company from Cyprus, it could become taxable in Cyprus with Cypriot corporate income tax (12.5%).

The local UAE director could help. Differently from Cyprus, Netherlands, and some other countries where you can appoint local service providers as nominee directors, UAE does not recognize this, i.e. UAE does not allow such thing as nominee director.

In other countries, you are protected because you have a trust deed/nominee agreement. If you find some person in UAE who will accept to be nominee director (there are plenty of options in the market) he will have full powers, so you will take into account many risks. On the other hand, there are many ways to mitigate these risks.

 

[JimBeam]

The difference is so small it's not worth it in many cases.
In UAE you would pay 9% CIT while in Cyprus you would pay 12.5%.

So with the 3.5% difference you need to account:

1. company service license renewals and office/flexi desk rental
2. accounting and audits (actually cheaper in UAE than in Cyprus but still you have to pay it extra)
3. minimum two trips to Dubia to maintain your visa (often more since for some things you need to show up there in person)

Let's say these three things above costs 15.000 EUR/year (each item 5k roughly).
That means that the break point is about 425k in profit meaning that it almost makes no sense below 500k taxable profit.

So you might be paying a bit more on Cyprus but you would have pice of your mind.

 

[jkl197]

and also some minor details in favour of Cyprus:
cost of travelling to dubai 2-3 times per year (plane + hotel) from EU, whilst there are many cheap flights to Cyprus

also in many EU countries whether only psychologically or legally, UAE is considered a tax heaven and if one day you decide to move back to a EU country you will have to prove with a lot of documents that the UAE residency was genuine and not fake, otherwise the EU country could charge you taxes for the previous years (depends on the particular country and your personal circumstances)