Migration is a regular process in human history. Humans always migrated from less beneficial locations to places with a better future.
Companies, if the legal possibility is given, do the same. In the last few years, this has developed rapidly and many jurisdictions offer the possibility that companies can migrate or re-domiciliate their legal base. Before having this possibility, the company had to be liquidated and the new company had to start from scratch at the new location. This also meant that the track record and the contracts stopped and new bank accounts needed to be opened, which has become in most countries a real ordeal.
With the Substance demand from the European Union and the OECD, this has become a significant solution to get substance at an adequate location. It is also in line with the task of the OECD (Organisation for Economic Co-operation and Development) which is to support free-market economies.
But what is a Company Migration?
A company migration (also company “re-domiciliation”) is the process in which a company transfers its (tax) domicile from one jurisdiction to another. Hence the company changes the jurisdiction while maintaining the same legal identity. Subject to compliance with the corresponding legal requirements in both jurisdictions, the company is removed from the register in the jurisdiction of original incorporation and continues its legal existence as a company registered in the destination jurisdiction.
What are the Benefits of a Company Migration?
The (legal) continuation enables the company to maintain all its history and track record while taking advantage of the benefits of the new/destination jurisdiction – retaining existing relationships with clients and suppliers (e.g. existing contracts) and banking relationships.
Why entertain the Idea of a Company Migration?
A corporate migration may be considered for a variety of reasons:
- Taking advantage of a more favourable tax regime;
- Transferring an offshore business onshore;
- Fulfilling Economic Substance requirements;
- Proximity to clients and/or new markets.
Why migrate a Company to the United Arab Emirates?
The United Arab Emirates (UAE) have successfully established and positioned themselves as a premium and leading hub in the Middle East, Africa and South Asia (MEASA) region, offering a variety of advantages such as:
- Zero tax regime;
- Extensive network of tax treaties with over 80 countries and more currently being ratified;
- No exchange control restrictions and possibility of unrestricted repatriation of income/profits and capital;
- Recognized financial hubs (Dubai International Finance Centre, DIFC, ranking as 8th Best Global Financial Centre and leading Financial Centre in the MEASA Region, Global Financial Centres Index (GFCI) 2019;
Abu Dhabi Global Market, ADGM, following the lead of the DIFC and offering innovative solutions); - Presence of internationally recognized financial, legal and tax services providers and regional hub of multinationals;
- World-class infrastructure facilities and connectivity (106 airlines operating more than 280 international connections from UAE airports in 2019, IATA Report on the Importance of Air Transport to the United Arab Emirates);
- 29th largest economy in the world and no. 2 in the Middle East and North Africa (World Bank Index 2018);
- High quality of life (the UAE offering the best quality of life in the Middle East, Mercer’s Quality of Living listing 2019);
- Safe and secure family environment with one of the lowest crime rates in the world;
- Political stability and liberal business environment (UAE ranking 23rd among 156 countries, Index of Economic Freedom (IEF) 2019);
- Adapting quickly to the challenges of the pandemic and offering new solutions.
The Legal Framework for Company Migration within and to the United Arab Emirates
The first UAE free zone opened in the 1980s, setting the framework for the many that followed, and today there are more than 45 free zones across the UAE. Until recently, however, only a few free zones such as Dubai International Financial Centre (DIFC), Jebel Ali Free Zone (JAFZA), the Dubai Multi Commodities Centre (DMCC) and Abu Dhabi Global Market (AGDM), have enacted corporate migration regulations, while the regulatory framework applicable in the UAE mainland did not provide for corporate migration from a foreign country to the UAE (mainland).
Many UAE free zones are “themed”, e.g. Dubai Internet City, Dubai Health Care City, and the activities permitted in the respective free zone are to be in line with the zone’s specific theme.
While DIFC and ADGM are financial free zones offering mostly “financial” activities and activities ancillary to those regulated activities, DMCC and JAFZA are both “generalist” free zones, offering a broad and comprehensive list of licensed trading and services activities and therefore do unlock vast possibilities for a company migration within the UAE and from abroad.
In 2016, also RAK International Corporate Centre (RAK ICC) and Ras Al Khaimah Economic Zone (RAKEZ) have enacted company migration legislation offering the transfer of company domicile. Therefore, even International Business Companies (offshore) can migrate and become onshore (e.g. in the DMCC or RAKEZ), amongst others, in order to comply with local and international economic substance requirements.
Corporate migration is however not restricted to free zones anymore. Dubai law No (14) of 2015 set up a legal framework for foreign companies to transfer their place of registration to Dubai (mainland). At the request of the company licensed outside the UAE, the competent Dubai Department of Economic Development (DED) may enter the company’s records into the DED’s company register and subsequently issue a business continuation certificate and license for the company. It is expected that some other free zones, currently lacking corporate migration regimes, will follow the lead and adapt their regulations to remain competitive.
The company re-domiciliation framework should be particularly interesting to companies having initially set-up in jurisdictions without substance (in other traditional no or only nominal tax jurisdictions such as British Virgin Islands (BVI), Cayman Islands, Jersey, Guernsey, Mauritius, Bahamas and the Seychelles) now forced to comply with new and enhanced international economic substance policies and standards. Swiss Group has broad experience in all aspects of company migrations within the UAE, across all UAE jurisdictions, as well as international transfer of company domiciles.
The attached fact sheet gives a more detailed overview of the requirements.
As we can see the new Substance requirements together with the possibility of migrating companies represent a huge advantage for the UAE and Dubai in particular. This means that a company which has difficulties in showing the necessary substance can move to the UAE, where they can choose from any size of an office, where they can employ staff from any part of the world without any restrictions and where the management and families of the employees can live happily in a well-developed country, with more than 200 private schools so that families feel comfortable to stay.
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