How to pay less tax by setting up a company in the Emirates (THE GUIDE)
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1/ The Basic Operation of Emirati Companies
Mainland Companies (Onshore)
"Mainland" company
Registered with the Department of Economic Development (DED) of an emirate
Can operate anywhere in the Emirates, including the local market
Unrestricted access to government contracts and Emirati territory
Offshore Companies
Ownership structure, holding company, tax optimization, invoicing international, etc.
cannot hire locally or rent physical offices in the UAE
Dubai Freezones
in a free zone
an opaque company (from a tax perspective)
with zero corporate income tax (under certain conditions)
Advantages:
100% foreign ownership permitted
Tax exemption (under certain conditions, especially if there is no local business)
No need for a local partner
Visas can be applied for for partners/employees
2/ Taxation in the UAE
Corporate income tax:
0% below AED 375,000
9% above AED 375,000
AED 375,000 (United Arab Emirates Dirham) = €90,000
Dividend taxation:
Dividends and other profit distributions received from residents are exempt from tax
Capital gains tax:
Capital gains are taxed at the current corporate tax rate.
Individual Taxation:
There is no personal income tax.
3/ Setting up a company in Dubai as a French tax resident
Taxation?
As a French tax resident, foreign dividends are taxed like French dividends, namely:
= 30% flat tax:
12.8% income tax
17.2% social security contributions
→ Very little tax optimization, therefore...
Beware of the concept of permanent establishment
"For the purposes of international tax treaties, a permanent establishment is:
a place of management, a branch, an office, a factory,
a workshop, a mine, an oil or gas well, a quarry, or any other place of extraction of natural resources
a farm or plantation
etc." »
→ A permanent establishment is taxed in the country in which it is incorporated
"If an agent acts on behalf of a company and has the authority to enter into contracts in the company's name... that company is considered to have a permanent establishment in that country."
→ You yourself will be considered a permanent establishment.
→ Your activity will be taxed in the same way as a traditional company: VAT, corporate tax, dividends, etc.
→ So, no tax optimization! To put it simply...
Beware of the concept of economic substance
"Economic substance is the fact that a company is not just an empty shell on paper, but that it actually exists and carries out real activity in the country where it is registered.
4/ The anti-abuse clause of the UAE tax treaty
Article 19: Provisions to eliminate double taxation with respect to France
There is, above all, a specific "anti-abuse" clause
in the tax treaty between France and the United Arab Emirates
As soon as you trigger the conditions of French domestic law (4B of the General Tax Code)
To put it simply, if you have in France:
your home or their principal place of residence
or your principal professional activity
or the center of your economic interests
You run the risk of being taxed on all your income in France
→ because the tax treaty will no longer apply
The company structure in Dubai + French tax resident is therefore very fragile
→ that's why I don't recommend it and why it's not used for tax optimization 😉
5/ What to do and my opinion
Cut ties with France
avoid going back and forth to France
Avoid ties (personal, professional, investments, etc.) with France
6/ The strategy I use
I personally use another strategy
→ A hybrid solution, with companies that are either opaque or traditional from a tax perspective:
Income tax: is only 15% or 3%
There is no tax on capital gains: neither on sales nor on investments (ETFs, bonds, cryptocurrencies, stocks, etc.)
And 0% tax on dividends: or only 5% if you are a French tax resident
→ Bottom line? * I pay my corporate tax at 15% or 3%
I pay no tax on my capital gains
and I pay my dividends only where I am a tax resident
"This makes for a total tax rate of between 3% and 19%, regardless of where I am in the world 😉"
🔔 This isn't suitable for everyone or for all activities.