HAMDAN ALSHAMSI LAWYERS & LEGAL CONSULTANTS | View firm profile
Re-domiciliation, also known as corporate migration or transfer of incorporation, is an increasingly popular strategic process that allows companies to shift their seat of incorporation from one jurisdiction to another.This maneuver offers a seamless transition, and the United Arab Emirates (UAE) has emerged as a premier destination for such transitions. The UAE’s numerous free zones and well-established legal frameworks make it an attractive locale for re-domiciliation.
Diverse Motivations for Re-Domiciliation
Companies pursue re-domiciliation for various reasons, including commercial, practical, taxation, and legal considerations.
Key considerations include:
-
- Tax Efficiency: Companies seek favorable tax regimes to optimize their tax liabilities.
- Regulatory Environment: Operating within a more lenient regulatory framework can enhance operational flexibility.
- Market Access: Better access to key markets can drive business growth.
- Stability: Enhanced legal and political stability offers a more secure business environment.
- Operational Efficiency: Improved infrastructure and resources can streamline operations.
- Investment Opportunities: Access to new investment avenues can foster expansion.
- Skilled Labor: A skilled workforce can bolster business capabilities.
- Brand Reputation: A UAE base can enhance a company’s global brand image.
- Industry-Specific Advantages: Legal and operational advantages tailored to specific industries.
Importantly, re-domiciliation does not disrupt a company’s operations or affect the validity of its existing agreements, ensuring business continuity during the transition.
The UAE’s Appeal for Re-Domiciliation
The UAE offers a range of compelling advantages for companies considering re-domiciliation, making it a highly attractive destination for corporate migration. By re-registering as a UAE entity, companies can ensure a smooth and uninterrupted continuation of their existing rights and obligations, safeguarding their operational integrity and business continuity.
The UAE’s business-friendly environment is characterized by its tax-efficient framework, which includes low corporate tax rates and numerous incentives that can significantly reduce operational costs. Additionally, the UAE boasts an extensive network of double tax treaties with numerous countries, which helps prevent double taxation and provides further financial benefits, making it an economically advantageous location for international business.
Beyond the financial incentives, re-domiciling to the UAE positions a company strategically within a dynamic and rapidly growing market. The UAE serves as a regional hub with unparalleled access to emerging markets across the Middle East, North Africa, and South Asia. This strategic location not only enhances the company’s regional influence but also demonstrates its commitment to leveraging the UAE’s robust economic opportunities and fostering growth in the broader Middle Eastern market.
Moreover, the UAE’s regulatory environment is designed to support and encourage foreign investment, offering various free zones with specialized facilities and services tailored to diverse industry needs. This supportive infrastructure, combined with the UAE’s stable political and economic climate, makes it an ideal environment for companies seeking to enhance their global footprint while capitalizing on the region’s growth potential.
Criteria for Re-Domiciliation Eligibility
Companies must verify their eligibility before re-domiciliation to the UAE free zones such as the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM). Essential criteria include compliance with the specific regulations outlined in Article 8 and subsequent articles of the DIFC Companies Regulations and Section 100 and subsequent sections of the ADGM Companies Regulations. This includes meeting legal requirements related to corporate governance, and regulatory compliance to ensure a smooth and successful transition to these jurisdictions.
Essential criteria include:
-
- Compliance with Original Jurisdiction: Adherence to the legal requirements of the original jurisdiction is fundamental.
- Valid Purpose: Companies must demonstrate a legitimate business purpose for re-domiciliation.
- Legal Framework: The original jurisdiction’s laws must permit the transfer of incorporation.
Navigating the Re-Domiciliation Process in the UAE
Given its relatively novel status in the UAE, businesses contemplating re-domiciliation must fully understand eligibility requirements and procedural nuances.
Engaging with legal and tax professionals familiar with both the original and UAE jurisdictions is crucial.
Re-domiciliation involves a complex process distinct from establishing foreign branches or subsidiaries.
Key considerations include:
-
- Legal Compliance: The re-domiciled company must comply with UAE law and relevant free zone regulations.
- Operational and Tax Implications: The process impacts various operational and tax aspects.
- Free Zone Selection: Choosing the appropriate free zone requires careful consideration of business activities, residency requirements, and compliance obligations.
Conclusion
Re-domiciliation presents a powerful strategic tool for companies, offering the advantage of retaining their legal identity while adapting to new regulatory and tax environments. With its diverse options and substantial potential, the UAE stands out as an appealing destination for re-domiciliation. However, businesses must approach the process with diligence, conducting thorough due diligence and seeking expert guidance to ensure a smooth and successful transition.
Author: Ziad Chebli Partner – Corporate Department , Hamdan AlShamsi Lawyers & Legal Consultants