What is the best place to pay taxes? Dubai, Andorra or Portugal:

Dubai has lately become one of the most sought-after destinations for businessmen and entrepreneurs looking for tax optimization for their companies.

Dubai offers a very competitive tax system for its residents, even compared to its neighboring emirate Abu Dhabi.

Personal income tax – Personal Income Tax Dubai

In Dubai a person cannot have an income tax and therefore is not taxed on the income he earned. There is no legal definition of tax residency, so the emirate government has not issued a tax residency permit until recently.

It also implies that a person living in the country cannot prove tax residency because the only certificate granted is of national origin.

Fortunately, the Ministry of Finance already provides tax residency certificates to individuals who have demonstrated that they have lived in Dubai for at least 180 days in a given tax year.

What is a «free trade zone»?

This is well known, in practice most of the UAE has restrictions on foreign investment. Non-native investors cannot own more than 49% of the shares of companies.

However, it can increase to 100% for companies registered within the Free Trade Zone within the UAE.

This area has a special tax regime, the main purpose of which is to promote foreign investments. ADBGH and Dubai DMCC are known worldwide as markets in the UAE. These two were among the first in the country.

Who is Dubai recommended for?

Digital nomads have moved to the United Arab Emirates to pay less taxes while enjoying a relaxed international lifestyle.

Dubai offers young people attractions in an international profile because unlike Andorra or Switzerland there is a wide variety of attractions and an international airport. Typically, these entrepreneurial newcomers settle in Dubai’s so-called «free trade zones».

Dubai has a 0% rate for profits made from cryptocurrencies, therefore it can be considered crypto-friendly.

However, one of the negative points of this Arab emirate, is precisely the remoteness from the main European capitals and the climate of the same that makes its residents migrate to other countries in the months of April to October trying to escape the very high temperatures.

Corporate Tax

The corporate tax in Dubai is 0. What can make it a highly attractive place to develop a professional activity, however despite this part is so interesting, always keep in mind that if in any case you want to send the money obtained in Dubai to another jurisdiction, it will ask you in any case the tax returns and in some cases, declarations are not accepted at 0%.

Although the UAE legislation does not contain provisions relating to the tax residency of companies, the Ministry of Finance issues tax residency certificates.

How to take the first step?

Resetting and saving has helped many cryptocurrency entrepreneurs with tax residencies to Dubai.

It is important to know what kind of partnership you want or need to create and secondly you should know that the minimum share capital is 1USD.

The minimum number of partners to form a limited company is 2 and the deadline to create a company in the UAE is from 1 to 3 weeks. In the latter case, as in Spain.

The only tax that will affect you will be the VAT (VAT) at a rate of 5%.

Economic substance requirements for companies

Some persons consider establishing offshore companies without human resources in Dubai for tax purposes. The Company must meet the economic substance requirement for the Company to carry on any activity considered relevant.

Generally, the company must have a management and a duly appointed director.

There are incentives for companies to hire local staff and electronic signatures are currently not permitted on government forms.

More tax advantages in Dubai

Dubai is free of all inheritance, gift, property and estate taxes. Dubai is a major financial center that can coordinate the business operations of the United Arab Emirates.

Several digital nomads and HNWI are relocating their residence in Dubai due to the attractive tax system.

Other taxes: real estate and VAT

In Dubai, residential property taxes have increased to 55% across the municipality. From January 2018, a new indirect tax of 5% will be applied on some consumable products.

How to obtain residency in Dubai?

You can obtain the golden visa in Dubai for 5 and 10 years in different ways.

To obtain the golden visa for 5 years, you can do it through:

• An investment through the purchase of a property valued at least AED 5 Million.
• Incorporating a company with a share capital of at least AED 500,000.
• Being a student.

To obtain the golden visa for 10 years you can do it by investing in a public project in Dubai an amount of 10 Million AED.

Andorra and Dubai: relations and IDC with UAE

Both countries have been coordinating the so-called Expo Dubai 2020, which was scheduled to start on December 21, 2020, but was postponed due to the COVID-19 pandemic. It was a registered exhibition of universal scale chosen in September 2018 by BIE from October 21 to March 2022.

In addition, Andorra has a double taxation agreement with the UAE since 2017.

Relations between the United Arab Emirates and Andorra.

The Andorran head of state believes that the Middle East is the area where many business opportunities are possible. Since 2017 Andorra and the United Arab Emirates have signed agreements to avoid double taxation, so «our diplomatic relations started in 2008 have prospered and we will certainly work to improve relations between the two countries.» Xavier Espot discussed the promotion of tourism relations with the Middle East and its communication with the public.

Why live in Andorra?

Andorra is one of the safest countries in Europe. In addition to security, the Principality of Andorra provides a very attractive tax framework, because unlike Dubai where taxes are 0%, in Andorra there is a maximum of 10%, which makes it very easy to change jurisdiction later.

Setting up a company in Andorra

Anyone can set up a company in Andorra without the need for a local partner, as is the case in Dubai in some cases.

Setting up a company in Andorra takes approximately three months and the minimum share capital required for the company is €3,000.

What taxes are paid in Andorra?

The tax framework in Andorra is very attractive since the maximum rates are set at 10%. It is also a tax framework approved by the European Union.

Personal Income Tax

The personal income tax in Andorra has a maximum rate of 10%. However, the first 24K€ are exempt from taxation and the rest up to 40K€ are taxed at 5%. The surplus from earned income would be taxed at 10%.

However, those traders who obtain their profits as income from movable capital, will have to pay tax from a profit of 3K at a direct rate of 10%.

In any case, dividends distributed by Andorran companies to Andorran residents are completely tax exempt.

Corporate Tax

The corporate tax in Andorra has a fixed rate of 10% after deduction of all the company’s expenses.

VAT

VAT in Andorra (IGI) has a fixed rate of 4.5% in general. There are different IGIs to be applied for the different services rendered in Andorra, however the general rate is applied at a maximum of 4.5%.

Double Taxation Agreements in Andorra

Andorra currently has 10 agreements to avoid double taxation with other countries.

Specifically, it has agreements with:

• United Arab Emirates.
• Spain.
• France.
• Portugal.
• Hungary.
• Cyprus.
• Malta.
• Luxembourg.
• Republic of San Marino.
• Liechtenstein.

How to obtain the residence in Andorra?

To obtain the fiscal residence in Andorra it is necessary to reside either at least 90 days a year (through passive residence) or 183 days a year (through active residence or self-employed residence).

Passive residence is obtained by making an investment in the country of at least 400,000 Euros, of which 50,000 Euros will remain frozen as a deposit in the accounts of the Andorran Financial Authority (AFA).

The active residence or self-employed residence can be obtained through the creation of a company in Andorra and through the investment of €15,000 in the AFA as a deposit.

Other options: Portugal

Portugal has become one of the most interesting solutions for those freelancers who have not resided in the European Union in the last 5 years.

Why? Basically because of the regime for non-habitual residents that Portugal approved last 2009. This put Portugal on the radar of many entrepreneurs looking for a solution to the high taxes in many countries.

Who is Portugal recommended for?

For those entrepreneurs and for those people who can create an online company, Portugal is a good option.

Those who have not been considered tax residents in Portugal in the last 5 years can apply.

Requirements to create a company in Portugal.

To create a company in Portugal, the first step is to reserve a company name with the Registro Nacional de Pessoas Colectivas.

This procedure takes a maximum of 2 days and once the company name is obtained, the company deed is signed before a Notary Public together with the company’s articles of association.

The incorporation experience can be done through the web as long as all the data of the project in question is collected. Once the company is registered in the Companies Registry and in the Chamber of Commerce, the declaration of the beginning of the activity and the registration with the social security is made.

In a single trip, as long as you have the necessary information and documentation, you can open your company in Portugal, even if you have already done everything online.

What taxes are paid in Portugal?

The famous non-habitual resident regime in Portugal has a flat rate for income from employment of 20%.

In addition, certain profits obtained abroad, such as dividends and income from real estate sales are completely exempt from tax as long as they do not come from tax havens.

Personal Income Tax

The non-habitual resident regime in Portugal can be kept for at least 10 years.

This regime will therefore allow you to tax your earned income at a flat rate of 20%.

Corporate Income Tax

The corporate tax in Portugal (mainland) varies between 17% and 21%.

This is still attractive compared to Spain.

VAT

The general VAT rate in Portugal is 23% (compared to 21% in Spain and 4.5% in Andorra).

However, the reduced VAT rate in Portugal is 6% and the intermediate rate is 13%.

More information

Sometimes it is complicated to decide which jurisdiction is more adapted to the personal situation of each client and that is why we offer to help you in this process.

If you need more information about which jurisdiction best suits your tax needs, do not hesitate to contact us without any obligation. We will listen to your case and we will try to advise you initially towards the jurisdiction that best suits your needs.

Contact us through our email or through our whatsapp.