T
he most notorious Blacklist goes back to the late 1990s. It has been created by the OECD (Organization for Economic Cooperation and Development) to Black List jurisdictions ONLY because they had low Lax regimes.
The European Union has decided to launch its own Black List. They set 26 Nations “Tax heaven” Black List nearly two years ago after disclosures of widespread Tax avoidance schemes used by corporations and wealthy individuals.
According to European Union statements and it’s criteria, some jurisdictions are Black Listed if they had significant shortfalls or loopholes in their Tax rules that favour the “potential” Tax evasion. During the introduction of the International Tax standards, a multicolour carousel of list begun. There were two types of countries, one listed on the Black List who are defined as not cooperating countries, the other countries listed on “grey list” for contains the insufficiently cooperating.
On 23rd January 2018, European Union special counsel announced that eight of the previously Blacklisted countries have removed from the blacklist and moved them to a separate list, the Grey List since Emirati officials assured their European counterparts it would meet European Union provisions.
The latest introduction shows that adding ten jurisdictions by the European Union Finance Ministers. The list included Dutch Caribbean Island of Aruba, Barbados, Belize, the British overseas territory of Bermuda, Fiji, the Marshall Islands, Oman, Vanuatu and Dominica now and again the United Arab Emirates.
The United Arab Emirates perpetually named again as a non-cooperative Tax jurisdiction. In the Black Listed jurisdictions, the financial institutions will have to carry due diligence on customers connected to the jurisdiction. It will further make it more possible that transactions will be reportable under the European Union’s new mandatory disclosure “DAC 6” disclosure requirements for Taxpayers and intermediary rules which will require intermediaries to disclose certain cross-border Tax arrangements. DAC 6 is basically the direct response to the Organisation for Economic Co-operation and Development’s (OECD) final Base Erosion and Profit Shifting (BEPS), giving births to Common Reporting Standard (CRS) introduced the automatic exchange of Tax and financial information on a global level.
We further remark that in European Union decision processes in the named countries show that the Italy and Estonia have been objected to the new “Tax Heaven” list, as they opposed the inclusion of the United Arab Emirates, since both the country (Italy and Estonia), are a major destination for Emirati investments.
I’m surprised about how much attention and efforts are they use or has been given to impact fiscal competition on the level of potential Tax erosions, but relatively little on the composition and reasons behind it and why they are so concern. Especially when favourable Taxation has given by a true economy model, the same economic model who has recently made significant investments in the economically troubled European country. According to the European Union Council, the lower levels of Taxation set by over 60 countries harm their revenues. The theory of this unproven contention is that European Union countries are 2 losing Tax revenues because of the “harmful”, lower Tax levels of other countries. Yet, the European Union Council has not conducted or published any research to prove its claim.
The reason behind so many efforts are several: the problem isn’t that they don’t get it, the problem is that they can’t sell it, they are not able to sell their system anymore, they have to give to European Union Taxpayer the misperception that those countries are inaccessible place for the many and accessible only for rich people looking for fiscal alchemy. European Union is interested in two things, and two things only, making European Union Taxpayer afraid to invest aboard and in counties like Emirates and telling the European Taxpayer who’s to blame for their high Taxation.
To fix on the named Back Listed jurisdictions potential investor negative trust. The language that the European Union uses to speaks of co-operation, although it sounds more like coercion. The targeted countries must either surrender to the European Union’s demands to raise their Taxes or face consequences.
What the gentleman of European Union council does not understand or accept is a basic truth, United Arab Emirates is not interested in any Offshore business or Tax tricks for any of the European Union resident companies or individuals. The United Arab Emirates, the second-largest, most diversified and open Arab economy, is truly interested in a very tangible business, offering a country who has progressively worked towards enhancing the country’s infrastructure, safety and stability to provide a comfortable environment to attract Europeans, Asians, Russians and Chinese investors and to became investors and residents here in the Emirates. Peoples of any class, any religion and any Ethnic background are actually residing, investing and living permanently here.
This is NOT a harmful Tax competition, this wise competition of quality of life and environment together with the free will granted to everyone to decide how and where to live, challenge itself and start a new business in a different place and call it home. Dubai and Abu Dhabi’s stability over time has proved that the cities are undergoing steady enhancements, which are attracting foreign investments and demonstrated a popular destination for employee and company relocations, can European Union say the same?
I suggest to everyone of this European Union gentleman and everyone whom to come, to look around and to understand how a different business model and sovereignty can work, Dubai ranks top in the Middle East for quality of living, Dubai and Abu Dhabi were ranked as the Middle East region’s leading cities for maintaining quality of living in seventh consecutive years, ranking 74th Dubai globally and was closely followed by Abu Dhabi, in 78th place. The degree of well-being individuals feel was based on 10 lifestyle categories including economic environment, housing and education. Can the European Union say the same?
Back on the topic, let me kindly comments that each country has the right in respect of their own national sovereignty to rule and according to fiscal resident (individual and corporations) the Tax regime that better suits to its country, the United Arab Emirates statement argued that it has “shared with the European Union a detailed timeline of actions that it is currently implementing in accordance with its sovereign legal process and constitutional requirements “Source: WAM Emirates news agency, late Tuesday”. A “solo” supporting voice, not been heard inside European Union, comes from Italy, that said the United Arab Emirates, a federation of Emirates, which include the top financial hubs of Dubai and Abu Dhabi, had “constitutional constraints” that justified its delay in changing rules.
This self-given power by the European Union major county to push and victimize sovereign states under the blackmail to damage in terms of reputation other countries, as well to find a reason like to make harsher controls on their transactions with the European Union (EU), is 3 ridiculous. In other words, those territories that do not surrender to European Union Tax demands will be punished, secondly, these criteria it looks like to put shame in a product of one competitor because he is offering a better product on the market for a better price, I’m questioning now who is doing the unfair competitions? In the private sectors this practice it will be a felony, but with all such power plays in international politics it’s called “harmonization”.
As per European Union statements, additional reasons for including it seems in terms of the United Arab Emirates, the Council said it “facilitates Offshore structures and arrangements aimed at attracting profits without real economic substance and has not yet resolved this issue.”
Again, European Union massive distractions, “Offshore structures” words and definitions arose from the past and from 90s practice, and economic substance” new decorative terms to hide the fact your entrepreneurial freedom is not “freedom anymore” and they will judge your business reasons, how and why you establish a new business.
On the level G20, Organisation for Economic Co-operation and Development (OECD) and European Union level they gave the birth to the definition of economic substance refereeing to practice and doctrine when Tax Authorities are focusing on some criteria when reviewing cross border structures and are carefully checking the entrepreneur’s benefits. Generally speaking, these criteria to understand if the companies are “real” as per their vision, you need to have employees and staff, office, local decision power and local costs
Let’s make a bit of clarity, the European Union is not the standard, and regulations differ for businesses from country to country and especially in the United Arab Emirates.
Emirates is a country with commercial restriction in relations to the requirements of the business entity and the limitation of business activities allowed. Economic activity in the United Arab Emirates is regulated at a Federal level. The availability of business vehicles by the United Arab Emirates legal and corporate systems leave the entrepreneur free to tune his corporate form and budget in relations to his needs; it will depend upon the area and the activity proposed to be conducted and the corporate form the best suits to him. We have mainland company is an onshore company licensed by the Department of Economic Development (DED) of the related emirate which is allowed to do business in the local market and international, and only recently the rules and the requirement of a local Emirati, as a sponsor, is changed.
As well we have Free Zone establishment, who are also resident companies. First of all, it is important to clarify a principle that has often been misunderstood: “Free Zone” does not mean “Offshore”. There is often a confusion between the lexical definition given in the United Arab Emirates compared to the one used in Europe. Often this difference in classification generates important terminological misunderstandings, especially because the term Offshore is locally used with commercial and not Tax value, with reference to commercial restriction between the mainland and Free Zone in order to offer services and product. Incorporated within a designated “bubble” jurisdiction (the Free Zone) of the emirate territories, the company is allowed to do business inside the same free zone or outside the United Arab Emirates, this free zone area is not designed for fiscal tricks, but are specifically designed to encourage foreign investment by allowing 100% ownership to expatriates as business incentives for investors and entrepreneurs who don’t need local Limited Liability Companies.
Accordingly with the residence principle the rule that the income of an entity is Taxed according to the laws of the jurisdiction where IT IS RESIDENT, both the above-mentioned companies in the United Arab Emirates are eligible for a fiscal resident certificate and are 4 fulfilling all the economic substance rules and requirements, because it’s the United Arab Emirates law itself who required it for the establishment.
They have proper licensing (to be paid to the authority under each category of activities, depending on the authority it can cost till 8900 US dollars for each category), they have proper bookkeeping rules such as International Financial Reporting Standards (IFRS), they need audited financial statement, and manager dully resident by United Arab Emirates visa to be responsible for local commitment (for debits, vat and corporate responsibilities) any visa employee’ costs to the company employer, approximately from 3000 US Dollars. Employees, by labour low they have the right for health insurance, a flight to back and return to the native country yearly, an end of services benefit after completing the first year. The company to become eligible for a visa for employees need to have and proper office space since the number of visas is linked to the Square Feet. Even more, are eligible for a Tax resident certificate by Ministry of Finance (MOF) and to the benefit of Double Taxation Avoidance Agreement (DTAA). The question is if a company is a resident by law, and eligible for the Double Taxation Avoidance Agreement (DTAA) benefits; if the company it has economic substantial how European Union can have any claim against the same and the Jurisdiction itself. Surprise, surprise, a company in Emirates is not a cheap business, and the incorporation it will cost more than a GMBH Gesellschaft mit beschränkter Haftung in Germany or SociétéA Responsabilité Limitée (SARL) in France.
Ras Al Khaimah International Corporate Centre (RAKICC) and Jebel Ali Free Zone (JAFZA) can offer non-resident companies formations, used actually for United Arab Emirates resident as asset protection solutions to avoiding shariah on hereditary personal assets like real estates and personal bank accounts. The Ultimate Beneficial Owner and Shareholder can also be a non-resident simply is a fact that as per central bank regulation only resident can apply for a bank account.
As a professional in the field working tougher with the bank and speaking about Anti Money Laundering (AML) and Know Your Clients (KYC) standards the United Arab Emirates ensure that they fulfil the highest international standards.
The UAE residency principles of the Ultimate Beneficial Owner is reflected further in regulations set by Central Bank of the United Arab Emirates is also applicable to all banks. Banks need to maintain valid identity documents and information for their customers, at all times.
This helps the banks to know and understand their customers and their financial dealings to be able to serve them better and manage risks prudently. Based on the communication you receive from the bank, you may need to submit, some or all of them, following documents according to category: Latest Emirates ID, Passport, Visa, Proof of Residential Address in UAE (Ejari, Utility bill or other bank statements from last 3 months), The Foreign Account Tax Compliance Act (FATCA) form. For corporate entities, Emirates ID Card for all shareholders with 5% holding, Directors and Power of Attorney, Proof of Operating Address in the United Arab Emirates(Ejari, Utility bill or other bank statement from last 3 months), Trade License or Certificate of Incorporation, Memorandum & Articles of Association, Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account.
Can the European Union say the same?
Is it true, if the European Union gentlemen’s will check on internet the emerging online offer of virtual services providers or “incorporators”, offering such virtual incorporations, may give the misperceptions that here there are no rules, and not committed on the legal, Tax & 5 value-added Tax (VAT) and compliances, behind furthermore, after the incorporations. It’s inadequate and unethical to offer companies like candy and also agree on the fact that investors must be informed and well trained on any civil and criminal liabilities. Marketing or malicious marketing of a few cannot affect or define what a legal and bank system truly its, especially when legal responsibility and consequences are more than “virtual”.
Conclusively, nothing changed. The United Arab Emirates was one of the eight countries to transfer onto the grey list, at that time we were all great expectation that United Arab Emirates banks and their correspond banks for EURO transactions gave the same benefit making the process smoother, however, no real benefit was ever seen during this period. “The United Arab Emirates remains firmly committed to its long-standing policy of meeting the highest international standards on taxation, including the Organisation for Economic Co- operation and Development’s (OECD) requirements, and will continue to update its domestic legislative framework in this regard. “Source: WAM Emirates news agency”.
I’m wondering what will be the real benefit of this trade in, whatever will be the colour of the list of United Arab Emirates will be included, since the European Union is a “rogue trader”, just a week before this blacklist, European Union was trying to approve a differ blacklist about money-laundering that includes Saudi Arabia, quickly criticised also by the United States Treasury.
European Union will never accept a competitor legal system like the United Arab Emirates, and will never understand any real economic with different Taxation model. European Union will never understand how they can survive to offer a better lifestyle and facility and at the same time Taxation benefit. Consequently, they will do all the obstructions possible to damage and or to achieve indirect control on other economy and other bank systems.
