1. What is corporate migration?
Corporate migration is a process whereby a corporate entity incorporated in one jurisdiction, migrates to another jurisdiction. The corporate entity will cease to exist in the jurisdiction it currently exists under and becomes governed by the laws of the jurisdiction it is migrating to. A corporate entity aiming for corporate migration would need to apply to the relevant registrar of the new jurisdiction for a ‘Certificate of Continuance’ rather than a certificate of incorporation (which is the certificate granted to a new entity upon its registration/incorporation). This means the corporate entity, despite migrating, continues as the same legal entity. It maintains its legal existence, including its assets, liabilities, contracts, and shareholder agreements, as if it had always been incorporated in the new jurisdiction.
The United Arab Emirates (UAE) is an increasingly popular destination for corporate migration and the process is commonly referred to as ‘redomiciliation’. In this article, we explore the legal benefits of redomiciliation to the UAE, highlighting its favourable regulatory environment, robust free zones, and legal frameworks that support efficient corporate migration.
2. What are its main benefits?
Redomiciliation allows a company to seamlessly transition to a new jurisdiction while retaining its historical record of existence and contractual relationships. This includes preserving contractual obligations and banking arrangements, such as credit facilities. By moving jurisdictions, companies can take advantage of more favourable corporate laws, regulations, or tax regimes in the new jurisdiction.
The UAE is a popular choice for redomiciliation due to its strategic location, which connects businesses with global financial centres and regional markets. It also offers attractive tax benefits and allows for the full repatriation of capital. The country also provides for effective asset protection options, such as DIFC Wills and foundation structures, and boasts a strong and stable economy.
3. Legal Framework for Corporate Migration
The UAE has established a robust legal framework to facilitate corporate migration. The UAE’s redomiciliation laws have created a streamlined process for companies moving their legal headquarters to the UAE. Recent enhancements have further simplified regulatory compliance and minimised administrative hurdles, making the migration process highly efficient and accessible.
With a greater number of UAE freezones enacting corporate redomiciliation regulations, foreign companies have numerous options to choose from when deciding the most suitable jurisdiction to redomicile to. Companies redomiciling to the UAE must choose between different legal jurisdictions, such as onshore UAE, offshore, or one of the numerous free zones. Each jurisdiction has its own set of regulations and compliance requirements, which businesses must navigate carefully. It is worth noting that several bodies oversee the redomiciliation process, including the UAE Ministry of Economy and the relevant local free zone authority. Each authority provides guidance on the redomiciliation process pertinent to their jurisdiction and have specific processes in place to ensure that all legal and regulatory requirements are met for corporate entities migrating to their freezone.
4. Redomiciliation Eligibility
It is essential to determine whether the laws of the corporate entity’s current jurisdiction permit migration to another jurisdiction. Additionally, it is also important to ensure that the new jurisdiction allows for the redomiciliation of foreign companies and offers the existing business activities listed on the company’s license to facilitate a smooth transition.
In terms of documentation, the relevant authorities in the UAE require certain documentation to complete the process of redomiciliation, including inter alia; proof of good standing from the current jurisdiction, approval to redomicile from the current jurisdiction, certified copies of the company's constitutional documents, and audited financial statements. These requirements aim to ensure transparency and uphold high standards of corporate governance. Certain freezones and onshore companies may have a requirement to appoint a UAE resident as an officer of the company to manage the company and the bank accounts.
5. Notable UAE Free Zones: Redomiciliation
The UAE’s free zones are particularly attractive for redomiciliation due to their specialised legal and regulatory benefits. Notable free zones include:
- Dubai International Financial Centre (DIFC): DIFC is a leading global financial hub with its own independent legal system and regulatory framework based on English common law. This makes it an attractive choice for financial services and professional firms seeking a stable and internationally recognised legal environment. The DIFC companies law contains detailed provisions for redomiciliation.
- Abu Dhabi Global Market (ADGM): ADGM also operates under a legal framework based on English common law, providing a robust environment for businesses, especially in the financial services sector. Its regulations are designed to facilitate business operations and ensure compliance with international standards. The ADGM companies law contains detailed provisions for redomiciliation.
- Dubai Multi Commodities Centre (DMCC): DMCC has established procedures and regulations for the migration of companies from other jurisdictions, including those based in local free zones. This process assumes that the originating jurisdiction’s regulations also permit such transfers.
- Jebel Ali Free Zone Authority (JAFZA): JAFZA is one of the largest and most established free zones in the UAE. It offers a business-friendly regulatory environment with benefits such as full foreign ownership and exemption from import and export duties. JAFZA’s regulations allow companies to transfer their registration from their home jurisdiction and to continue their business under a license from JAFZA.
5. Tax Efficiency and Incentives
The UAE’s legal and tax regime is designed to attract and retain international businesses. Many UAE free zones offer exemptions from corporate income tax, allowing companies to maximise their profits without incurring significant tax liabilities. Recent developments in UAE tax law, including the introduction of a federal corporate tax regime, have not impacted the favourable environment for businesses operating in free zones. It is also worth noting that UAE has an extensive array of tax treaties with numerous countries.
Additionally, the zero personal income tax in the UAE enhances the overall financial attractiveness for expatriates and business owners. This policy supports business leaders and employees by increasing their net earnings.
6. Conclusion
Redomiciling to the UAE presents significant legal and regulatory benefits for companies aiming to enhance their global operations. The UAE’s forward-thinking stance on entity redomiciliation, combined with its sophisticated legal frameworks, favourable tax regime, and supportive regulatory environment, positions it as a highly attractive destination for corporate migration. By leveraging the advantages offered, corporate entities based outside the UAE—whether they have outgrown their current environments or wish to enhance their global presence—can now relocate their headquarters to the UAE. As the UAE continues to develop as a premier global business hub, the trend of redomiciliation in the region is expected to rise.
Authors:
Jeffy Cruz
Senior Associate, Corporate
Contact number: +971 50 462 2835
and
Ayesha Najeeb
Associate, Corporate
Contact number: +971 50 462 2471