Cryptocurrencies are in another bull market. Many investors have made good gains on crypto. If you are one of them, you might be looking to cash out some in order to rebalance your portfolio. Dubai offers great tax benefits to crypto investors.
How Dubai Tax Authorities treat gains in cryptocurrency
Dubai has currently zero percent personal income tax. This means that if you are a tax resident in Dubai, no matter how much gains you make, there is zero income tax. Whether you actively trade or hold; there are zero percent taxes on capital gains, on business income and on salary. Your gross salary figure matches your net salary figure!
Most other tax authorities treat gains from cryptocurrencies with a capital gains tax. Seems like an easy way to collect money and fill the coffers. Moreover, they often require extensive record keeping and tracking of your transactions. Not in Dubai.
How you benefit from low bitcoin taxes
It is important to understand that tax laws generally focus on facts. Tax Authority of the country you are currently living in most likely has the right to tax your income, based on the local tax laws.
Most personal taxes are levied based on the residency situation of the taxed person. Each country has their own laws to determine tax residency. They can look at the amount of days you spend there, if you own a house, or if you have economic or social ties. If you wish to benefit from low Dubai crypto taxes, you simply have to migrate from your current place of residence to Dubai.
Moving tax residency to Dubai
When the facts change, so do the tax laws that apply to you. By factually migrating you can change your tax residency.
The only real question is what do you need to do, to no longer be a tax resident according to your current country’s rules. If the facts truly change, this is surprisingly simple in most cases. In some cases, there could be an exit tax. So in order to become a tax resident you need to move to Dubai.
Dubai is one of the emirates of the UAE. The UAE are a first class country with great infrastructure, a favourable tax system, warm pleasant weather and home to a skilled and multicultural workforce. It is a great country to live in and do business. It is modern and clean, and everybody speaks English. It has a favourable tax system of zero corporation tax and zero income tax, and there are no capital control restrictions. You can send and receive as much as you please.
Moreover, Dubai has a well-established regulatory framework for cryptos. Cryptos are legal here. What this means is that Dubai is the only country for crypto investors that is easy to move to with legal certainty, no income taxes and no reporting requirements.
How to become tax resident of Dubai
Every country has requirements for people to become a resident. This could either be an investment in real estate, or starting a business.
The most straightforward method to become a resident in Dubai is to setup a company in one of the Free Zones. Free Zone companies can rent office space in the UAE, and based on this office space your company is entitled to apply for residency visas for you, your family, and your employees (if you have any). That means it gives you the right to stay in the UAE. In addition, there are affordable office solutions called: flexi-desks.
After you have moved to Dubai, you become subjected to Dubai tax and reporting requirements on your personal holdings.
How this applies to crypto investors
Simple really. You have to begin by setting up a freezone entity with the correct trade activity. There are many activities possible. If you do consulting work, you can start a consulting company. If you are a software developer, you can start a software development company. You can also start a trading or holding company for your assets.
In any case, you have to set up a company to obtain residency, so you have to choose something. You will be the shareholder and manager of this company. Once the company is established, you can apply for a residency visa with the company as sponsor.
Since there is zero corporation and income tax in UAE there is no reporting requirements of your personal investments in crypto to any authority in the UAE. The only catch is that you have to renew the company every year and pay the appropriate licensing fee. Therefore, you should maintain any obligations regarding the visa.
Our office can help you out form the company in Dubai. It takes roughly a month to get the company and your residency visa running as soon as the correct documents are filed to the freezone authorities.
Business bank account too
Yes, banking is important. Our office is a bank introducer to many banks in UAE as well as Electronic Money Institutions. Our aim is to find the appropriate bank that works for your best interest. Bank account opening in the UAE takes two to three months.
It is worth noting that when you setup a business in Dubai, you need to open a business account. You should also setup a personal bank account for local expenses. Next to that, you are not obliged to use exchanges or banks inside the country. You likely will be able to keep using your favourite exchange and international banking solutions such as Wise.
How to get a tax residency certificate in the UAE
In particular cases, an existing country could request a tax residency certificate. This is official proof issued by the authorities confirming you are a tax resident in a particular country.
The instructions from the Ministry of finance of the UAE are clear: you cannot obtain a personal tax residency certificate from the UAE unless you have spent at least 183 days there.
If you need a tax residency certificate of the UAE to your name you have to abide by this rule. However, no crypto investor ever considered relocating to Dubai a punishment.
Dubai and the UAE is a growing hotspot for crypto meetings and ongoing exhibitions. It is home to Expo 2020 so this year is going to be extra busy. More people, more meetings, more opportunities and business going on.
Relocating to Dubai may be just the push you needed. It is a safe place to be and recently it proved itself by dealing effectively with COVID-19.
Freemont provides all the services under one roof
Our service offering ranges from advising/consultancy, incorporation, residency and subsequently banking, accounting, legal services and any additional services required.
Remember that just like everywhere else; discussing crypto with the wrong bank or freezone employee could result in many questions. Bank employees dealing with foreign investors usually do not work in the front office. Dubai is a networking place and through the right agent, you will talk to the right people.
This saves you a lot of time. Time that you can spend on different things such as managing your investments. Opportunity cost, basic economics.
Get your affairs sorted
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