One: the company that lives in Cyprus
An international business company registered in Ras Al Khaimah’s offshore registry, with us as its registered agent, that sells management consulting. Its shareholder visits the UAE for about a month a year, in two trips. The work — the advice, the calls, the presentations — is done by its other director from her desk in Cyprus. Its clients are abroad, except one: a UAE company, also ours, that is not registered for VAT and pays the consultancy about a hundred thousand dollars a year. The question, asked through the shareholder’s accountant, was whether the company had to register for UAE VAT, and the wish behind the question was that it should not.
The wish is legitimate. Registration is a cost, a quarterly filing and an audit trail for a company whose UAE footprint is a registered office. But the answer does not come from the wish; it comes from asking where the company is established for VAT purposes, which is not where its certificate was issued. A business has a place of establishment where it is legally formed or where its central management decisions are taken, and a fixed establishment wherever it keeps the people and resources able to make supplies. This company has a place of establishment in the UAE on paper and a working establishment in Cyprus in fact, and where a supplier has more than one the law looks to the establishment most closely connected with each supply. For the clients abroad that is the Cyprus desk, and services supplied from an establishment outside the UAE to customers outside the UAE are not UAE supplies at all — not zero-rated exports, but outside the scope, which is a quieter place to be. For the one UAE client the picture is different: a UAE-established supplier making a taxable supply to a UAE recipient, and that fee counts towards the mandatory registration threshold of AED 375,000.
So the advice was in two parts, and both are ordinary. First, the foreign income does not count towards the threshold and should be documented as what it is, with contracts, invoices and timesheets that show who did the work and from where. Second, the UAE fee is the only line that counts, and it sits under the threshold today; keep it there, or accept that on the day it passes AED 375,000 the company registers within thirty days, charges 5 per cent to a client that cannot recover it, and the arithmetic of the engagement changes. Corporate tax is a separate conversation — the company is a UAE juridical person and files like one — but it was not the question this week.
The lesson is the one I give more often than any other. A licence tells you where a company may work. It does not tell the tax authority where it does. Substance is not a word in a brochure; it is a description of where the people sit, and the tax follows them.
Two: the tanker and the question it raised
On Friday a vessel was hit about thirteen nautical miles off Al Jazeera, on the coast of the emirate where this firm holds its licence. The same week the Federal Reserve’s minutes said most of its members expect another rate rise before the year is out, the World Bank wrote that the UAE economy will shrink 1.6 per cent this year and grow 8 per cent next, Dubai’s third-quarter property sales came in at roughly half of last year’s value on the private counts, and Washington put nine UAE company names into official documents. And the question I now hear, in one form or another, at almost every meeting: should I move money out?
My answer is no, followed by a longer answer about what “out” means. Out of the dirham is out of the dollar, because the peg has not moved in three decades and the dollar had its fourth week of gains. Out of the UAE and into Europe means into a euro at a seventeen-month low, a deposit rate of 2.5 per cent and a central bank that says its inflation outlook has deteriorated. Out of property and into cash is the one version of the question that makes sense this year, and only because cash is paid properly for the first time since 2007: the Ministry of Finance’s retail sukuk carries 5.06 per cent and trades on Nasdaq Dubai, three-month EIBOR is above 4.3 per cent, and the ten-year Treasury spent the week above 5.2.
What the clients are really asking is whether the country still works. The honest answer is in the week’s own numbers: non-oil activity grew in the first half, the purchasing managers’ index is at a twenty-month high, bank lending is up 18.8 per cent on the year, and the Central Bank has let 155,000 customers defer AED 15.9 billion without a wobble in the non-performing ratio. The economy is being hit at the port and holding at the desk. That is a reason to keep money here. It is not a reason to keep it where it was in February.
Three: where the cash should sit
Nothing here is investment advice; it is what we tell clients when they ask where the company’s money should live. Five rules, and none of them is new.
First, the structure before the asset. Money that belongs to a family should sit in a vehicle that survives the founder — a foundation in the DIFC, ADGM or RAK ICC — before it is placed anywhere, because a dispute or a death during a war is the worst time to discover that the shares were held personally. Second, two banks, always, in two different groups, and at least one with no question over its dollar correspondent; the Banque Misr file taught everyone that a bank’s problem becomes the client’s within a week. Third, a ladder of liquidity: three months of operating costs in a current account, the next nine in the sovereign — T-Bonds and T-Sukuk at the 27 October auction, or the retail paper on the exchange — and only what is left in anything that cannot be sold in a day. The bank’s “preferential” deposit rate is compared with 5.06 per cent or it is declined.
Fourth, property is bought at the index, not at the asking price, and ready stock only, unless the escrow and the completion-delay clause have been read by someone who reads them for a living; the buyer has the negotiating position for the first time since 2021 and should behave like it. Gold at USD 4,100 is insurance priced for a war that has already started; buy it only if you would hold it at 3,000. The strong dollar is the one gift in the mess: a dirham buys 1.41 lari and more euros than it did a year and a half ago, so if you were going to buy a Tbilisi office or a Limassol apartment anyway, this is the quarter to agree the price.
Fifth, the file is an asset. Nine company names went into American documents this week, and six of them look like a thousand ordinary free-zone companies. The difference between the company that keeps its account and the one that receives an exit letter will be the quality of its contracts, its shipping documents and the written account of who pays whom and why. We spend more time building that file than on any other single thing, and it has never paid better.
What the three have in common
A company is where its people work. A country is where its institutions work. Money is where the file supports it. In each case this week the paper said one thing — a Ras Al Khaimah registration, a minus 1.6 per cent forecast, a free-zone licence — and the substance said another, and the advice was to act on the substance and keep the paper honest. That is the job, and in a year like this it is most of the value we add.
Mohanad Almeshal is Co-Founder and Corporate Counsel of Polaris Corporate Services, a licensed Trust and Corporate Service Provider in Ras Al Khaimah and Dubai. The cases described are real; the identifying details are not. Nothing in this article is investment advice.