Anyone who wants to emigrate to Dubai as an entrepreneur and still has a German holding company without subsidiaries because they were previously sold by it often considers how to transfer the money from the holding company to Dubai without an exit tax. Because the goal should be to invest it there in new companies and capital investments. Our answer to this is simple, but it has a striking tax logic: before leaving, the holding company is dissolved, the profits accrued in it are taxed and then invested in Dubai with the net amount from private assets in new capital investments. The point is that future tax-free income in Dubai is still higher than if the holding company invested its accumulated profits in Dubai or elsewhere abroad.

Holding as an obstacle to moving to Dubai? Introduction

Many successful German entrepreneurs are increasingly attracted to the Persian Gulf. In recent years, the city of Dubai has developed a reputation as a forward-looking metropolis. This is no coincidence, but comes from a far-sighted planning. After all, it has been foreseeable for some time that the current economic basis of the United Arab Emirates (UAE), namely the reserves of fossil fuels, will eventually dry up. So in Dubai and elsewhere in the rich neighbouring states on the Gulf, alternatives to the previous business model are being built.

Now, on the one hand, we have this spectacular city that attracts more magnetically than almost any other entrepreneur from all over the world. On the other hand, many German entrepreneurs in this country are tied to a corporate structure that has provided excellent services for them in the past. Of course, we are talking about the holding company. Indeed, even before moving to Dubai, the holding has been helpful in minimizing taxes on the sale of its operating companies.

But if your shareholder wants to move to Dubai, the German Treasury intervenes. He then vehemently claims his right to tax on the value that the holding company contains in hidden reserves at the time of departure. Depending on the legal form of the holding company, there is thus either an exit taxation or another form of tax easing. In the case described here, this means the taxation of all the profits accrued in the holding company. But if you have planned to make new investments in Dubai with these funds, the question of possibilities for tax optimization almost naturally arises.

2nd Option 1: Moving to Dubai with Holding

So what remains of options? Well, one can look for ways that allow it to move to Dubai tax-free without giving up the participation in the holding. We are therefore talking in particular about tax arrangements to avoid the exit tax. There are indeed a number of promising prospects for this. But in the end, all these models result in one result: the holding company remains taxable in Germany. This logically also means that, no matter how small or large the return that the holding company earns from the investment of the profits accrued in it, it remains subject to taxation in Germany.

To put it more concretely, at most about 70% of future profits will arrive at the holding company. And this is only the first step on the path of taxation. In the event of a distribution of dividends to the shareholders who are now resident in Dubai, around 25% capital gains taxes are again incurred. In uniform terms, the German Treasury and the entrepreneur behind the holding company share any profit. So this is basically exactly as it was before moving to Dubai with the holding company. So anyone who flirts with the move to Dubai for tax reasons should be sobered by this prospect.

Option 2: Moving to Dubai without holding

Here comes our consideration of how to optimize this dilemma for tax purposes. And, beware, it will seem paradoxical at first glance: Then you just distribute the accumulated profits of the holding company. They are then liquidated. With the now taxed money in the private account you can then emigrate to Dubai.

“But what about the taxation of profit distribution?” many of you will now throw in disturbed. Our clear answer is: “Pay them!” Yes, of course, we are talking here about a tax of 25% on the profit already subject to taxation, plus solidarity surcharge and possible church tax. However, they can reinvest the entire remaining net amount in Dubai without being tied to Germany for tax purposes.

Now you are surely asking us what advantage this should bring? Well, the good 70% of the profit that remains after we have paid the capital gains tax plus additional levies on the final profit distribution of the holding company results in a return that remains 100% tax-free in the UAE. In comparison, of the 100 % of the reserves in the holding company, one can only expect a net profit of 50 % on the return. And now you ask yourself, what is the better financial result in the end: 50% of 100% or 100% of 70%?

4th move without holding to Dubai – Conclusion

Tax optimization must always be thought holistically. In our case, anyone who had only paid attention to how to emigrate to Dubai as a shareholder of a holding company as tax-free as possible would continue to pay taxes in Germany. However, since we have also paid attention to the total taxation, which also includes the taxation of the shareholders of the holding after their departure, we help them to achieve tax-free dividends in Dubai in the future through their liquidation. Yes, it is often a clear advantage if you manage to completely remove the tax liability in Germany. After all, Germany is also a high-tax country. Under certain circumstances, after moving abroad, it is still better to submit to foreign tax law. In Dubai, however, this means that there are no more taxes with the right setting. This approach pays off especially for long-term foreign investment.