9 hours ago
From GIFT to Singapore: How global hubs are shaping the new playbook
- Associate Partner, MICS
Everyone has heard of the UAE's headline single digit nine per cent corporate tax rate. But what most people don't realise is that some of the world's biggest companies despite being based in high-tax jurisdictions, have consistently paid effective tax rates in the single digits, typically ranging from six to nine per cent.
How is that even possible? One simple answer: Smart, strategic tax optimisation.
So how did these companies structure themselves to achieve such outcomes? Is it still feasible in today's complex and constantly evolving global tax environment? And if so, how complicated is the playbook?
Let's unfold the global tax game – and how building the right structure can be your winning move.
Where it all begins: Structuring with purpose
When companies set up operations, their primary considerations often revolve around ease of doing business, customer proximity, and market access. Surprisingly, tax is rarely the top factor at least initially.
But not all functions in a company are tied to these operational dependencies. Some, like headquarters, treasury centres, intellectual property (IP) ownership, holding companies, and SPVs, can be located with greater flexibility. And when done right, these choices can be game-changers for both operational efficiency and tax savings.
The big Fours: Holding companies, HQ, treasury, and IP
Here's where strategy enters the game:
• Holding company: Often used to centralise ownership of subsidiaries and assets, and to efficiently manage dividends, capital gains, and group-level financing.
• Headquarters: Can be placed in jurisdictions that offer not only strategic access but also favourable tax regimes.
• Treasury functions: Since these involve managing global cash flows and financing, tax and regulatory predictability matter more than physical proximity.
• Intellectual Property (IP): IP holding companies are frequently located in countries that offer tax incentives on royalties and capital gains.
Locating these functions in jurisdictions with stability, feasibility, predictability, and favorable tax treatment can significantly enhance the bottom line. Equally important are withholding tax (WHT) implications and the availability of double taxation avoidance agreements (DTAAs), which directly impact the tax efficiency of cross-border payments such as dividends, interest, and royalties. Jurisdictions with strong treaty networks often provide reduced or zero WHT rates, making them particularly attractive for housing holding companies, treasury hubs, and IP ownership.
There are famous examples – Apple and Google, among others – who have reaped enormous tax benefits simply by strategically housing their IP in favourable jurisdictions.
Top jurisdictions for strategic tax functions
Each jurisdiction has carved its niche:
• Singapore: A globally trusted IP hub offering attractive tax incentives for IP development and commercialisation.
• GIFT City (India): Rapidly emerging as a preferred jurisdiction for treasury operations and regional headquarters due to its regulatory clarity and tax exemptions.
• Ireland and Luxembourg: Historically favoured for IP and financing structures, though tightening global tax norms have nudged companies to reassess.
• UAE: Supported by an extensive network of DTAAs and evolving tax infrastructure, it is gaining ground as a versatile base for several strategic functions.
UAE: A strategic player in the evolving tax landscape
With the introduction of its corporate tax regime in 2023, the UAE repositioned itself as a credible and competitive jurisdiction in the global tax planning ecosystem. Operating from a qualifying free zone can allow key functions – including HQ, treasury, holding companies, SPVs, and IP – to potentially benefit from a zero per cent corporate tax, subject to meeting substance and activity-based requirements. In addition, access to a growing network of DTAAs allows for potentially favorable withholding tax treatment, enhancing the efficiency of global structures.
Rather than aiming to be a low-tax outlier, the UAE is adapting to global standards while still offering targeted advantages that businesses can leverage based on their specific needs.
A final reflection
In the modern tax environment, where compliance and optimisation must go hand in hand, no single jurisdiction offers a one-size-fits-all solution. Singapore continues to lead as a preferred jurisdiction at least of Asia, for IP and regional HQs due to its R&D incentives and robust legal framework. GIFT City is rapidly gaining ground with focused benefits for treasury operations and financial entities. Ireland and Luxembourg, while reassessing their frameworks post-BEPS, still retain relevance for certain financing and licensing models.
The UAE, with its blend of flexibility, treaty access, and evolving infrastructure, is now a serious consideration for global tax planning.
Ultimately, the winning move lies in aligning your operational footprint with a tax strategy tailored to your business's functions, risk profile, and growth vision.
