The Middle East region will continue to offer major opportunities to the petroleum sector for the next generation. The largest reserves and lowest production costs in the world will mean that the “last man standing” in the international oil and gas industry will be in the Middle East when the energy transition completes its anticipated sea-change over the next 30 years.

The national oil companies in the region are not under the same pressure that IOCs are facing to transition to renewable energies and instead look set to focus on carbon capture technologies as they seek to balance the equilibrium of national revenues with the environment.

However, the dynamics of international business structures have changed radically over the last decade. The need for “local presence” has intensified as localisation programmes roll forwards, but the impact of the global financial crisis in 2008 and the shifting geopolitics of the last decade has had a more reaching effect: offshore companies in tax havens are in decline and businesses are looking for alternatives which satisfy investors, banks and governments as to their ownership, economic substance and legitimacy.

HFI believes that one of the strongest alternative offerings to emerge over that decade has been the DMCC company option, under the DMCC Free Zone Authority in Dubai in the United Arab Emirates. The advantages of using DMCC entities have a wide geographical relevance, whether the focus is on the UAE, the GCC, the wider Middle East region or outwards internationally to the adjacent African and Asian economies.

We have identified ten key factors which place the DMCC option at the head of the queue:-

• Independent Regional Presence - A Dubai free zone option has independent regional “neutrality” which would not be possible if a regional presence was to be established in one of the major production centres. This makes it ideal for a starter presence in the region or for other circumstances where a pan-region approach is needed. In-country entities can then be built out as customer requirements and operational needs dictate;

• 100% Foreign Ownership – Full foreign ownership is permitted without local participation or sponsorship and with limited liability giving the ability to ringfence risks away from core and key assets of the group;

• Tax Effectiveness – There are no corporate taxes, personal taxes or withholding taxes in the UAE placing DMCC on an equal footing with offshore companies although VAT and customs duties apply, and taxation reforms may transpire down the road;

• Versatility of Licensing Options – These entities can be used to contract into other jurisdictions without forming a permanent establishment and to form branches, subsidiaries and joint ventures (although there are restrictions on using them inside the UAE). DMCC companies can be used to hold intellectual property assets or tangible assets such as plant and equipment. They can be used as special purpose vehicles or international payroll companies;

• Multiple Options to Establish - It is possible to establish new entities and also to transfer existing entities into DMCC from other jurisdictions and to amalgamate entities into combined DMCC entities;

• Rule of Law and Investor Protection - The UAE and Dubai Governments have an excellent track record in protecting and respecting international investor rights and the UAE and DMCC have sophisticated legal systems which borrow heavily on western corporate laws;

• High Regulatory/Compliance Standards to assist Banking & Investment – DMCC Authority operates to high regulatory standards which facilitates the obtaining of bank accounts, financing and investment;

• Cost Effectiveness and Automated Efficiency – The DMCC regulatory environment is highly automated and efficient, and much effort is made to ensure that start and ongoing costs are kept to economic levels including the ability to use virtual offices or flexi-desk arrangements in the early processes with granting of personnel visas in parallel;

• No Exchange/Repatriation of Funds Controls – There are no exchange or repatriation controls impacting on the ability to repatriate dividends or shareholder loan repayments; and

• Currency Stability - The UAE currency is pegged to the US Dollar, the international reserve currency and operating currency for the international petroleum sector.

We believe this matrix of advantages offers up an attractive mix of value and benefits to clients in their Middle East and wider international business structures.

For further information contact hugh.fraser@hfi-consulting.com