CEO of MSK group, Ms. Margarita Skavoranska has explained the gulf business culture while sharing the best out of the reliable recommendations of doing business in UAE with Ukrainian business community. She has apprised the importance of UAE’s free zone in addition to giving all the answers of how an offshore and onshore company works in a proper manner.
Here is to the complete interview given by Ms. Margarita, the CEO of MSK group.
Starting a business in Dubai with an Arab sheikh, finding a distributor from the royal family, selling Ukrainian goods in the best shops, and products – in the most expensive UAE restaurants – as it turned out, is real. We met the head of a consulting company that opens doors to the Gulf market for Ukrainian entrepreneurs.
Margarita Skavronska, CEO of MSK Group UAE (Dubai), a member of the board of directors of the Ukrainian Business Consulate in Dubai, told Vlasno.info what offshore, onshore and main land companies are and how they will help protect and grow businesses overseas. She also suggested a lot of interesting life hacks for representatives of Ukrainian business who are just thinking about starting to conquer the East.
Offshore – for whom and why?
Bringing business to international level is a necessity if we talk about contemporary Ukrainian realities. It is not necessary to be a mega corporation to decide opening an office or a representative office abroad – now all conditions are created for this purpose: specialized companies and their professional staff in consulting will provide step-by-step support for any company that has decided to conquer the world market.
Of course, in terms of profitability, the most profitable is to open companies in free economic zones, the so-called offshore. Why there? Because this is by far the most effective asset protection strategy. Businesses registered in offshore countries are subject to double taxation as per law of Ukraine.
The list of countries where it is possible to open an offshore company includes those countries where the tax rate is significantly lower than in Ukraine. Thus, the company chooses one tax-paying country and can make relatively small payments. It is a legitimate tool that is sometimes a stick for small and medium-sized businesses. And there are many other mechanisms for unscrupulous businessmen who seek to inflict damage to the state and launder money through transfer pricing. However, we will leave the “grey” schemes in the brackets today and tell you about “white”, that is, profitable and legitimate ways of taking a business to the next level.
Free zone Consulting is most often the practice of opening companies of two types: offshore and onshore. The former implies the registration of a company abroad without its physical presence there. This is regarded more as protecting the business and acquiring some guarantees. Onshore, on the contrary, requires the opening of at least an office and active involvement in the market of a country that is profitable in terms of taxation.
So how do you get into this free zone?
Our politicians and oligarchs over the past few years have managed to discredit the offshore areas of Cyprus, the Virgin Islands and the Panama Islands by simply laundering money there, so anyone who is really looking for a favorable place to grow their business should pay attention to the exciting offers of the Persian Gulf, and in particular, United Arab Emirates.
According to Margarita Skavronskaya, CEO of MSK Group UAE, sales of Ukrainian products – from soil to chicken eggs – are actively developing in the Emirates. That is, even with a small farm or plantation, you can supply your goods in Dubai while having asset protection, zero tax and complete privacy. For Arab companies of all three types (offshore, onshore, main land) the tax system is the same, companies only need to find the optimal system for their business.
Margarita Skavronskaya notes that the interests of companies that open in the Emirates may differ:
I would divide the interests of the companies with which we cooperate into two groups: one group has objective business interest when the Emirates are considered as a market for goods and when physical presence is required. And the second group are those who are interested in internationalization and globalization of business.
That is, the first group is onshore and the second – offshore?
Yes, in the first group we support the full cycle of Ukrainian business entering the UAE market: starting from the idea when marketing research is needed, understanding how stable a business model or product will be in the Emirates market. Then we proceed to the realization of the idea and understanding of what legal form and in what company this business should be “packed”. The following is contract analysis and legal consulting, minimizing the risks of our clients in the Arab Emirates. And further HR, recruitment, visa issues and more.
How difficult is it to provide the company with personnel and partners in a foreign country?
Since we are constantly “boiling” in this environment, we can give the company the most important thing – business contacts. It is, in fact, the most powerful engine of business in the Emirates, this term is called “vasta”. In addition, contracts should be approached with an understanding of regulations, legislation and so on.
If a company chooses an offshore company to acquire a global business status, what benefits will it bring to it?
Many of our businesses are already exported, have companies outside Ukraine. Our business is already familiar with these tools, he is familiar with working with companies that are incorporated in other countries. And this is especially relevant now. For example, contracting with Ukraine from European countries, Asia, and Africa is complicated by Ukraine’s recent status as a military conflict country. And it is easier to conclude an agreement from an Arab country, and especially from the Emirates, not to mention the financial preferences that a business receives, working and selling on behalf of such a company.
What is your function in this process?
Developing a holding structure with tax consequences for the owner. This process – the development of this holding tree is our task. Naturally, the wishes of our customers are considered. For someone it is protection, for someone it is status, privacy, protection of intellectual property and so on. And someone just wants to understand what tax residency he, as an individual, will be the most comfortable, productive and profitable.
The Ukrainian manufacturer is often unfamiliar with the peculiarities of doing business abroad, especially in a sharia-operated country …
Yes, our manufacturer needs to understand the features of doing business. Not only him, but any representative. For example, sales in the Emirates are not made on behalf of a Ukrainian or any other international company. Contracts with local agents and local distributors are required. And this is already a legally subtle issue, because Sharia law, if a company has a contract with one distributor, is virtually lifelong slavery. These are the “pitfalls” we minimize for our clients, warn them against unprofitable transactions, explain how to act in these conditions.
How else can you help Ukrainian business in the Arab Emirates?
The first thing I will be interested in talking to a business representative is his needs. Based on the needs, I will be guided in what block of our work is needed here. And if it is a common business interest with the Gulf countries, if it is an interest in business development, development, then on our part we will help to evaluate the idea, to implement it, to give it legal form.
If we talk about a business that is initially registered in the Emirates as an onshore company, does it retain the obligation to introduce at least 51% of the shares of some local residents into the shareholders?
Yes, that is the norm, almost 80% of the population of the Arab Emirates is the national owners of onshore companies. They earn so much, but they do not concern the management of the company. There is a specially developed package of documents in which it is stipulated that it is an owner who does not have the right to manage and receive dividends, he is entitled only to a fixed payment.
Who are these people? For example, can an Arab sheikh become co-owner of a Ukrainian company?
The involvement of local residents in the onshore business depends on their status and their ability to help the business. Such a sponsor costs from $ 2 to $ 50,000 a year. And so, the sheik can become such a sponsor. We have a suitable contract and we offer some exclusive clients as a sponsor even the sheikhs.
How long is the process of registering an onshore company?
It takes two weeks, and the company in the status of LLC will be able to sell itself. By their nature, these companies are entrenched and obliged to maintain a real presence – having an office and staff in the UAE, but we also help them with that.
Where should the Ukrainian founders start?
It is not always necessary to start with the registration of the company, sometimes you need to first look for a distributor – a local agent who can “touch the ground”, who has a contact base, a network of points of sale and so on. Each industry and product group usually have several distributors belonging to royal families. And to get through to them, we provide a separate service – search for distributors. In many ways, the right choice of the distributor determines the success of the project.
That is, before deciding to open a company in the UAE, can you analyze whether it will be profitable, and if not, abandon such an idea or change its format?
Exactly. In some cases, we also suggest conducting a market survey to see if similar products are on the market or are in demand. Although there are products that are always needed and without some research, for example, chicken eggs, when you come as a buyer to the store and see what they demand, or I buy ordinary Ukrainian cheese, and it is 7 times more expensive. Obviously, this is beneficial for the manufacturer, especially if you still consider a fair tax policy.
What are some successful examples of cooperation in your practice?
I am very proud of the cooperation with the Ukrainian Business Hub and the fact that physical deliveries of goods from our major manufacturers are already being carried out. These are mineral water, baby food, sweets, cookies and so on. These are the projects for the purchase of soil in Ukraine, a project to organize a blockchain academy in Ukraine. I also see huge potential for collaboration in the IT sector.