IT business presented itself in the UAE

Consulting companies note a new surge of requests from the IT business for advice on opening representative offices in friendly countries: the UAE, India, and the CIS countries. If in 2022 the demand was more for relocation, opening representative offices to retain employees and ways to circumvent sanctions, now it is more motivated by the search for new customers and partners. Moreover, in parallel, a request was formed “in the opposite direction” – for the legalization in the Russian Federation of intellectual property objects created in the relocation, in order to receive state benefits.

As Kept (formerly KPMG) told Kommersant, the demand of Russian business for services related to the opening of structures in the UAE has doubled compared to 2022. We are talking about consultations on tax aspects and issues related to operational activities, as well as on the opening of IT companies for software development, marketing and sales of IT services and products, including mobile applications, etc., clarified in Kept.

Interest in the UAE can be explained by the preferential tax regime and the friendly status of the country, the possibility of obtaining a tax residency certificate for companies and individuals (employees and owners), the possibility of opening a company in a short time, notes Olga Pletneva, a Kept partner.

According to the Dubai authorities, at the end of 2022, IT occupies 19% of the total volume of foreign investments in the country’s economy, second only to the financial sector – 23% (see “Kommersant” dated January 27). However, not only the IT sector chooses the UAE for registration of the main legal entity: the shareholders of one of the largest Russian railway operators of the Globaltrans group approved the re-registration of the company from Cyprus to the free economic zone in the UAE Abu Dhabi Global Market, the company announced on August 16.

Other friendly countries are also attracting more and more attention. According to S+Consulting, the number of companies wishing to get into the acceleration program to enter the Indian market increased by 30% in 2022 and this year the growth continues at a “comparable pace”. In addition, the company adds, business is exploring the possibility of opening offices in the post-Soviet space, for example in Uzbekistan: “This is still relevant for foreign exchange transactions, and a number of organizations are considering dividing into Russian and international parts.”

In general, according to Yakov & Partners, in all Russian industries, the growth in demand for assistance in opening representative offices abroad in 2023 amounted to 50-60% year-on-year.

“We note an increase both in consultations on the opening of Russian companies in friendly markets, and in the very facts of opening representative offices,” explained Oleg Shenderyuk, director of Yakov & Partners. According to him, the main contribution is provided by medium and small businesses.

Trust Technologies (formerly PwC) clarifies that if in 2022 the main motivation for opening foreign representative offices was to retain specialists seeking to leave the Russian Federation, then in 2023 it “shifted into the business plane”: increasing revenue, expanding the number of clients, search for new partners, attraction of investments.

According to Alexander Khaminsky, a member of the General Council of Delovaya Rossiya, since March last year, companies have needed consultations on which jurisdiction and form of incorporation, that is, registering a company with Russian participation in a foreign jurisdiction, to choose in order to exclude the impact of sanctions. But this year, the expert emphasizes, there has been a “reverse movement”: a number of IT companies need to legalize in Russia intellectual property objects created during their “forced stay abroad” and include them in the registers of domestic software in order to receive benefits.

New markets also have certain risks, Oleg Shenderyuk warns: “In new jurisdictions, it is sometimes not easy to open a legal entity, a bank account, rent premises, etc. But first of all, this is competition with local or international players.”

Sergey Ozhegov, General Director of SearchInform, notes that, for example, “in the UAE, it is necessary not to sell licenses for IT products, but to provide cybersecurity services.” In other friendly markets, domestic solutions are in demand as an alternative to Western ones, he says. Russian products may be better than their counterparts, adds Oleg Shenderyuk, but promotion “needs time and investment, which not everyone can afford.”

Tatyana Isakova