IFZA Crypto Business Setup and Regulatory Scope

Requirements to obtain a IFZA crypto license

• Submit the licence application to IFZA; for VARA-regulated activities, the Initial Disclosure Questionnaire is filed through IFZA before the VARA licence application
• Provide all certified copies of the founders passports and Utility bills
• Provide CVs of all shareholders and directors
• Provide a clean cryptocurrency wallet record with no suspicious transactions
• Provide business model description/business plan
• Comply with KYC and AML policies
• Comply with anti-money laundering regulations
• Ensure the protection of clients financial information
• Provide data on the structure and projected profits of the company
• Provide data on the origin of funds at the request of the regulator

Documents Required to Obtain a Crypto License in IFZA

To get an IFZA crypto license, you need to prepare a package of documents.

Individuals must provide:

• A copy of their passport as an identification document
• Photos of each shareholder that match the passport size
• If the individual is a resident of the UAE, a copy of the Emirates ID must be provided.
• A copy of a visa or proof of entry into the UAE

Notarized documents to be provided by legal entities:

• A copy of the resolution passed by your company's board of directors confirming your intention to become a shareholder in IFZA Dubai.
• A copy of your company's memorandum and articles of association reflecting its legal structure and basic operating rules.
• A copy of the relevant authorities' commercial license confirms your right to conduct business activities.
• A copy of your company registration certificate, issued by the competent authorities, confirming your legal existence.

Keep in mind that specific requirements may vary depending on current IFZA regulations and policies.

Opening a cryptocurrency business in the IFZA free zone

IFZA (International Free Zone Authority) contributes to the development of free zones and acquires the status of a leading investment center in the UAE. In collaboration with (DSOA) Dubai Silicon Oasis Authority, IFZA offers personalized packages for entrepreneurs wishing to register their companies.

In October 2020, DSOA and IFZA signed an agreement that expands business opportunities in IFZA through a partnership with DSO. This agreement opened the door for collaboration with many high-tech companies based in locations such as DSOA, the Dubai Digital Park (DDP), and the Dubai Technology Campus for Businessmen (Dtec).

IFZA became even more attractive to entrepreneurs in May 2021 with the opening of the crypto center. The IFZA cryptocurrency license presents unique opportunities for cryptocurrency businesses and investors: it creates co-working spaces, organizes training events, and supports new cryptocurrency startups.

Gofaizen & Sherle is ready to help you launch your crypto business in the IFZA-free zone for guaranteed results.

IFZA regulations and rules

IFZA plays an important role in regulating businesses operating in the zone. This organization has developed separate rules and regulations that are mandatory for all companies conducting their crypto business in IFZA. Its goal is to create a favorable and ethical business environment that ensures transparency and fairness.

The IFZA rules and regulations are designed to protect the interests of companies, employees, and investors. They contain several important requirements and obligations that companies must familiarize themselves with and strictly comply with:

• Registration and licensing:
  Businesses are required to register with IFZA and obtain an IFZA trade licence. Virtual asset activities in Dubai, including in free zones such as IFZA, are regulated and licensed by VARA, so a VARA licence is required before such activities start.
• Ownership:
  IFZA allows 100% foreign ownership; no local sponsor or UAE-resident agent is required. Company setup is handled through IFZA's network of authorised Professional Partners.
• Financial Accounting:
  Businesses must keep up-to-date, tax, and financial monitoring records to ensure transparency and accountability in financial transactions.

• Compliance with Laws:
  Companies must strictly comply with UAE regulations and laws, including the provisions of labor laws, environmental regulations, health and safety regulations.
• Respect for Intellectual Property Rights:
  Businesses are required to respect intellectual property rights and avoid any activity that may violate those rights. This includes the prohibition of plagiarism, copyright infringement, and the illegal use of innovative developments without the permission of the right holder. IFZA attaches great importance to the protection of intellectual property to create a favorable environment for the development of innovative and technological companies.
• Confidentiality of Information:
  Companies working for IFZA must ensure the confidentiality of any information received. This includes the data of customers, partners, employees, and other parties with whom the company may interact. Maintaining confidentiality is an integral part of ethical business conduct.
• Compliance with IFZA rules and regulations: Businesses are required to follow all rules and regulations established by the IFZA concerning the use of amenities and benefits in the free zone. This includes rules on the use of infrastructure, access to services, events, and compliance with general quality standards.

Cryptocurrency businesses in the IFZA must comply with additional requirements, such as customer identity verification (KYC) and anti-money laundering (AML) compliance. IFZA takes into account international standards and best practices in the regulation of cryptocurrency transactions to ensure a high level of security and trust in this area.

IFZA has the power to impose fines or sanctions on businesses that violate its rules and regulations. In case of serious violations, IFZA has the right to revoke the license of a company and demand that it terminate its activities in the free zone. This promotes discipline and compliance with the standards necessary to maintain IFZA's reputation and attract the trust of the business community and investors.

In its ongoing work to improve its rules and regulations, IFZA takes into account the rapid development of technology and changes in the cryptocurrency industry. The organization monitors global trends and new regulatory approaches to ensure an efficient and innovative business environment at IFZA.

• Compliance with Laws:
  Companies must strictly comply with UAE regulations and laws, including the provisions of labor laws, environmental regulations, health and safety regulations.
• Respect for Intellectual Property Rights:
  Businesses are required to respect intellectual property rights and avoid any activity that may violate those rights. This includes the prohibition of plagiarism, copyright infringement, and the illegal use of innovative developments without the permission of the right holder. IFZA attaches great importance to the protection of intellectual property to create a favorable environment for the development of innovative and technological companies.
• Confidentiality of Information:
  Companies working for IFZA must ensure the confidentiality of any information received. This includes the data of customers, partners, employees, and other parties with whom the company may interact. Maintaining confidentiality is an integral part of ethical business conduct.
• Compliance with IFZA rules and regulations: Businesses are required to follow all rules and regulations established by the IFZA concerning the use of amenities and benefits in the free zone. This includes rules on the use of infrastructure, access to services, events, and compliance with general quality standards.

Cryptocurrency businesses in the IFZA must comply with additional requirements, such as customer identity verification (KYC) and anti-money laundering (AML) compliance. IFZA takes into account international standards and best practices in the regulation of cryptocurrency transactions to ensure a high level of security and trust in this area.

IFZA has the power to impose fines or sanctions on businesses that violate its rules and regulations. In case of serious violations, IFZA has the right to revoke the license of a company and demand that it terminate its activities in the free zone. This promotes discipline and compliance with the standards necessary to maintain IFZA's reputation and attract the trust of the business community and investors.

In its ongoing work to improve its rules and regulations, IFZA takes into account the rapid development of technology and changes in the cryptocurrency industry. The organization monitors global trends and new regulatory approaches to ensure an efficient and innovative business environment at IFZA.

Taxes in IFZA free zone

IFZA Dubai offers tax and financial advantages: a 0% corporate tax rate on the qualifying income of a Qualifying Free Zone Person, exemption of individuals from taxation of income from international activities, 100% repatriation of profits and capital, no currency restrictions, and no import and export taxes. This creates a favorable environment for business and optimization of financial flows.

However, according to the Public Notice of the Ministry of Finance and the Federal Tax Administration, which was published on the official IFZA website as of June 1, 2023, the following UAE corporate tax rates apply to entities registered in the free zone:

• 0% on qualifying income
• 9% on taxable income exceeding AED 375,000

This means that companies will only be taxed at 9% on that portion of their taxable income that exceeds AED 375,000. Income below this threshold will be exempt from taxation.

Under the tax provisions of the UAE Corporate Tax Law, the taxable base depends on the taxpayer's classification.

• For "residents", tax applies to income derived from both domestic and foreign sources based on their place of residence.
• On the other hand, "non-residents" are taxable only on income derived from sources within the UAE, excluding income from foreign sources.

Under the new legislation, certain types of income paid to non-residents may be exempt from income tax in the UAE, which means a zero tax rate is applied. Due to this, no income tax registration and filing obligations arise for either UAE businesses or foreign recipients of income derived from the UAE.

It is important to note that income tax does not apply to transactions between UAE resident individuals. This means that for domestic transactions between residents, income tax will not be taken into account.

Reporting:

• All taxable persons, including those from the free zone, are required to register for corporate tax and obtain a unique corporate tax registration number. In certain cases, the Federal IRS may require certain exempt individuals to register for corporate tax as well.
• Taxable individuals must file a corporate tax return for each tax period within 9 months after the end of the applicable period. This is usually the same deadline for any corporate tax applicable to the tax period for which the return is filed.

As you can see, there are many nuances and clarifications in the law. To find out whether your company falls under the new UAE tax legislation - we advise you to consult Gofaizen & Sherle