As New corporate Tax introduce.....but still There is no personal tax...so want to get benefit of this..
I want to register my Web development business...with tax free status
What will be the solution for this while being resident of Dubai ?
Thinking of USA LLC...as It is tax free and cheap.
but biggest problem is PE rule....what is the best solution for my situation ?
Thanks
USA LLC is a great structure., but whatever structure you create - if it creates a PE, it will be taxed in UAE.
As a small business, you can potentially afford to be a bit more aggressive in tax planning, but it's better to be careful.
There are several strategies that businesses can employ to mitigate PE risk:
Understand and Comply with Tax Laws: Thoroughly understand tax laws in the jurisdictions where the company operates. Different countries have different rules regarding what constitutes a permanent establishment, and the criteria can be very nuanced. Generally speaking, the PE will be created based on the DTT or UAE CT law depending on the jurisdiction:
- Under the UAE CT Law, the definition of a PE is aligned with the definition in the OECD Model Tax Convention.
- UAE has signed and ratified the BEPS Multilateral Instrument and chosen to retain the existing 'permanent establishment' definition in its DTTs. It has not elected to adopt the expanded 'permanent establishment' definition.
Its worth noting that the UAE CT Law does not make reference to a Service PE but more clarity on how this aspect will be interpreted may be provided in the Cabinet decision addressing what “any other form of nexus” will encompass.
Service PE is formed if the following conditions are satisfied:
- Furnished within a source state.
- Furnished by Foreign Enterprise through employees or other personnel.
- The period of furnishing services increases the specified threshold limit.
Service PE can be constituted if services are provided by “other personnel” who are not a company’s employees, but are under the control and supervision of a foreign company.
Structure Your Operations Appropriately: Design your business operations in a way that minimizes PE risk. This may involve separating certain business functions across different entities, limiting the activities of certain entities in high-risk jurisdictions, or employing third-party agents for certain tasks to avoid creating a PE.
For example, you can hire professional managers for your company. There are tax-optimal structures where the company has outsourced the management, and the UBO provides services to the company as a freelancer.
Documentation: Track and document where your company's activities are taking place (consider using digital solutions for this). This can help demonstrate to tax authorities that you have not created a PE.
Intercompany Agreements: Establish robust intercompany agreements that clearly delineate the roles and responsibilities of different entities within the company. These agreements can be a key tool in demonstrating to tax authorities that a PE has not been created.
Legal and Tax Advisory: Engage legal and tax advisors specialising in international tax law. They can provide guidance on structuring your business operations to minimize PE risk and can help navigate the complex and ever-changing landscape of international tax law.
