Does UAE classify foreign companies as local Taxable residents?

[Cloudbanck]

It depends, it could be

in UAE CIT is up to 9%
In Qatar, CIT is generally 10%

A UAE company pays UAE corporate tax by default. If additionally Qatar deems the company as being tax resident in Qatar then there could be tax in both countries. In this case a double tax treaty between Qatar and the UAE (or some GCC treaty) could determine that tax is only payable in one of the two countries.

And if Qatar doesnt deem the company in question to be tax resident in Qatar, then it only pays tax in the UAE.

But in no case will there be no corporate tax.


A more interesting case is a Dutch citizen with an Emirates id living in the UAE at least 9 months per year, and owning a single member US LLC. This US LLC has a three person board with two board members who are residents in Bahrain, and the dutch guy. All board meetings take place in Bahrain and board meeting minutes are duly taken.
The US LLC has no office in the UAE, is managed from a laptop and sells services online to a small number of clients all over the world with very long contracts.

Will the US LLC have effective management and control in the UAE and pay UAE corp tax?

 

[Don]

A UAE company pays UAE corporate tax by default. If additionally Qatar deems the company as being tax resident in Qatar then there could be tax in both countries. In this case a double tax treaty between Qatar and the UAE (or some GCC treaty) could determine that tax is only payable in one of the two countries.

And if Qatar doesnt deem the company in question to be tax resident in Qatar, then it only pays tax in the UAE.

But in no case will there be no corporate tax.

Certain activities are exempt from tax in the UAE. Qatar has territorial tax, so foreign-source income should not be taxed.

A more interesting case is a Dutch citizen with an Emirates id living in the UAE at least 9 months per year, and owning a single member US LLC. This US LLC has a three person board with two board members who are residents in Bahrain, and the dutch guy. All board meetings take place in Bahrain and board meeting minutes are duly taken.
The US LLC has no office in the UAE, is managed from a laptop and sells services online to a small number of clients all over the world with very long contracts.

Will the US LLC have effective management and control in the UAE and pay UAE corp tax?

If the board oversees global operations and makes strategic decisions in the UAE, it could be liable for taxes there.
If you keep, e.g., a local warehouse in UAE, it will most often be just a PE (provided management is elsewhere).

 

[Chroft]

makes strategic decisions in the UAE

What if one is thinking hard on a decision in UAE, but then goes to Bahrain and makes it finally there? From the perspective of tax authorities, what is considered the trigger for "committing to a strategic decision" and how could they investigate it?

 

[Cloudbanck]

What if one is thinking hard on a decision in UAE, but then goes to Bahrain and makes it finally there? From the perspective of tax authorities, what is considered the trigger for "committing to a strategic decision" and how could they investigate it?

I think they will just look at the paperwork of where the decisions took place (e.g. minutes of board meetings) and where the decision makers are residents.

 

[Chroft]

I think they will just look at the paperwork of where the decisions took place (e.g. minutes of board meetings) and where the decision makers are residents.

Let us go further and consider a scenario where the minutes were signed in Bahrain. The formal decision maker is a resident of Singapore and has the position of general manager, as appointed by the director. The director is a UAE resident, but at the same time he has limited the scope of his responsibility by an internal corporate resolution and excluded for himself the right to make strategic decisions and participate in the control of the company's activities - transferring these functions to the general manager. What assessment can the UAE tax authorities make in this case?

 

[jafo]

What assessment can the UAE tax authorities make in this case?

You ask every employee in the UAE (n) this separately, and you will get (n²) answers. Why? They do NOT face any punishment for their mistakes.

 

[Chroft]

You ask every employee in the UAE (n) this separately, and you will get (n²) answers. Why? They do NOT face any punishment for their mistakes.

It is even worse. I have asked much more simple questions to local people in the UAE who consider themselves lawyers and received different answers, sometimes even contradictory ones.

 

[jafo]

It is even worse. I have asked much more simple questions to local people in the UAE who consider themselves lawyers and received different answers, sometimes even contradictory ones.

I'm sorry I laughed. This was very funny (and true!)

 

[JackAlabama]

It is even worse. I have asked much more simple questions to local people in the UAE who consider themselves lawyers and received different answers, sometimes even contradictory ones.

its true. I had that many times.