Physical substance of visa motivated freezone companies in UAE

[Thomas67]

As a natural person using personal funds, can't be true. Let's wait more clarifications.

Have a look at the sources here above, or give arguments/facts/sources please.

 

[Thomas67]

I have the same question regarding the Turnover. As well as if the tax administration considers that the net profit from crypto to stable coins transactions is taxable or not (in many countries these transaction wouldn't be seen as taxable events, but I've no confirmation for UAE).

Has someone a view, document or link about these two points?


@Gediminas In the case of active trading (stocks, forex, crypto), the activity is likely to be categorized as commercial business, due to its speculative and profit seeking nature. Though, is there a source stating that such a commercial business necessarily requires a license/incorporation to be law compliant?

(the Commercial Transactions law doesn't state anything regarding licenses at first sight)

Has anyone a view on it?

Just called the Department of Economy and Tourism (Dubai Government), in charge of trade/commercial licenses.

A license is not needed when trading or investing personal funds - even as a main activity (explicitly asked). An extra confirmation can come from the SCA or CBUAE if needed. I would prefer to have a document though (if someone has one).

My view is the opposite. I also believe most tax accountants can't differentiate long term investment from day/swing trading, and will only consider that the activity is done using personal savings.

- The Commercial Transaction Law is quite clear to me about this: "Speculation works practiced by a person, whether or not a trader, for purpose of realizing profit" is a commercial business.
- Corporate tax guide (last part; see also @Mekan Gurbanov 's post above, partially answering the question): "Personal Investment income is not subject to Corporate Tax when derived by natural persons from investment activity conducted in their personal capacity that is neither conducted through a Licence or requiring a Licence from a Licensing Authority, nor considered as a commercial business in accordance with the Commercial Transactions Law"

On top of this, I believe UAE is a country where it's probably better to have a good surprise than the converse in terms of financial penalties/possible sanctions.

In terms of compliance, audit I'm (at this stage) not sure it's needed, but accounting yes. Then there is the pending question of license requirement for traders (personal savings, main activity and high level of sales proceeds) and for prop firm traders (a service is provided to a prop firm).

Still looking for a source regarding @Gediminas 's statement "The line between personal investments and business activities is not fully clear, but it depends on volume, your background (are you a professional trader or not), other sources of income (is this your only income), the time you spend managing these investments, and many more".

Based on this, a professional trader (main activity, high volume, expertise,...) is expected to run a business activity.

Even in the case where the Commercial Transaction Law didn't concern trading (own funds, no clients, main activity), not sure trading belongs to the Personal Investment category though.

Quite unfortunately, the corporate tax guide (natural persons) only mentions, as an example (p.21), the case of a long term investment in securities.

The second example related to the resale of a car is interesting though, as the argument is: no corporate tax "as the sale of the car is on the personal account of the natural person and does not require a License"

Still struggling with it, any help would be appreciated even in dm

Nb: the example of the car might not be sufficient though; buying cars cheap and reselling them at a higher price on a frequent basis could possibly be seen as a commercial business, even if a personal account is used.

 

[MarkusCostigan]

Just called the Department of Economy and Tourism (Dubai Government), in charge of trade/commercial licenses.

A license is not needed when trading or investing personal funds - even as a main activity (explicitly asked). An extra confirmation can come from the SCA or CBUAE if needed. I would prefer to have a document though (if someone has one).


Even in the case where the Commercial Transaction Law didn't concern trading (own funds, no clients, main activity), not sure trading belongs to the Personal Investment category though.

Quite unfortunately, the corporate tax guide (natural persons) only mentions, as an example (p.21), the case of a long term investment in securities.

The second example related to the resale of a car is interesting though, as the argument is: no corporate tax "as the sale of the car is on the personal account of the natural person and does not require a License"

Still struggling with it, any help would be appreciated even in dm

Nb: the example of the car might not be sufficient though; buying cars cheap and reselling them at a higher price on a frequent basis could possibly be seen as a commercial business, even if a personal account is used.

Thank you Thomas.

So can we say that trading/crypto trading with personal funds is tax-free even if the treshold is exceeded?

 

[Thomas67]

Thank you Thomas.

So can we say that trading/crypto trading with personal funds is tax-free even if the treshold is exceeded?

The current understanding is that trading can't be seen as a (passive) investment and, aside this, could also be seen as a commercial business. No license needed, but the personal investment exemption in the corporate tax law is unlikely to apply.

Any other view based on sources is obviously welcome. Also, still no view on the treatment of crypto to crypto transactions.

 

[Redhue]

The current understanding is that trading can't be seen as a (passive) investment and, aside this, could also be seen as a commercial business. No license needed, but the personal investment exemption in the corporate tax law is unlikely to apply.

Any other view based on sources is obviously welcome. Also, still no view on the treatment of crypto to crypto transactions.

Anyone get any updates on this or some sort of definitive legal/accounting opinion? The more I read, the more confused I get.

 

[JackAlabama]

Anyone get any updates on this or some sort of definitive legal/accounting opinion? The more I read, the more confused I get.

you are not alone with this.

 

[JSA]

Has there been an official statement from the government regarding this yet?

 

[RAGAV]

Just called the Department of Economy and Tourism (Dubai Government), in charge of trade/commercial licenses.

A license is not needed when trading or investing personal funds - even as a main activity (explicitly asked). An extra confirmation can come from the SCA or CBUAE if needed. I would prefer to have a document though (if someone has one).

Hi Thomas67,

Does it mean we can take any kind of visa (either through Freezone or freelancer visa) and trade in stocks, derivatives on any regulated exchanges using personal funds? What is the risk of violation of the activity (and potential visa renewal) defined by Freezone company or freelancer if trading profits are the primary source of income?

I reached out to the SCA and they told that their permission is not required to trade in stocks, derivatives in international markets.

 

[JustAnotherNomad]

This is why the UAE isn't a great place to do business.

 

[Thomas67]

Hi Thomas67,

Does it mean we can take any kind of visa (either through Freezone or freelancer visa) and trade in stocks, derivatives on any regulated exchanges using personal funds? What is the risk of violation of the activity (and potential visa renewal) defined by Freezone company or freelancer if trading profits are the primary source of income?

I reached out to the SCA and they told that their permission is not required to trade in stocks, derivatives in international markets.

The more I read/learn about it, the more complex it becomes (also with the introduction of the CIT and its practical implications). You should definitely be fine (I believe) if you're setting up a prop trading company, have the appropriate licenses, depending on the instruments, and use locally regulated intermediaries. This will also ensure the origin of funds is clear and legit.

Fee free to investigate/consider other options, they might be much more risky (in UAE compared to other countries).

SCA doesn't cover the scope of international brokers, nor the possible legal impacts it might have would you use one.

Visa can be obtained with any type of company/freelance activity. A company can invest its capital, but trading requires a license.

Here above I'm mentioning no license is needed, but there's a contradiction with the commercial transaction law (speculative activity, virtual assets, ...) labelling the activity as commercial business - likely requiring a commercial license, such as a proprietary trading license.

Nb to the readers: no comment stating no license or company is needed (in 2024-2025) without an explicit source/reference please.

 

[RAGAV]

The more I read/learn about it, the more complex it becomes (also with the introduction of the CIT and its practical implications). You should definitely be fine (I believe) if you're setting up a prop trading company, have the appropriate licenses, depending on the instruments, and use locally regulated intermediaries. This will also ensure the origin of funds is clear and legit.

Fee free to investigate/consider other options, they might be much more risky (in UAE compared to other countries).

SCA doesn't cover the scope of international brokers, nor the possible legal impacts it might have would you use one.

Visa can be obtained with any type of company/freelance activity. A company can invest its capital, but trading requires a license.

Here above I'm mentioning no license is needed, but there's a contradiction with the commercial transaction law (speculative activity, virtual assets, ...) labelling the activity as commercial business - likely requiring a commercial license, such as a proprietary trading license.

Nb to the readers: no comment stating no license or company is needed (in 2024-2025) without an explicit source/reference please.

This is the definition of personal investment in FTA Decree. Probably implies there are activities that can be treated as commercial without needing a license. (If we interpret it in plain English).

I was planning to trade in personal account using personal funds (after obtaining a freelancer visa or LLC visa). I have talked to multiple business set up consultants. They told that you can use LLC or freelancer visa as a vehicle to reside in UAE and trade in personal account. Do you see this option as risky?

 

[Thomas67]

This is the definition of personal investment in FTA Decree. Probably implies there are activities that can be treated as commercial without needing a license. (If we interpret it in plain English).

I was planning to trade in personal account using personal funds (after obtaining a freelancer visa or LLC visa). I have talked to multiple business set up consultants. They told that you can use LLC or freelancer visa as a vehicle to reside in UAE and trade in personal account. Do you see this option as risky?

For me there's indeed a distinction between investing (long term/passive) and active trading. Business set up consultants want to close a deal (the set up fees), there aren't responsible of what you do as natural person. Only a lawyer (not only tax advisor) can answer your question. I've at least described what I believe is the safest.

This thread also discusses the topic: https://www.offshorecorptalk.com/th...ks-cryptos-with-own-funds-in-dubai-uae.44800/

So far difficult to gather explicit sources/references instead of opinions.

 

[JustAnotherNomad]

That's the problem with the UAE: Ask five people, get six answers. You can apply for a ruling from the FTA, but I wouldn't put that much faith in that either. If they change their mind a day later, what will you do? Sue them? Haha!
In the UAE, you are always one step away from prison - I don't think it's an accident. They will always be able to find someone behind bars whom they don't like. I would never do business there.
Live there, yes. Set up an entity there? Never.

 

[RAGAV]

For me there's indeed a distinction between investing (long term/passive) and active trading

True. I concur. Any activity that requires active involvement is generally considered active business according to the spirit of the law. I am perfectly fine with my activity classified as commercial in nature and paying corporate tax (9%) on profits [Even when trading in personal account with personal funds].

I am only planning to trade stocks, futures and options (equity derivatives) on US and European exchanges. No trading in crypto.

My chief concern is whether my activity needs an explicit license.

I read one of your older messages in some other thread where you mentioned talking to DED and they confirmed that no license is required for trading in personal account with own funds and also it being primary activity. After reading that, I thought of taking LLC license or freelancer license and then trade in personal account.

I spoke to a practicing CA in UAE. He told me that active trading (short term and /or derivatives trading) is treated as business activity and liable to corporate tax even when carried out as a natural person.

 

[Thomas67]

My chief concern is whether my activity needs an explicit license.

I read one of your older messages in some other thread where you mentioned talking to DED and they confirmed that no license is required for trading in personal account with own funds and also it being primary activity. After reading that, I thought of taking LLC license or freelancer license and then trade in personal account.

I spoke to a practicing CA in UAE. He told me that active trading (short term and /or derivatives trading) is treated as business activity and liable to corporate tax even when carried out as a natural person.

At this stage I'm not quite sure I can trust what DED indicated on the phone to be honest. First because it's possible the guy didn't know and just provided the most logical answer (satisfaction score), secondly because only official texts/decrees/rules can be used to defend yourself.

The view of the accountant you've contacted is quite useful I believe. It would confirm the main source I have at this stage on the topic, i.e. the commercial transaction law section 1, chapter 1, articles 4-5.

One document is missing for now, a decree stating that any commercial business requires a commercial license (and is hence de facto regulated). It might not necessarily be a decree though, since there are specific regulators. Hopefully will I find it, or can any reader contribute.

In terms of instruments (the underlying behind the derivative is relevant) my first conviction, based on different articles read so far, was that Forex trading absolutely requires a company and a locally regulated broker: to make the activity legit - and clarify the origin of funds (a highly important aspect in UAE - AML and fight against terrorism financing) right away and not a posteriori. In other words, forex trading in other conditions seems illegal (risks to be assessed).

Now, I'm wondering if the Forex trading case shouldn't be extended to any type of trading. For stocks the good news is Interactive Brokers has set up a branch in UAE/Dubai end of last year. Bad news is, if trading requires licenses, a company, locally regulated brokers/exchanges, many traders in UAE could face issues at some point. Hence the importance of working on the topic and be protected by sources/lawyers text opinions, etc...

 

[Thomas67]

True. I concur. Any activity that requires active involvement is generally considered active business according to the spirit of the law. I am perfectly fine with my activity classified as commercial in nature and paying corporate tax (9%) on profits [Even when trading in personal account with personal funds].

I am only planning to trade stocks, futures and options (equity derivatives) on US and European exchanges. No trading in crypto.

My chief concern is whether my activity needs an explicit license.

I read one of your older messages in some other thread where you mentioned talking to DED and they confirmed that no license is required for trading in personal account with own funds and also it being primary activity. After reading that, I thought of taking LLC license or freelancer license and then trade in personal account.

I spoke to a practicing CA in UAE. He told me that active trading (short term and /or derivatives trading) is treated as business activity and liable to corporate tax even when carried out as a natural person.

My last view on it, which actually allows to reflect the reality of most people in Dubai/UAE, while being also in line with the law/decrees:

T

Post in thread 'License needed to trade stocks/cryptos with own funds in Dubai/UAE?'

Jan 7, 2025

Actually I believe the answer to the main question of this thread is more simple than expected.

It is provided by combining the commercial transaction law and the decrees related to the corporate tax:
- Investing, holding, swing trading over several days/weeks or more (what most people do in Dubai/UAE) => personal investment => no license, no CIT
- HFT, day trading, scalping, using sophisticated tools, (likely) trading derivatives, (likely) trading Forex (can't be seen as an investment) => a commercial business => license required (as for any business), and CIT applies (with possible...

• Thomas67

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[apres777]

There is a huge difference between theory and practice in the UAE. Especially since the new “tax regulations” took place, I personally know a dozen traders who trade privately and without a company. 80% of people who have set up a company for this sole purpose, consider it pointless in retrospect. If I were you, I would save the money for the company, especially if it has no “purpose” and is primarily intended for the visa. The company only complicates everything, especially banking and if you trade in any form with “crypto”. (Have fun explaining this to the commercial bank, unfortunately they are very conservative on the subject). There are companies that offer you VISAs or you can get a freelancer VISA.

 

[JimBeam]

There is a huge difference between theory and practice in the UAE. Especially since the new “tax regulations” took place, I personally know a dozen traders who trade privately and without a company. 80% of people who have set up a company for this sole purpose, consider it pointless in retrospect. If I were you, I would save the money for the company, especially if it has no “purpose” and is primarily intended for the visa. The company only complicates everything, especially banking and if you trade in any form with “crypto”. (Have fun explaining this to the commercial bank, unfortunately they are very conservative on the subject). There are companies that offer you VISAs or you can get a freelancer VISA.

Yes, this is what I would also do.

1. Get some freelancer visa or get some other kind of visa (friend "employs you in his company or something"). If you go with freelancer visa - do not to mention anything like that - do it for some coding/media work or something like that.
2. Do not form a company as that's expensive to keep just for visa and also expensive or if you miss on something fines can be high. So I would avoid this at all cost. Also it slows you down in case of 5. (see below)
3. Trade with your own funds
4. Keep let's say 50% of the funds in a decent foreign bank
5. In case anything bad happens with this setup - do what everybody else does - buy a one way ticket and get the f**k out of there and never return.

 

[Thomas67]

There is a huge difference between theory and practice in the UAE. Especially since the new “tax regulations” took place, I personally know a dozen traders who trade privately and without a company. 80% of people who have set up a company for this sole purpose, consider it pointless in retrospect. If I were you, I would save the money for the company, especially if it has no “purpose” and is primarily intended for the visa. The company only complicates everything, especially banking and if you trade in any form with “crypto”. (Have fun explaining this to the commercial bank, unfortunately they are very conservative on the subject). There are companies that offer you VISAs or you can get a freelancer VISA.

Thanks for your view. The whole point is that it very likely depends on the type of operations, as described. If all your friends are swing traders/mid term investors (while of course managing their own money) there is indeed no point in setting up a company as the activity wouldn't be seen as a business.

I agree with all the rest, including the suggestion of getting a freelance visa (already done in my case). Abd to answer the main question of this thread, I believe the freelance activity or the freezone company can have the visa as sole purpose. Though in my case I'll eventually convert it to a real consultancy activity which will then add substance.

 

[happyjohn]

That's the problem with the UAE: Ask five people, get six answers. You can apply for a ruling from the FTA, but I wouldn't put that much faith in that either. If they change their mind a day later, what will you do? Sue them? Haha!

Isn't there a reliable and professional service agent any longer in UAE that knows what is going on and doable in company formation and tax matters ?

How would it be if you get 6 different answers and you go with one of them and it shows it is wrong, what are the authorities saying if you can proof that you got 6 different answers in written?