I wouldn't worry too much about those transactions before taxation, so you should be fine. Furthermore you're not doing anything illegal if you scale down a business.
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Possible workaround for new UAE Corporate Tax?
- Thread starter imtaku
- Start date
Looks like the only way to save on taxes is to pay your self a high salary
But how high could be director salary in Dubai ?
Also let's suppose you make 100k a month in profits, we deduct salary like 60k and the 9% applies only to the rest which is 40k ?
But how high could be director salary in Dubai ?
Also let's suppose you make 100k a month in profits, we deduct salary like 60k and the 9% applies only to the rest which is 40k ?
Yes, but 9% is only on profit above 375k per year.
So with 40x12=480k, you only pay 9% on 105k, so about 9k in total.
Better explain it this way in USD
375k AED = 100k USD
Suppose you make 1 million usd a year:
1 million$ - 100k$ = 900k$
So 900k$ - 100k$ (salary) = 800k$
So now you pay 9% of 800k$ = 72k$
30-60k AED monthly salary is something that sounds reasonable.
You can also employ your wife or husband as a COO and cut another 20-30k per month. So for a small business you will pay only on revenue exceeding 1.4 mil AED
You can also employ your wife or husband as a COO and cut another 20-30k per month. So for a small business you will pay only on revenue exceeding 1.4 mil AED
How long have you been in Dubai? It's perfectly legal if they have the right to work, in fact many small businesses are mostly "family" business.
And don't forget you can spend your corporate money on business activities - flights, hotels, laptops etc. Basically everything you need to run business.
As someone living and doing business in Dubai, I was shocked to read your comments. So I looked into it and seems like the imprisonable offences are concerned with actual bankruptcy fraud rather than regular bankruptcy through poor business performance. Recommend people read pages 57-61 of https://ded.ae/DED_Files/Files/القو...Law No. (9) of 2016 On Bankruptcy.docx.pdfSinos, this is because you are referring to administrative penalties and simply disregarding the penal code, which exists in parallel.
It would be a paradise for criminals if you could do whatever and just pay a small fine
Administrative Penalties:
These are essentially fines imposed for failures to comply with VAT/CIT requirements. Examples include failure to register for tax when required, failure to submit a tax return or make a payment within the required period, and errors leading to incorrect refund claims.
The penalties are detailed in the UAE laws and are often financial in nature, with fixed amounts or percentages of unreported tax depending on the violation.
Criminal Penalties:
These are applied in more serious cases of tax evasion, such as deliberate falsification of records to reduce payable tax or fraud.
Penalties might include imprisonment as well as hefty fines - usually both. The nature and extent of the penalty are often determined by the severity of the offense, and cases are typically referred to the judiciary by the Federal Tax Authority (FTA).
In severe cases, other repercussions like deportation (for non-citizens) could also apply.
It's crucial to differentiate between unintentional mistakes (which might still incur administrative penalties) and willful tax evasion (which could lead to criminal penalties). In either case, the FTA is the primary body overseeing tax compliance in the UAE, and they have the power to conduct audits, impose penalties, and refer cases for criminal prosecution.
Is it legal to hire a family member in your company as a bonafide employee? Yes.
Is it legal to hire a family member in your company as a way to artificially lower the company's tax base? No.
Does anyone check? In some countries, yes, in others, not so much. In UAE? Who knows. Probably not even UAE knows yet.
I have been looking into many jurisdictions recently; Bvi, cayman islands freezone, Hong Kong, Singapore.
None of them provide what Dubai offers.
Take bvi for example, if you run it from UAE. You have to pay 9% tax.
Any jurisdiction that offers 0% tax free and even traditional bank, you still have to pay 9% taxes in UAE as long as you are resident of UAE.
Maybe someone will come and say move to like Thailand or Paraguay run bvi from there at 0% tax free. But you will get terrible emi and never real banking.
So the only way left is stick to UAE and pay 9% taxes, maybe lower tax a bit with high salary and that's it.
I believe it would be better if we discuss tax optimization tips than to look for other jurisdiction.
None of them provide what Dubai offers.
Take bvi for example, if you run it from UAE. You have to pay 9% tax.
Any jurisdiction that offers 0% tax free and even traditional bank, you still have to pay 9% taxes in UAE as long as you are resident of UAE.
Maybe someone will come and say move to like Thailand or Paraguay run bvi from there at 0% tax free. But you will get terrible emi and never real banking.
So the only way left is stick to UAE and pay 9% taxes, maybe lower tax a bit with high salary and that's it.
I believe it would be better if we discuss tax optimization tips than to look for other jurisdiction.
Is banking in UAE really good? I read people complain on this forum about problems with USD/EUR payments and exchange fees
For me been good enough. Multi currency business account with corporate card. No minimum balance requirement.
It really depends on your business.
You may also be able to use tricks like having a PE or branch in some other country (as @Don mentioned) to get access to better banking. Just have to make sure you avoid tax in that country. Might not work with a BVI company, but I would guess that chances are better with a US LLC or UK LLP.
Besides, I don't see why an EMI from a good country should be worse than a UAE bank.
UAE banks can just freeze all your funds at any time and put you under a travel ban. UAE residents usually try to keep their money out of the country... Why do you think banks like HSBC are so popular?
People do not seem to be too happy staying in UAE when they have got themselves in debt:
"The owners after facing bankruptcy often flee the country and left the luxury cars behind, as under Sharia law, if the debt is not paid, then it’s a criminal offence and the person is subjected to jail."
That being said I've come across several people who have once lived in UAE but, at one point, knowingly decided to leave and simply not pay their loan obligations and were not bothered at all. It's actually quite common behaviour amongst "western backpackers" to move abroad, establish and build some credit score, max out credit cards and move to a next country.
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Interesting read on UAE corporate tax situation:
https://gulfnews.com/business/corpo...a-salary-from-their-companies-1.1692069241122
https://www.khaleejtimes.com/busine...g-company-subject-to-corporate-tax-in-the-uae
https://www.thenationalnews.com/bus...tax-will-the-one-size-fits-all-approach-work/
https://gulfnews.com/business/corpo...a-salary-from-their-companies-1.1692069241122
https://www.khaleejtimes.com/busine...g-company-subject-to-corporate-tax-in-the-uae
https://www.thenationalnews.com/bus...tax-will-the-one-size-fits-all-approach-work/
I was asking myself the same. It seems people use UAE banks only for transactional banking and residents keep most of their wealth abroad (in case they need to flee). Says a lot about the level of trust people put in these banks
But the trick may always be to stay in the UAE for doing business but bank outside UAE - it doesn't matter where you bank as long as you live in a country with no taxes! I know this changed right now because of the 9% tax. But for some with the right tax tools it may still be lucrative.
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