Remote worker travelling the world - setup

[troubled soul]

Is there confirmed guidance from the UAE tax authority that income from an LLC is considered dividends? Have there been rulings or guidance notes issued on how LLCs are treated?

I am thinking the same....there is no official guideline there which mention this directly or indirectly

 

[thomasparra]

Please keep in mind that getting certificates or tax IDs is not the same as being tax resident of a country.

For instance, you cannot get the Thai tax residence certificate without being 180 days in Thailand AND having paid tax: Certificate of Residence (Individual Taxpayer).

Also, be careful with assuming that having a tax number in Georgia (or in any country) makes you a tax resident there. I have tax numbers in a variety of countries, but that doesn't necessarily make me a tax resident in any of them, even if I pay some taxes in those countries, because I don't spend enough time there.

But again, whether your home country will go after you depends on what your home country is. Countries like Spain or Italy won't let you go that easily and will consider you guilty of tax evasion until you prove your innocence, and good luck proving your innocence with the residency certificate from Pattaya after having spent only a week partying there.

Other EU countries don't care or have the resources to go after people who leave, so once you leave you're gone. I'm just assuming OP is from a country like Italy/Spain/Germany, in order to err on the side of caution.

Yes, and the tax certificate will probably be not enough with regards to your home country. You can get that 90 day based tax certificate in UAE but your home country might still ask for more evidence you are actually living there (apartment lease, utility bills for instance).

 

[Ancova]

Is there confirmed guidance from the UAE tax authority that income from an LLC is considered dividends? Have there been rulings or guidance notes issued on how LLCs are treated?

Happy to share the same with you tomorrow once I find the information

Please keep in mind that getting certificates or tax IDs is not the same as being tax resident of a country.

For instance, you cannot get the Thai tax residence certificate without being 180 days in Thailand AND having paid tax: Certificate of Residence (Individual Taxpayer).

Also, be careful with assuming that having a tax number in Georgia (or in any country) makes you a tax resident there. I have tax numbers in a variety of countries, but that doesn't necessarily make me a tax resident in any of them, even if I pay some taxes in those countries, because I don't spend enough time there.

But again, whether your home country will go after you depends on what your home country is. Countries like Spain or Italy won't let you go that easily and will consider you guilty of tax evasion until you prove your innocence, and good luck proving your innocence with the residency certificate from Pattaya after having spent only a week partying there.

Other EU countries don't care or have the resources to go after people who leave, so once you leave you're gone. I'm just assuming OP is from a country like Italy/Spain/Germany, in order to err on the side of caution.

100% agree but as a former government employee, I can get it from UAE

 

[myhand]

In UAE you open a company and get residency through that company. You choose one of the tax exempted activities. Just in case you also get a tax residency certificate in Dubai. Usually you would need to stay 90 days a year in Dubai to get this certificate, but we have a service for 4,000 AED to issue this certificate without staying the 90 days.
Then you open a US LLC and use banking through the states and pay yourself dividends to your Dubai personal account.

how would you avoid 9% corporate tax?

 

[12345]

Doesn't matter where you are (or claim to be, I'm sure that for your own safety you are very far from UAE), these certificates are issued by the FTA itself, and there's online verification for them.



It depends on your home country/current country of tax residence. Some countries will let you off the hook more easily as soon as you stop spending time there and cut your ties with them, others are more strict and will require proof of tax residency somewhere else.

If you're able to disclose the name of this high-tax EU country, more specific advice can be given.

If that's not possible, as a general rule, I'd advise to become an actual resident somewhere for the first couple of years, and spend 6+ months a year there. So, for example, become a tax resident of a cheap country in SEA (most don't tax foreign income), or a cheap EU country with low taxes (Romania and Bulgaria come to mind).

That way, you'll leave your current high-tax country without raising major red flags, and if challenged, you'll be able to show that you were a legit resident somewhere else.

Poland. He doesn't have kids, wife or any property in the country

Wow so is he forced to spend 180 days in Bulgara / Romania or Thailand ? Wow then I think it's better to just pay the tax in his home country

What if he deregisters and doesn't register for tax residency elsewhere, is it very big of a problem? He is fine with using Wise/Zen/Revolut only as a bank

 

[cryptofriendly]

Please keep in mind that getting certificates or tax IDs is not the same as being tax resident of a country.

For instance, you cannot get the Thai tax residence certificate without being 180 days in Thailand AND having paid tax: Certificate of Residence (Individual Taxpayer).

Also, be careful with assuming that having a tax number in Georgia (or in any country) makes you a tax resident there. I have tax numbers in a variety of countries, but that doesn't necessarily make me a tax resident in any of them, even if I pay some taxes in those countries, because I don't spend enough time there.

But again, whether your home country will go after you depends on what your home country is. Countries like Spain or Italy won't let you go that easily and will consider you guilty of tax evasion until you prove your innocence, and good luck proving your innocence with the residency certificate from Pattaya after having spent only a week partying there.

Other EU countries don't care or have the resources to go after people who leave, so once you leave you're gone. I'm just assuming OP is from a country like Italy/Spain/Germany, in order to err on the side of caution.

I see. What I mentioned seems to be a resident certificate, without the TAX. Though it's usable in Thailand for many things, like bank accounts etc.
https://thailawonline.com/certificate-residence-thailand/
For all I know, Germany specifically has a system where one can unregister himself as resident and move to a different country, and immediately ceases to be a tax resident. No need for any 180 days things.
One shouldn't keep any property in Germany then, or have any other ties, and not visit for more than 2 weeks per year, no rent a property, etc. It gets more complicated if one already has a company (exit taxation). But for many people with no assets or wife left in Germany, just signing out at the city office and moving away is enough to be free from their tax authorities.

 

[scooterguy]

Poland. He doesn't have kids, wife or any property in the country

Wow so is he forced to spend 180 days in Bulgara / Romania or Thailand ? Wow then I think it's better to just pay the tax in his home country

What if he deregisters and doesn't register for tax residency elsewhere, is it very big of a problem? He is fine with using Wise/Zen/Revolut only as a bank

It depends on how much he makes. Yes, it's probably better to stay a Polish tax resident if income doesn't exceed at least $70k IMO.

You have to keep in mind that forfeiting an EU tax residency comes with other costs: maintaining a company, health insurance, etc. so if income is not large enough it doesn't make sense.

Deregistering and not becoming a tax resident anywhere else is possible in theory, but it's not recommended, as it comes with additional challenges (plus the ones mentioned above).

Note also that Poland has an exit tax for assets exceeding 4M PLN, so again, it has to be kept into account if his profits start increasing and piling up.

 

[Ancova]

Is there confirmed guidance from the UAE tax authority that income from an LLC is considered dividends? Have there been rulings or guidance notes issued on how LLCs are treated?

Here is an article of our auditors at Deloitte where they state that dividends are not taxed

https://www2.deloitte.com/content/d...ttl-tax-unitedarabemirateshighlights-2021.pdf

 

[Sols]

Here is an article of our auditors at Deloitte where they state that dividends are not taxed

https://www2.deloitte.com/content/d...ttl-tax-unitedarabemirateshighlights-2021.pdf

I understand that, but as you know, an LLC does not distribute dividends. There are no shareholders in an LLC to distribute dividends to. Instead, LLCs have members. Under US law, income from an LLC is considered normal income (i.e. not dividends) for the members.

LLCs as hybrids of partnerships and corporations.

Some jurisdictions don't recognise LLCs as hybrids and instead consider them corporations. Canada is an example of this, where LLCs become taxable persons and, as such, they distribute dividends and not personal income. Many other jurisdictions lack specific recognition or recognize LLCs as partnerships (pass-through entities).

So I was wondering if there has been a ruling or guidance note issued in UAE whereby LLCs are determined to be corporations that issue dividends rather than distribute income.

 

[Cloudbanck]

It depends on how much he makes. Yes, it's probably better to stay a Polish tax resident if income doesn't exceed at least $70k IMO.

You have to keep in mind that forfeiting an EU tax residency comes with other costs: maintaining a company, health insurance, etc. so if income is not large enough it doesn't make sense.

You can still maintain a company in the EU though even after no longer being an EU tax resident, just not in a country where a company would create ties/make you a tax resident. There are many options, Ireland, Estonia etc.

And for health insurance, there are actually ways around that too. You can establish residency in an EU country, get an EHIC card , typically valid for 5 years, and then leave. Then you'll get health care in all EU countries (plus Switzerland) except in the country that issued the EHIC card. It doesnt matter if you are no longer a resident of the country that issued the card.

And you can also always re establish residency in the EU and get health care - it s not always immediate though.

And anyway, there is great private health insurance, and when paying for it yourself it becomes very clear how enormously wasteful government provided health care is.

 

[Ancova]

I understand that, but as you know, an LLC does not distribute dividends. There are no shareholders in an LLC to distribute dividends to. Instead, LLCs have members. Under US law, income from an LLC is considered normal income (i.e. not dividends) for the members.

LLCs as hybrids of partnerships and corporations.

Some jurisdictions don't recognise LLCs as hybrids and instead consider them corporations. Canada is an example of this, where LLCs become taxable persons and, as such, they distribute dividends and not personal income. Many other jurisdictions lack specific recognition or recognize LLCs as partnerships (pass-through entities).

So I was wondering if there has been a ruling or guidance note issued in UAE whereby LLCs are determined to be corporations that issue dividends rather than distribute income.

You have to look at it from the UAE side since UAE considers LLC's as an entity. This means profit distribution are dividends. UAE does not care if it is dividends that come in, from the US part it is only important that you are tax resident of UAE.

 

[Cloudbanck]

You have to look at it from the UAE side since UAE considers LLC's as an entity. This means profit distribution are dividends. UAE does not care if it is dividends that come in, from the US part it is only important that you are tax resident of UAE.

I don't think we know how the UAE treats US LLC's yet.

If they are treated as an entity , ie a foreign juridical person, then if they have PE in the UAE they have to get registered in the UAE and pay 9% on profits.

If they are not treated as an entity, ie it's just like a natural person in the UAE earning money, then there is no tax or need to register up to 1M AED in turnover.

 

[Sols]

I don't think we know how the UAE treats US LLC's yet.

If they are treated as an entity , ie a foreign juridical person, then if they have PE in the UAE they have to get registered in the UAE and pay 9% on profits.

If they are not treated as an entity, ie it's just like a natural person in the UAE earning money, then there is no tax or need to register up to 1M AED in turnover.

Exactly. That's what I'm after. Until there is a definite ruling or guidance note issued, we don't know how UAE will treat income from US LLCs.

US LLCs are entities. I'm not aware of any jurisdiction that doesn't recognize LLCs as entities. But, for tax purposes, are they opaque entities or transparent entities? The answer determines at which point tax kicks in, as it affects where the entity is tax resident and/or has a PE.

 

[Cloudbanck]

Ok by "non-entity" I meant transparent, ie you are taxed as an individual, not as a company.

 

[JustAnotherNomad]

The UAE clarifies in its corporate tax FAQ that foreign "incorporated partnerships" (entities that the UAE recognizes are treated as transparent for tax purposes by the country they are formed in) are treated as opaque: They are subject to UAE corporate tax if they are managed and controlled from the UAE and/or have permanent establishment in the UAE. In other words, the same rules apply as for a foreign corporation.
I would be extremely surprised if LLCs were treated any different.