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Tax on trading in the UAE

#24
Tom Taylor said:
Thanks for sharing! They provide a setup for proprietary crypto trading company.
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You can have business activity "Proprietary trading in crypto commodities" but this is an unregulated activity, so the big question seems to remain: Is it exempt from CIT?

I mention the SFO/MFO approach because the operation seems to be exempt and I wonder if income from it would also be exempt. Receiving $xxxx from your wealth manager doesn't sound like a business activity to me. I have no actual knowledge of this, I'm searching for the right approach.
 
#25
khinkali said:
You can have business activity "Proprietary trading in crypto commodities" but this is an unregulated activity, so the big question seems to remain: Is it exempt from CIT?

I mention the SFO/MFO approach because the operation seems to be exempt and I wonder if income from it would also be exempt. Receiving $xxxx from your wealth manager doesn't sound like a business activity to me. I have no actual knowledge of this, I'm searching for the right approach.
Click to expand...
Interesting option. Is there a source mentioning a tax exemption for a SFO and the other advantages it could have - compared to trading as a natural person, also to compensate the costs and compliance requirements?
 
#26
Thomas67 said:
Interesting option. Is there a source mentioning a tax exemption for a SFO and the other advantages it could have - compared to trading as a natural person, also to compensate the costs and compliance requirements?
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From @TheCryptoAnt's link above https://mof.gov.ae/wp-content/uploa...ifying-Activities-and-Excluded-Activities.pdf

Exempted:
"Wealth and investment management services that are subject to the regulatory oversight of the competent authority in the State."

I don't know if that applies to DWTC SFO but it sounds promising. The next question is whether having your assets managed by an SFO makes the income not be from your own business activity.
 
#27
khinkali said:
From @TheCryptoAnt's link above https://mof.gov.ae/wp-content/uploa...ifying-Activities-and-Excluded-Activities.pdf

Exempted:
"Wealth and investment management services that are subject to the regulatory oversight of the competent authority in the State."

I don't know if that applies to DWTC SFO but it sounds promising. The next question is whether having your assets managed by an SFO makes the income not be from your own business activity.
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Thank you. Yes, there might be a distinction between the exempted profit generated by such a service and the capital gains themselves. Would also be interesting to know what is meant by wealth and investment management, not sure active trading is included compared to investing.
 
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#28
Thomas67 said:
Thank you. Yes, there might be a distinction between the exempted profit generated by such a service and the capital gains themselves. Would also be interesting to know what is meant by wealth and investment management, not sure active trading is included compared to investing.
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active trading and trading in general is not investment.
wealth and investment management, however, allows for certain trades which include a periodic e.g. quarterly re balance activity to be inline with the underlying investment thesis of that venture.

That being said, its not specified further in that context here, but other countries from europe do have some guidance on how/where the lines are being drawn.
Could be they are generous and consider only algo trading as trading business and a few weekly trades still falling into the investment category, but idk that and it seems theres no one out there being able to tell.
 
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#29
zaybxc said:
Reading that document it seems that if speculation is your source of income then you pay tax.
Maybe if you open a prop crypto trading company you can reduce the tax base by 375k AED plus a salary.
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just adding here that Natural persons aren't allowed to give themselves a salary. Salaries cannot be deducted when calculating your profit for CT purposes.
 
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#33
Tom85 said:
Hello! Through the help of this forum I figured that the UAE maybe imposed 9% corporate tax on day/swing traders.

The UAE government recently released conditions stating that a natural person (individual) who conducts 'Business' or 'Business Activity' will be subject to the 9% corporate tax (even without running a company), if their turnover is more than 1 million AED. Source: paragraph 29 in Corporate Tax FAQ – Ministry of Finance – United Arab Emirates

Cabinet Decision No. (49) of 2023 clarifies what is considered as 'Business' or 'Business Activity' by individual person. It states that wage, personal investment and real estate income are not 'Business' or 'Business Activity'. We can argue that day/swing trading falls under personal investment income. However, the Cabinet Decision defines personal investment as an activity that is not considered as commercial business in accordance with the Federal Decree-Law No. 50 of 2022. Article 4 from that Decree Law says that commercial business is "Speculation works practiced by a person, whether or not a trader, for purpose of realizing profit".

So it looks like day traders in the UAE are subject to the 9% corporate tax if their turnover is more that 1 million AED (~272 000 USD). And it is very easy to generate that turnover by just trading 1000 USD every day in a year.
Turnover is defined as "The gross amount of income derived during a Gregorian calendar year" in Cabinet Decision No. (49) of 2023. Though I'm not sure how the turnover will be counted. Will the revenue in the brokerage account included in turnover or only cash hitting the bank account?
And in case of crypto, will crypto-crypto trading revenue apply to turnover, or crypto into fiat exchange will be counted?

I am interested to know if day traders in the UAE indeed need to pay corporate tax now? Please, help.
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Back to this thread as it was a good summary (cheers to Tom85, changed name I guess). Aside the CIT related questions, if trading is seen as a commercial business as mentioned here above (Fed decree law 50 - 2022), I'm still wondering if a license shouldn't be needed for the activity. In November an agent of Dubaided mentioned me by phone no license was needed to trade shares/crypto with personal funds (I think it's different for Forex or trading on local markets); but not sure he was right - and there are probably penalties for an activity exercised without license. I'll ask for a written confirmation. If someone has an official source, feel free to comment on.
 
#34
Thomas67 said:
Back to this thread as it was a good summary (cheers to Tom85, changed name I guess). Aside the CIT related questions, if trading is seen as a commercial business as mentioned here above (Fed decree law 50 - 2022), I'm still wondering if a license shouldn't be needed for the activity. In November an agent of Dubaided mentioned me by phone no license was needed to trade shares/crypto with personal funds (I think it's different for Forex or trading on local markets); but not sure he was right - and there are probably penalties for an activity exercised without license. I'll ask for a written confirmation. If someone has an official source, feel free to comment on.
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stuff like that is very hard to get. You ask 5 people and you get like 15 answers.
 
#36
TheCryptoAnt said:
lol, this is like trying to find the Holy Chalice atm.

As it stands, trading frequently (and using futures) gets taxed for what I can gather; same as in Switzerland.

Hopefully this gets amended eventually, for now most people I know continue with business as usual.
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My question wasn't really about the taxation to be fair. Could have opened a specific thread on license requirements for trading though, but Tom85's summary was quite relevant if the activity is seen as a commercial business. Will see.
 
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