UAE 9% CT Workaround: Estonian Parent + UAE Branch = 0% Tax?

[Shories]

With UAE's new 9% CT, everyone's panicking.

But did anyone notice the branch office provisions in Article 15(3)?

Found an interesting structure using:
- Estonian parent
- UAE branch (not subsidiary)
- Specific activity classification
- Strategic service agreements
- Substance requirements can be met through virtual office services

1. Estonian Entity (Parent) - Management Fees
2. UAE Branch (Operations) - Service Contracts
3. Third Entity in Zero-Tax Jurisdiction

Result: Still possible to achieve near-zero effective rate or am I missing something?

Opinions?

 

[Houdini]

Isn't it easier, as has been discussed so many times here already, to simply generate enough expenses in the company so that the tax ends up being 0% anyway?

 

[Shories]

Isn't it easier, as has been discussed so many times here already, to simply generate enough expenses in the company so that the tax ends up being 0% anyway?

Sure, but it depends on the individual's goals.

Expenses = money "leaving" your control

Why give money to vendors when you can keep it?

If someone aims to exit, for example, high expenses = in many cases low valuation of the company, bad for potential M&A, future investors see poor performance, and in the long run it is not possible to "clean up" years of artificial expenses.

Another case: let's say you have $5M in revenue, good luck spending it all and then explain to bank/auditors how you did it.

Also, always having expenses, you need to document everything, and with large incomes it's very annoying. (In case you choose the "legit" way).

But yeah again, it depends on the individual's goal.

 

[Marzio]

am I missing something?

You are missing this

 

[Shories]

You are missing this

UAE branch can be structured to avoid PE classification, and you can maintain an "auxiliary and preparatory" status.

Revenue Flow:
Operating Company -> UAE Branch (technical services, management services, advisory fees...)

Basically use service agreements instead of direct operations.

1. Branch structure ≠ automatic PE
2. Article 5(4) OECD exemptions apply
3. Proper service agreement structuring
4. Activity classification optimization

Key would be documenting auxiliary/preparatory status while maintaining substance requirements.

 

[Marzio]

UAE branch can be structured to avoid PE classification

If the UAE branch isn't subject to tax, all the income flowing to Estonia will be taxed upon dividend distribution. That's why i underlined that phrase.