UAE clarification of Freezone Qualifying Income

[Konstanz]

Now we see that UAE was a mousetrap. For those who bought real estate , created companies etc etc
Now they say income tax is off the table but in few years , they will announce they are introducing personal income tax
But it's normal. UAE is too big country to be tax free. Let's face reality, they have to maintain infrastructure, produce water to water plants in deserts, build roads, it all cost a lof of money for the government

People like Fred was living long time in mirage. And they still do. By saying that manufacturing will be marketing

 

[Marzio]

Since there are no management and control rules

If by "management and control rules" you are referring to CFC rules then yes, Thailand doesn't have CFC rules.

The problem aren't CFC rules, the problem is that you create a permanent establishment (PE) in Thailand with your daily operations so the offshore company becomes tax resident in Thailand.

https://www.rsm.global/thailand/insights/permanent-establishment-pe/pe-risk-thailand
The idea behind PE is that work needs to be performed somwehere and unless "somewhere" is a tax free country, income will be taxed according to "somewhere's" CIT

 

[troubled soul]

I am 99% sure that Dubai's economy is heavily reliant on money from criminals and gangsters. Forget about the tax; some companies don't even want to reveal their finances. I'm not talking about the average joe or digital business owner. I'm talking about the people who live in signature villas with dozens of sports cars. All of these people have some sort of shady background.

These people are the backbone of Dubai's economy. Without them, who would eat the expensive food and buy the expensive items that Dubai is known for? If even 25% of these rich people left Dubai, the city's economy would collapse like a house of cards.

It's no wonder that the UAE rulers are reluctant to force these people to reveal their finances. After all, Dubai has become successful in large part due to gangsters and criminals. It's a safe haven for them because they don't have to reveal their sources of income.

Taxing free zones would be a disaster for Dubai's economy. Free zones are home to many businesses that are essential to the city's economy, such as logistics companies, trading houses, and financial institutions. If these businesses were taxed, they would likely relocate to other countries with more favorable tax regimes. This would lead to job losses and a decline in economic activity.

The only model that will work is one where mainland companies are taxed at 9% and free zone companies are not taxed. This would ensure that Dubai's economy remains competitive and that businesses can continue to thrive.

Of course, this is all just speculation. But it's hard to ignore the fact that Dubai is a city with a lot of money, and a lot of that money comes from questionable sources..

 

[bnpsu]

If by "management and control rules" you are referring to CFC rules then yes, Thailand doesn't have CFC rules.

The problem aren't CFC rules, the problem is that you create a permanent establishment (PE) in Thailand with your daily operations so the offshore company becomes tax resident in Thailand.

https://www.rsm.global/thailand/insights/permanent-establishment-pe/pe-risk-thailand
The idea behind PE is that work needs to be performed somwehere and unless "somewhere" is a tax free country, income will be taxed according to "somewhere's" CIT

Thanks for the clarification. What about in the case of a US LLC holding passive investments in Thailand (ie. equities or crypto)? Would that company have any PE risk or tax exposure?

 

[bedouin]

Of course you can't cash out your net income this way - but reduce your % absolutely

Why can't you? Of course you can. As of right now at least.

 

[Marzio]

What about in the case of a US LLC holding passive investments in Thailand (ie. equities or crypto)? Would that company have any PE risk or tax exposure?

In that case you should be fine because "passive investments" by definition doesn't require any active work so not PE risk.

 

[meze99]

What about Small Business Relief of 3000000aed? What type of company is eligible?

 

[stronco]

The US considers anything passed from the single member LLC to the owner as "distributions" which are neither salary nor dividends.

The country of tax residence of the owner however, may very well treat such flows differently. Totally depends from country to country, but for the UAE this is has not been clarified.


Well, beside the 375k profit exemption, there seems to also be an exemption for turnover below 1M AED . At least it's mentioned in the following articles:

https://gulfnews.com/business/corpo...n-to-pay-corporate-tax-in-uae-1.1684318157806
https://www.trenchlaw.com/the-minis...r-annual-turnover-exceeds-dh1-million-272294/
https://www.thenationalnews.com/bus...rate-tax-only-if-their-turnover-exceeds-dh1m/
https://www.gulf-insider.com/uae-to-introduce-corporation-tax/

As far as I can see the sub 1M AED turnover thing does not apply for FZCO companies.

 

[bedouin]

Funny how IFZA keeps sending emails to partners about BS promos like "IFZA Property Promotion!" (sent today), "Dubai Real Estate Market lectures" (yesterday), "SPECIAL SOHO OFFER" (yesterday), and are dead silent about how absolutely useless they have become overnight.

The only event that mentions CT is "GERMAN LANGUAGE EVENT: Corporate Tax in the UAE"... on the 22nd of June. Guess you have to be German and attend there in person almost a month after CT has been passed if you want to have a chance to ask the uncomfortable questions (hope they don't "lock anyone there for further replies").

If you can't get full transparency from the FZ regulator itself, makes sense not to get it either from any of their resellers and self-considered gurus.

 

[alessio]

As far as I can see the sub 1M AED turnover thing does not apply for FZCO companies.

It can be difficult to differentiate between the 1M AED exemption announcement and SBR (Small business Relief) for those who are struggling with it. The 3M AED exemption should only be applied for after three consecutive financial years of not reaching a 3M revenue threshold.

Here is it :

• Minimum Threshold:– The resident taxable entity having combined income for the current tax year and each of the tax years prior to it does not exceed AED 3 million.
• No Relief:-If the turnover in any accounting period exceeds the minimum threshold, a company cannot apply for SBR.
• Application Period:- The turnover threshold of AED 3,000,000 applies from June 1, 2023, to December 31, 2026.
• Extension:-For accounting periods beginning on or after June 1, 2023, but before December 31, 2026, the eligible companies may submit applications for SBR or submit an extension

 

[Konstanz]

These all rules (exemptions, non exemptions, qualified , non qualified, exempted, audits, declarations, accounting) too much complex to work on company incorporated in blacklisted country and pay 9% income tax.
I think it's done for Dubai as jurisdiction.

 

[Cloudbanck]

As far as I can see the sub 1M AED turnover thing does not apply for FZCO companies.

Yeah, but should apply to a freelancer or owner of a single member US LLC or other similar foreign company. And I guess most freelancers earn less than 1M, so this is quite significant, especially because there are no reporting requirements.

 

[bedouin]

These all rules (exemptions, non exemptions, qualified , non qualified, exempted, audits, declarations, accounting) too much complex to work on company incorporated in blacklisted country and pay 9% income tax.
I think it's done for Dubai as jurisdiction.

You dont understand. It's done for Dubai as a jurisdiction for all digital nomads, marketers, ecoms, etc. Yes.

Dubai are aware of this and they are stepping up their game, that is all. Think about the ugly girl who was laughed at in her school days but then she turned super hot at college. Suddenly she moved from accepting being with the first loser who had interest in her to dating the quarterback junior star.

Dubai wants another type of investor now. That's just it. They changed their dress code. Nothing new.

 

[alessio]

These all rules (exemptions, non exemptions, qualified , non qualified, exempted, audits, declarations, accounting) too much complex to work on company incorporated in blacklisted country and pay 9% income tax.
I think it's done for Dubai as jurisdiction.

Are you living in our world ?

We are in 2023 with international standards - You speak like it was 100% normal and that it makes sense a Child of 21 years old go to UAE - open professional bank account within weeks - invoice 100K USD on the morning from high tax country and bring it to UAE - next day send it to his personal bank account.

It's all about focusing on bad or good side of it.

The good sides are :

- Proper accounts to assist all those young entrepreneurs to learn how to really develop their business outside of gambling in Crypto
- Audit not to pay but to "Invest" as when you face the banker after 2 years, you understand that you need those financial audits for past years to take advantage of bank leverage and invest your profit in Real Estate for instance.
- You are talking about blacklist country ? If so, I regret not understanding well Economic reports of last years of UAE showing up Export numbers who clearly shows that they beat and as I know they succeed to bring those founds into their bank accounts.


Lot of people here who are never really paid attention to what Dubai is building are struggling thinking of the taxation side.

So let's put the Church in the middle of the village :

- What are the better available solutions than the new midlde-east hub Dubai with 9% CT full of opportunities ?

Please for all the specialist right here, be precise and explain who are the place to setup if not Dubai ? Let's talk about tax, fees, financial flux, delay and difficulty of getting banking

Let's analyze situation as professionals -

 

[Konstanz]

Are you living in our world ?

We are in 2023 with international standards - You speak like it was 100% normal and that it makes sense a Child of 21 years old go to UAE - open professional bank account within weeks - invoice 100K USD on the morning from high tax country and bring it to UAE - next day send it to his personal bank account.

It's all about focusing on bad or good side of it.

The good sides are :

- Proper accounts to assist all those young entrepreneurs to learn how to really develop their business outside of gambling in Crypto
- Audit not to pay but to "Invest" as when you face the banker after 2 years, you understand that you need those financial audits for past years to take advantage of bank leverage and invest your profit in Real Estate for instance.
- You are talking about blacklist country ? If so, I regret not understanding well Economic reports of last years of UAE showing up Export numbers who clearly shows that they beat and as I know they succeed to bring those founds into their bank accounts.


Lot of people here who are never really paid attention to what Dubai is building are struggling thinking of the taxation side.

So let's put the Church in the middle of the village :

- What are the better available solutions than the new midlde-east hub Dubai with 9% CT full of opportunities ?

Please for all the specialist right here, be precise and explain who are the place to setup if not Dubai ? Let's talk about tax, fees, financial flux, delay and difficulty of getting banking

Let's analyze situation as professionals -

It's better to incorporate in Cyprus (12.5 % tax, Malta can be 5% effective income tax, Bulgaria, Romania). You can basically have EU company with the same requirements and similar taxation and avoid all problematic with UAE

 

[alessio]

Once again -

Let's challenge the audience :

- I am doing Marketing Services/Ecommerce - I am 25 years old and I am ready to leave Europe to get better taxation environment and opportunities.

Starting from 0 -
Target is to do 1M net income yearly-

Please can someone shows up with better solution than Dubai using professional arguments

As a reminder

- No personal tax
- 9% tax based on net income up to 100K USD (could be optimized easily up to 5% for 1M USD income)
- Business environment and multi-cultural place
- CRS managed by Indians in banks (will be understood by those who want to).
- 5% VAT

Let's consider setting up cost, admin, yearly maintenance of the structure, etc.. and analyze.

What's the better plan

It's better to incorporate in Cyprus (12.5 % tax, Malta can be 5% effective income tax, Bulgaria, Romania). You can basically have EU company with the same requirements and similar taxation and avoid all problematic with UAE

I don't have really much skill for juridiction like Bulgaria but let's just challenge it :

5 Best EU Countries for Freelancers 2023 (TAX AND MORE).

Should be a good start ?

If anyone want to be part - let's challenge Dubai together

 

[Konstanz]

Once again -

Let's challenge the audience :

- I am doing Marketing Services/Ecommerce - I am 25 years old and I am ready to leave Europe to get better taxation environment and opportunities.

Starting from 0 -
Target is to do 1M net income yearly-

Please can someone shows up with better solution than Dubai using professional arguments

As a reminder

- No personal tax
- 9% tax based on net income up to 100K USD (could be optimized easily up to 5% for 1M USD income)
- Business environment and multi-cultural place
- CRS managed by Indians in banks (will be understood by those who want to).
- 5% VAT

Let's consider setting up cost, admin, yearly maintenance of the structure, etc.. and analyze.

What's the better plan


I don't have really much skill for juridiction like Bulgaria but let's just challenge it :

5 Best EU Countries for Freelancers 2023 (TAX AND MORE).

Should be a good start ?

If anyone want to be part - let's challenge Dubai together

I think this is how UAE government think that Dubai is so nice place that people would still incorporate and live , even with tax

 

[jafo]

There are zero better options.

There are DOZENS of options!

I'm paying a total of 8.63% corporate tax now and living among my own people in Zug & Zurich, Switzerland!!! No minimum stay etc etc
If UAE really is going to implement this the way it is written (assuming they aren't just appeasing the OECD and buying time until the multipolar world is strong enough to tell the OECD to go f*ck themselves), why would ANYONE want to move to the UAE?

Source: My earlier question to the forum ...

PS. I will leave these other options to the people who sell corporate services to sell. I have been doing my own research since the mid-80s, so I have invested a lot of time and resources to keep this up to date, so I will NOT disclose it because it would really be counterproductive to the advertisers here. Besides, people do NOT appreciate free things. The value is nothing! If you don't pay, it doesn't cost you anything. I don't sell ANYTHING, so I'm NOT going to hamper others from making a living. Information is very valuable!

There are two rules in life:
1) Never give out all the information.

 

[Konstanz]

There are DOZENS of options!

I'm paying a total of 8.63% corporate tax now and living among my own people in Zug & Zurich, Switzerland!!! No minimum stay etc etc
If UAE really is going to implement this the way it is written (assuming they aren't just appeasing the OECD and buying time until the multipolar world is strong enough to tell the OECD to go f*ck themselves), why would ANYONE want to move to the UAE?

Source: My earlier question to the forum ...

PS. I will leave these other options to the people who sell corporate services to sell. I have been doing my own research since the mid-80s, so I have invested a lot of time and resources to keep this up to date, so I will NOT disclose it because it would really be counterproductive to the advertisers here. Besides, people do NOT appreciate free things. The value is nothing! If you don't pay, it doesn't cost you anything. I don't sell ANYTHING, so I'm NOT going to hamper others from making a living. Information is very valuable!

There are two rules in life:
1) Never give out all the information.

Yes, the only reason why somebody would move to UAE is 0% tax and no declarations/reporting
Like St Kitts and Nevis just closer to Europe and normal city

 

[Marzio]

I'm paying a total of 8.63% corporate tax now and living among my own people in Zug & Zurich, Switzerland!!!

Good for you, my post was about overall taxation.

Now add your personal income taxes to the 8.63% CIT and let me know about your total tax burden

In UAE it's 9% total

For those that want to pay less than 9% there are nearly zero better options.

I'm not saying there aren't options (if you want you can fly to Vanuatu), i'm talking about better options meaning options with the same taxation level, networking opportunities, lifestyle and so on.

I don't see them but i'm sure you can englight us.