UAE clarification of Freezone Qualifying Income

[Jackx3]

Interesting analysis and debate.
Just thinking about some other consequences of this change. Given a couple of the freezone have their own judicial system,
If you had a tax "issue" would it be dealt with under Sharia law or the prevailing freezone legal system?

 

[Konstanz]

Interesting analysis and debate.
Just thinking about some other consequences of this change. Given a couple of the freezone have their own judicial system,
If you had a tax "issue" would it be dealt with under Sharia law or the prevailing freezone legal system?

I am not UAE law expert but isn't 9% federal tax, so general law of UAE would be applied?

 

[Alonzo]

This is NOT some banana republic. These are educated and sophisticated people. They don't wake up one day and turn around, scribble some words on paper, screw their long-term customers with bait & switch, and shoot themselves in the foot.

These are savvy business people that recognize an opportunity and seize it.

If you are earning zero from John and John wants to transfer his business to your area and you will earn a few million without doing jack sh1t while not spending a penny on John, are you going to tell John to go pound sand?

Actually, in Geneva they had a new law for the lump sum tax in 2016 and taxpayers with the old regime had a grandfathering clause of which they can continue to benefit (of the old regime) BUT it lasted 5 years.
https://www.bonnard-lawson.com/geneva-final-vote-lump-sum-taxation/Right now they need to meet the new criteria in order to further continue.

So yeah that's why I hardly believed you. So you say (correct me if I'm wrong) that lump sum taxpayers, who arrived before the abolition, can benefit in ZH for life? If yes, can you give me a source highlighting this clause?

EDIT: The grandfathering clause that I mentioned was for all cantons with the regime not only Geneva

 

[European]

This might have been answered already
If your FZ company follows a Jan-Dec fiscal year, is it true that it will have to pay not tax in 2023 in any case? Only from FY 2024 onward?

 

[jafo]

Right now they need to meet the new criteria in order to further continue.

So yeah that's why I hardly believed you. So you say (correct me if I'm wrong) that lump sum taxpayers, who arrived before the abolition, can benefit in ZH for life? If yes, can you give me a source highlighting this clause?

EDIT: The grandfathering clause that I mentioned was for all cantons with the regime not only Geneva

I am not sure if I can post the name of the law firm you can hire for this since they do not advertise on OCT. It may be considered an advertisement by the mods. I'm NOT that lawyer, nor do I work for him. The lawyer who did this for me retired a while back right along with BSI.

If you get permission from the mods, I'll give you the link to the law firm's webpage. I don't want to be banned or ruin someone else's business opportunities.

The law firm can answer all your detailed questions and they can also provide you with official links.

@mods ???? I just realized I don't even know who the mods on here are

 

[Dandyline]

Having been doing business both in Dubai and UAE for some time, Cyprus is no way a paradise:
- complex tax rules (VAT, CIT, employees taxes etc) - the cost of running a Cyprus company is comparable or in my personal experience higher than a similar setup in UAE.
- terrible local banking. The same goes to Dubai, so no major difference there, again most of the folks rely on EMIs or Swiss banks to work with daily banking and treasury accordingly. Some people have a short memory, please google the banking crisis on Cyprus in 2008/9.
- property prices are crazy inflated by the same influx of Russians and ex-CIS residents. They call it "Limassolsk" now. The only difference - in Dubai you have plenty of nice areas to live, on Cyprus it's basically two towns and a very limited choice. Don't expect high finishings or great amenities unless you are ready to pay several mil EUR for your own dream house.
- forget about shopping, luxury things, fine dining, 1h delivery, massages for 40 EUR - you will not find anything like these on Cyprus
- personal taxes still apply. Non-dom helps to optimise the structure and 60-days tax residence is a real boon, but you still have to report your personal tax affairs.
- very low level of service except hospitality industry. Nepotism and general south laziness in every aspect of life - from doctor appointments to notary services.
- EU regulations everywhere (for those who deal with the countries that are not in the best relations with the EU)

There are some advantages of Cyprus when comparing to Dubai:
- Common law
- internationally recognises jurisdiction, no issues with blacklists
- better climate in Summer (however much worse in Winter time)
- better connected to Europe, however you mostly get Easyjet or "Club Europe" class to travel (not a big deal, but for those who spend their life in the plane cabin that matters)
- cheap, healthy and delicios food - you can easily find the same food in Dubai, but at 2-4x price.
- better quality of construction in the high-end apartments and villas and an option to build/customise your own place
- good UK schools where your kids will learn to speak English without Indian accent. Although, good luck getting there now.
- an option to get a Cyprus citizenship
- better nature with more variety
- better air quality (if you stay away from the roads)

TLDR IMHO: Dubai is more flashy, more safe, better suited for high-end lifestyle and people dealing with the East. Perfect for a one-man business setup, zero tax on personal level, small/zero taxes on coprorate. Cyprus is more under the radar, sleepy but good for family and working with EU, good for a medium/big sized business, low taxes on personal level (with non-dom), low/medium taxes on corporate.

Yes, pros and cons with both options. I think the best solution is to have a dual setup with Dubai company and residency (For non EU-customers, banks, PSPs) and Cyprus company and residency (For EU-customers, banks, PSPs), spend winters in Dubai and summers in EU.

 

[Martin Everson]

I am not sure if I can post the name of the law firm you can hire for this since they do not advertise on OCT. It may be considered an advertisement by the mods. I'm NOT that lawyer, nor do I work for him. The lawyer who did this for me retired a while back right along with BSI.

If you get permission from the mods, I'll give you the link to the law firm's webpage. I don't want to be banned or ruin someone else's business opportunities.

The law firm can answer all your detailed questions and they can also provide you with official links.

@mods ???? I just realized I don't even know who the mods on here are

This is off topic. So no link posting.


Please guys stick to thread topic...thx. Switzerland has nothing to do with this thread. I will start zapping off topic posts if it gets out of hand.

 

[jafo]

Yes, pros and cons with both options. I think the best solution is to have a dual setup with Dubai company and residency (For non EU-customers, banks, PSPs) and Cyprus company and residency (For EU-customers, banks, PSPs), spend winters in Dubai and summers in EU.

*This is actually a great idea/theory. If this is put into practice, I wonder what the results would be.

Theory -> Practice -> Results.

Has anyone tried this yet?

 

[manukahoney]

Yes, pros and cons with both options. I think the best solution is to have a dual setup with Dubai company and residency (For non EU-customers, banks, PSPs) and Cyprus company and residency (For EU-customers, banks, PSPs), spend winters in Dubai and summers in EU.

I would've waited for some clarification of CFC rules.
UAE and Cyprus have double taxation treaties, however the tax framework in UAE is, let's say, in its infancy and there might be some misunderstanding when separating the UBO from the corporation.
I would choose one of the places (UAE or Cyprus) and try to build both personal and corporate residence in the same place.

 

[jafo]

This is off topic. So no link posting.


Please guys stick to thread topic...thx. Switzerland has nothing to do with this thread. I will start zapping off topic posts if it gets out of hand.

I did heed your previous warning which is why I asked first. I am aware you already admonished us, but I also don't want to be rude/disrespectful by not answering forum users.

Thank you for overlooking our recidivism.

personal and corporate residence in the same place.

All the eggs in one basket?

 

[manukahoney]

All the eggs in one basket?

Why not? You can always have a "piggy bank" holding structure elsewhere to hold your wealth, but for most folks one company will be enough. I see so many guys building multinational structures with expensive costs and risks while running at 300k profits.

 

[TheCryptoAnt]

hey yall so this is a reminder than in reality all jurisdictions are tax free if you just dont pay.

Have a nice day

 

[JustAnotherNomad]

If your FZ company follows a Jan-Dec fiscal year, is it true that it will have to pay not tax in 2023 in any case? Only from FY 2024 onward?

Correct.

 

[ShillGates]

Well - then you can opt for being handled as a Mainland Company - no need for auditing and 3M AED small business relief - 0% tax till 01.01.2027.

@Au999 mentioned this yesterday here but we have the impression no one really realized it or did understand it:

https://www.offshorecorptalk.com/threads/new-big-dubai-fzco-benefit.41495/
We gonna call this in our new blog article in the upcoming days "Escape-clause"

See here - Ministerial Decision No. 82 of 2023

View attachment 4873

So what you do then in the decision making process in the first step is "NO" to Qualifying Freezone Person and you are opting to become a Mainland Company with No Audit requirements, 3M AED small business relief till 01.01.2027 an first 100k$ Profit Tax Free.

View attachment 4874

We gonna call this in our new blog article "Escape-clause".

Correct - average business has 15% profit margin - for "Small Margin Business" we would recommend the earlier mentioned "worst case tax" and for "High Margin Business" the "Escape-clause".

Not at all but as our sticky get's either ignored away, not recognized or frames as "DLS Dubai" can't be neutral - we mention you based on your comments how the reality looks like.

Again our statement is:
We assume that the Excluded Activities is an exhaustive list, and that the activities not mentioned automatically belong to the Qualifying Activities.
This results in a Free Zone Company (FZCO) having a 0% Corporate Tax Rate.

Why?

Because everything else doesn't make any sense if you make yourself familiar with the vision of the UAE leaders.

Do they want to attract companies producing metal goods or do they want Blockchain Startups, AI and everything which is actually coming up?

Do they plan to have Air Taxis or are they planning to have again Public Rides on Camels as an Taxi Replacement?

Just see the Vision 2030:

https://en.wikipedia.org/wiki/Cultural_policy_in_Abu_Dhabi#The_Abu_Dhabi_Vision_2030_Master_Plan
Some of you even mention it themselves:



So again our Blog Article will be structured in 3 points:

1. Our statement and why we see the things we do
2. "Escape-clause"
3. "Worst Case Tax"

For everyone who after this Blog Article still thinks that Dubai FZCO is dead - well then let us know how your life goes in Cayman Islands, Bahamas or Vanuatu and even the Banking Situation would be interesting. Maybe some of you guys would then relocate to Bermuda or Somali - I doubt that some Talabat Rider there delivers you in the night tooth paste or some Pakistani washs your car 4 times a month for 25$ but 0% Tax it's then for sure.

EDIT:
Just posted and literally 10 new comments - @alessio yes that's typical for forums but don't worry most our clients think like you do - it's just unusual that they take the time to fight ghosts in a forum - I do of course as this is part of the business however at some point you gonna call it a day as real life is more important.

@Konstanz if someone checks all your posts he gonna see that you are bashing UAE since the beginning we are around - all good from my side as well - no bad feelings.

But @Konstanz honestly in your earlier post you claim I'm using fake accounts and in the next post you are like "No one blames him of nothing. At least me" - Come On

@bedouin you were earlier in this thread not amused that IFZA didn't sent you any e-mail in regards to CT - just look around - no Freezone did so far - they have a roundtable next week Monday as they have for there own taste too less information to make an Official Statement - no one did - no DMCC, no JAFZA etc.

We can do this as a Private Company in a faster and more straightforward way - especially in a Forum like here.

is this blog article out yet? @Fred

 

[jafo]

hey yall so this is a reminder than in reality all jurisdictions are tax free if you just dont pay.

Dad? Is that you?
Man just never paid any of those leeches a penny! Lived in peace! They never knew he even existed. ROTFLMAO!

 

[sergeylim88]

why do we think the small business relief can't be used for a freezone with non qualifying income?

Small Business Relief will not be available to Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) as defined in Cabinet Decision No. 44 of 2020 on Organising Reports Submitted by Multinational Companies. MNE Groups are groups of companies with operations in more than one country that have consolidated group revenues of more than AED3.15 billion.

source: https://mof.gov.ae/ministry-of-fina...l-business-relief-for-corporate-tax-purposes/

 

[meze99]

Due to lack of substance for most freezone "start-ups" and vague wording of ministrerial decisions, I guess. For example for freelancers their ministrerial reponse is "small business relief may be available to the self-employed person and other individual entrepreneurs". Note, they state May Be, not Will Be.

 

[sergeylim88]

you can see what qualifying freezone person is on https://tax.gov.ae/en/taxes/corporate.tax/corporate.tax.topics/free.zone.persons.aspx

so if the freezone person is not qualifying free zone person then it should be able to get small business relief, is this correct or wrong?

 

[bedouin]

you can see what qualifying freezone person is on Federal Tax Authority - Corporate Tax Topics

so if the freezone person is not qualifying free zone person then it should be able to get small business relief, is this correct or wrong?

No. It would be a non-qualifying freezone person but a freezone person nonetheless. Bad times for FZCO's, they've become as useless as elevator operators I'm afraid.

 

[Fred]

No. It would be a non-qualifying freezone person but a freezone person nonetheless.

That's wrong and I mentioned just a few posts earlier why.!

You can opt to be handled as a Mainland Company by being a non-Qualifying Freezone Person:

How? By not providing an Audit:

You need to work with the "Negatives" of what's in the written law - it's the same with the Excluded Activity List - it's a final List of Excluded Activities and E-Commerce, Marketing and Consulting is not explicitly mentioned hence it's part of the Included Activities even if not mentioned explicitly there either.

Again - if this sloppy wording is now genius or just mismanagement is another question.

I attach the above Ministry Decision here for everyone again.

Bad times for FZCO's, they've become as useless as elevator operators I'm afraid.

That's your opinion and that's fine but stop spreading here false information if you are not familiar with the matter - again if you position yourself like this instead of saying you "think" - we have no other choice then showing everyone that this is false and misleading information.

is this blog article out yet? @Fred

Already written - get's published during today - we report here back once online.