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UAE clarification of Freezone Qualifying Income
- Thread starter joffreylol
- Start date
the official web site says this
meaning the affected financial years are the ones that start after 1st June 2023
i am not sure, but in my understanding if the chosen financial year is 31st May to 31st May, then maybe first financial year and first tax period will be 31st May 2024 to 31st May 2024
@Fred what do you think?
meaning the affected financial years are the ones that start after 1st June 2023
i am not sure, but in my understanding if the chosen financial year is 31st May to 31st May, then maybe first financial year and first tax period will be 31st May 2024 to 31st May 2024
@Fred what do you think?
I interpret(ed) the legislation as meaning that tax is applicable for companies that start their financial year 1 June 2023 to 31 May 2024, and thereafter.
Companies that have started their financial year prior to this date, will be subject to corporate tax when they begin their next financial year.
It seems strange that corporate tax would be applicable to a portion of a company's financial year.
As the poster above writes: "The Corporate Tax Law provides the legislative basis for the introduction and implementation of a Federal Corporate Tax (“Corporate Tax”) in the UAE and is effective for financial years starting on or after 1 June 2023."
I'm looking at the words "on" or "after". My financial year is prior...
But what do I know I'm just guessing like everyone else...
No, I still think Dubai is the least bad of all the options, fact is I am staying in Dubai and not relocating. So in that stance we all agree. It is not worth the hassle to relocate and the other options suck harder. Malta? Give me a break.
What bothers me are various things:
- The way everyone is twisting words around, throwing "ancillary" like a multipass to basically free-interpret the law with some interpretations that are embarrassing to read, including your sticky post where you say how 99% of your clientele (which I suspect is digital/digital-nomad-ish type). I doubt you're referring to ship builders -or gold providers like one user here said-. You are almost certainly referring to service providers who deal outside of the UAE mainly. All to be taxed the 9% no matter how much we twist things around.
- The way freezones have stayed quiet publicly. I understand if youre a freezone its hard to admit "hey, were useless now from a tax point of view" but naively enough, I would've appreciated something in the line "we're useless now but we will try to change this". All we got is silence just to score more lost entrepreneurs to setup. Heck, youre even pushing your services in your response above, this very moment (with your "all inclusive package). Bro, your setup is useless as for now. That doesnt mean you're a bad guy and that things will stay that way, you're the first one, along with all the people who have setup on freezones, who have been rugpulled here. You're just another victim but it would be refreshing for a change if you would stop trying to make everyone here think youre selling anything but seawater in the ocean. And please, it's a bit insulting to read "freezones haven't made a formal statement because regulation is not clear". More like "freezones haven't made a statement because they can't believe they've been backstabbed by FTA like this but are hoping none of the current and specially potencial licensees will notice, let's deal with s**t chit later maybe".
- The way the FTA rugpulled everyone, every company, even the very freezone regulators themselves. It's sickening. Its a major, MAJOR backstab. They have surely been "warning" about CT, sure, but they have never even hinted that FZCO's would be subject to it even if they dealt with non UAE companies only, and it would've been nice to have known that only ship builders and such would even begin to qualify. Why? Because of course, they would've scared a lot of poor souls who invested in the country recently and had they known they would have not done so.
You may say "oh still so many people want to invest now because it's such a good option still". Well, I do happen to know a few (not just one) other ifza resellers and most have had serious cancellations after these news and have lost a huge part of prepaid packages that will finally not establish. Of course, if they told those people "YOU WILL BE CT FREE NEXT YEAR, LETS CALL YOUR CONSULTING COMPANY ANCILLARY TO GOODS MANUFACTURE" then hey, maybe they would've stayed around.
So I don't know man, lets just all be honest here for a minute, yeah?
Everything is upside down when it comes to the roll out of the corporate tax.
No clarifications, just ambiguity.
Regardless of people's motives on here, the fact that there is so much ambiguity speaks volumes. I've been in touch with a few accountants, and they're also not able to provide clarity.
It's a wait and see approach which sucks for a business owner.
Totally agree with you on this and I think this is the crux of the matter for me - not the tax itself (death and taxes after all)
My concern is just how fickle this appears, to have gone from 'fz guaranteed no tax for 50 years" to " ha fooled you lolz" in a heartbeat.
If I had a golden visa or some other long-term "guaranteed" deal I'd be getting a bit concerned about now, can you trust any sort of stability on anything? Who's to say once enough people have golden visas they don't just say "hah fooled you lolz" again.
Yeah all PARTNERS got these emails. This is by no means any statement on what happened. Also they say UAE has the lowest CT in the world (yeah no sh!t Sherlock, tell us something we don't know). What disturbs me are two things:
- What is IZFA bragging about in the first place? UAE just raised CT by literally and mathematically infinite (∞). Wtf? That's some wicked marketing right there, UAE is taking a giant pee shower over everyone (their freezone included) and they say "oh, nice rain". That's running away forward, but still running away from the problem.
- What they don't say in their post is how irrelevant the concept of freezone has become (unless yeah, youre a ship builder). There are ZERO reasons why you would want to setup a FZCO over mainland right now if you dont have qualifying income. Freezone companies have been rendered useless overnight.
- Sole proprietorship status is still widely used in the mainland for solo owners. In this structure, they are treated as individuals, which means there is no employment contract and no opportunity for tax reduction through salary. This can be a disadvantage compared to LLC freezones where other business structures are available.
- When paying employees in the mainland, the use of WPS (Wage Protection System) is required, which involves transferring salaries to employees' personal bank accounts. In freezones, it's simplified and only wire transfers from a professional to a personal account without stringent government oversight. Non-compliance with salary payments can have consequences on the mainland license and often people are still struggling with.
- It's important to note that a freezone should not be seen only as a specific "license." Freezones are actually specific areas within the country, such as Dubai, with different regulations and benefits. For example, if you want to have a cost-effective office in the Jumeirah Lake Towers (JLT) district, you would need a DMCC license, as a mainland license would not allow you to operate in that area. Similarly, if you want to be close to luxurious international brands in Dubai Design District (D3), you would require a freezone license from D3 to establish your office and work closely with those businesses.
- The overall cost of setting up a business, including lease agreements, licenses, and visas, is typically more straightforward and hassle-free in freezones. In the mainland, you would need to secure your own Ejari (virtual office) separate from the license, which requires annual renewal.
- Freezones often offer more flexibility in terms of remote company management from outside the country using email correspondence. For example, if you need to add additional shareholders to your company, the process can be relatively straightforward in freezones. However, dealing with the Department of Economic Development (DED) in the mainland for such changes can be more complex and time-consuming, only has to be done from dubai.
Did decide to wait till tomorrow as some important Accountants are scheduled for a Roundtable with the FTA - we don't want to go out today and being outdated tomorrow again.
Further we decided to make the Blog Article much more extensive working with Case Studies and looking at the matter from all possible Persepctives.
Once released we post it here.
Sorry for being not able to hold my word on this but you can be rest assured it's for a good reason.
From a tax perspective its not better now to operate Freezone.
Regarding the office, if you want to rent an office with your fzco, it has to be in the very freezone it's in. That means if you live in JBR you have to go to shitty Silicon Oasis to rent your office. Not a good thing. Theres always another side to every story.
Also, not that I specially care, but I think Fred and alessio are either colluded, or the same person. Funny enough right after I posted, instants after alessio replied nice and thorough (you seem very well versed to not be a Dubai resident...), and instants after that, Fred posts.
I dont know, Rick.
Regarding the office, if you want to rent an office with your fzco, it has to be in the very freezone it's in. That means if you live in JBR you have to go to shitty Silicon Oasis to rent your office. Not a good thing. Theres always another side to every story.
Also, not that I specially care, but I think Fred and alessio are either colluded, or the same person. Funny enough right after I posted, instants after alessio replied nice and thorough (you seem very well versed to not be a Dubai resident...), and instants after that, Fred posts.
I dont know, Rick.
"Hey @bedouin , I just wanted to clear up a funny misconception here. It seems there's some confusion about me being the same person as @Fred . Well, I must admit, I'm not actually a human user named 'fred.' I'm actually a Chat GPT connected to this forum, here to assist with any questions related to UAE & tax optimization or discussions you may have. So, no, I'm not 'fred'—I'm an AI language model here to help. Let's keep the conversation going!"
If you're not Fred you're still definitely German (or indeed a robot), you must be... that sense of humor is terrible
You cannot secure an office under your company name.
Let's consider a specific example to better understand how things really work.
Previously, I discussed the DMCC Freezone in JLT. Within this area, prominent locations are the Marina and Palm. Neither of these locations has any offices available for rent, it simply does't exists as it is used for residential purpose. When you suggest that it's impossible to secure an office outside the less desirable Silicon Oasis, you are stating a fact. If you wish to operate in these areas, you have only two options:
1 - Obtain a restaurant or shop under a mainland license.2 - Alternatively, utilize the few available business centers, such as the globally recognized REGUS or WeWork.
Regus is a business center that can serve as your "contractor" on the mainland, and gonna be your only way to get a professional presence within those areas. Now, you can secure an office and representation within Dubai's premier areas. This option does not require a yearly commitment; instead, you can choose to commit on a monthly basis, if preferred, and does't matter if you sign under your individual name too.
In conclusion, your statement lacks context unless you are a restaurant owner wishing to operate under your FZCO. In this specific situation, even if you were to secure a restaurant license and receive approvals, your visa and financial structure would still be under an FZCO. This entity would act as a holding company.
I understand your concern, but would be great if instead of stating, you just ask questions and let community bring value to it
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"You cannot secure an office under your company name."
dont understand that statement at all. FZCO needs to have an office in freezone otherwise they can be seen as having a PE in mainland.
but yes, fzco are on the same footing as mainland, so heaven knows what the point of a freezone is. Unless you do qualifying activities etc...
dont understand that statement at all. FZCO needs to have an office in freezone otherwise they can be seen as having a PE in mainland.
but yes, fzco are on the same footing as mainland, so heaven knows what the point of a freezone is. Unless you do qualifying activities etc...
I have been able to rent an office on the mainland using my RAKEZ company.
The freezone told me I could do that.
The freezone told me I could do that.
