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UAE clarification of Freezone Qualifying Income
- Thread starter joffreylol
- Start date
Thats the issue, its not about money. The trust is gone, they change rules very fast. As someone said to me when I newly came in Dubai in 2016, they change rules like they change cloths. When I came in UAE, local economy was in bad shape, that suits me well, no traffic, empty metro, empty restaurants, declining rents, cheap airline tickets, discounts everywhere, life was chill. Now with economy boom things seem to get out of hand, everyone reacts here like grab as much before this growth cycle ends.
I don’t understand why a free zone is better than MainLand actually .. For a guy like me who deal with customers in Europe it’s same same now .. and it’s more easier for me to open bank account in Europe with mainland
I hope we will have more clarifications in the few months maybe things will change because VAT was introduce in 2018 if I remember well and we saw many changes until today
Unless there's something major I missed, a free zone is only better if you do business with other free zones and you only have qualifying activities.
So if you do something with ships or whatever those ridiculous categories where.
For all other categories, it seems like mainland is the way to go.
Yes, you can set up a free zone company and then ask for it to be treated like a mainland company, but I'm not sure if there is any advantage in that.
So if you do something with ships or whatever those ridiculous categories where.
For all other categories, it seems like mainland is the way to go.
Yes, you can set up a free zone company and then ask for it to be treated like a mainland company, but I'm not sure if there is any advantage in that.
From my point of view, all businesses become taxed, the law is very clear. Marketing agency, online store, dropshipping, consulting. Even if you just sell a product to individuals, your business becomes taxed.
Fortunately, my free-zone company is just a holding company that receives dividends from my US LLC, so I shouldn't be taxed. But I think that eventually everything will be taxed, Dubai without oil is not viable and everyone knew it.
For my part, I am looking to get out of here as quickly as possible. I was already sick of the shitty banks and lousy service from RAKEZ, so that gives me a good reason.
I understand that some people adapt the law in their own way and prefer to play with fire, but I came to Dubai to be legit. So not for me.
@Fred I hope you find another business, sorry for you man
Fortunately, my free-zone company is just a holding company that receives dividends from my US LLC, so I shouldn't be taxed. But I think that eventually everything will be taxed, Dubai without oil is not viable and everyone knew it.
For my part, I am looking to get out of here as quickly as possible. I was already sick of the shitty banks and lousy service from RAKEZ, so that gives me a good reason.
I understand that some people adapt the law in their own way and prefer to play with fire, but I came to Dubai to be legit. So not for me.
@Fred I hope you find another business, sorry for you man
Agreed the freezone holding company isnt taxed, but what about the US LLC? Do you own it directly, or does your UAE freezone company own it? I mean a resident in the UAE owning a US LLC, may as the law looks like technically be liable for UAE corp tax, even if it's probably not enforced.
Dubai already has a very small part of its budget coming from oil, but ok, the UAE as a whole is more dependent on oil.
But the thing with Dubai is the government doesn't have all the large expenses western welfare states have: pensions, unemployment/social benefits, government bureaucracy itself, healthcare, education, interest on debt. These expenses (plus defense in the case of the US and more recently Poland) are like over 95% of the cost of a western welfare state.
If you don't have these expenses it is totally viable to have very low taxes. Usage and license fees and possibly VAT can pay for the stuff you really need like infrastructure, legal system, police, emergency services, border control - which are surprisingly inexpensive.
What's the logic behind that? As @Cloudbanck mentioned, if the US LLC is viewed as pass-through on the UAE side, it would be as if you are running the FZCO and therefore taxable on the FZCO level.
which bank providers / EMIs do you use for US LLC? If you use Wise, they might close your account because they dont work with UAE companies (as shareholders of the US LLC company)
Yes, you're right, but in any case I'm going to get out of the UAE.
Wise, which is attached to my US company. No problem with them, I even have a bank card. They do regular checks but no problems. Wise has nothing to do with UAE business.
I also have an account at Bank of America, but a lot of bank charges. I also have Mercury which I don't use. You can also open at Multipass and Currenxie.
Yes the UAE company owns the US company. And even that becomes risky because the US LLC is a pass-through entity. You are right.
I have an employee on site who comes from my subsidiary in Madagascar, I will send him elsewhere, perhaps in a banana republic like the Seychelles or Mauritius which are closer to our subsidiary, or Vanuatu, to incorporate a new tax resident holding company.
The banking system won't be any worse than the UAE anyway, and at least there we can have a relationship manager who takes care of us.
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A partnership like a US LLC shouldn't be taxable in the UAE based on ownership alone, even if the income is considered pass-through.
The question they ask is whether the US LLC is managed and controlled from the UAE, or if it has permanent establishment in the UAE.
Your transparent US LLC could be a restaurant in New York, with a local director and staff. It would be paying taxes in the US, but it wouldn't be able to distribute dividends if it's considered a disregarded entity.
Payments from such an entity should be tax-free in the UAE, even though they are not dividends.
The question they ask is whether the US LLC is managed and controlled from the UAE, or if it has permanent establishment in the UAE.
Your transparent US LLC could be a restaurant in New York, with a local director and staff. It would be paying taxes in the US, but it wouldn't be able to distribute dividends if it's considered a disregarded entity.
Payments from such an entity should be tax-free in the UAE, even though they are not dividends.
https://gulfnews.com/business/corpo...y-for-preferential-0-corporate-tax-1.96894842
New tax law is harsher than we think....
New tax law is harsher than we think....
https://gulfnews.com/business/analy...ep-tracking-qualifying-income-1.1686634552704
I think most people here by now have realized they are going to have to pay UAE tax. Cognitive dissonance is no longer an excuse for not accepting hard facts.
Even with 9% corporate tax, there are still advantages to UAE, such as easy immigration and zero personal tax. Local banking is generally of high quality and relatively easy to access once you obtain residence.
You piqued my curiosity here...
Is there ANY way to have local banking, immigration, and zero personal tax without the 9% corporate tax?
PS. I have more questions, but I rather just focus on following a logical pattern. My next questions may be moot.
Salaries are a deductible business expense for the company, but subject to the GAAR (you cannot pay out an outrageously high salary, as that would be considered a hidden dividend distribution, i.e. avoidance of corporate tax). Salaries paid out to UAE tax residents are not taxed in the UAE as there is no personal income tax.
In other words, you can pay out $100-200k as a salary free of tax (assuming that is a regular salary for a company director).
And if your revenue is below ~$800k, until 2026 (if I remember correctly), the remaining profit can be paid out as a tax-free dividend.
Before you ask, no, you cannot split your business up into multiple companies that each have <$800k in revenue, as that would also violate the GAAR. This is even explicitly mentioned in the corporate tax FAQ.
In other words, you can pay out $100-200k as a salary free of tax (assuming that is a regular salary for a company director).
And if your revenue is below ~$800k, until 2026 (if I remember correctly), the remaining profit can be paid out as a tax-free dividend.
Before you ask, no, you cannot split your business up into multiple companies that each have <$800k in revenue, as that would also violate the GAAR. This is even explicitly mentioned in the corporate tax FAQ.
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