UAE clarification of Freezone Qualifying Income

[jafo]

Good point. I assumed that seeking tax clarification from the agency would be a binding decision.

So did I! As a matter of fact, on the advice of counsel a few decades ago, I sought a declaratory judgment on an issue. Got it from the head of the agency. The agency then sued claiming "the head of the agency had NO authority to bind the agency"! The judge agreed. I was SCAMMED millions of dollars by a top 3 law firm and the lawyers on my case were a former federal judge, a former agency director, and a former prosecutor.

All these people are a CANCER on society!

 

[troubled soul]

Well after Fred saying good bye to DLS Dubai....
Seems there is no hope now
Better to accept reality....and move on...
..If they want to give tax free status to tech and eCommerce....they will mention it on rule very clearly......sector is huge
Dubai CommerCity
Dubai Internet City
Dubai media city
Whole freezone is based on these sector....Seems all company in these zones are subjected to Tax...

Now let's see how Pavel Durov of telegram will react to this Corporate tax.....It is Telegram HQ after all....

 

[Sols]

This is a very handwavy answer.

It's not handwavy. It's as precise as one can be right now. As a general rule, though, you would not need to be personally tax resident in a place to trigger "doing business in" type regulations.

You could be resident but cant even get tax cert because not staying long enough and/or do not meet other requirements.

You're conflating you (the human being, the natural person) with how corporate income tax is applied for legal persons (companies) doing business in a location.

Welcome to UAE, where the implementation of CIT is an absolute disaster handled about as poorly as possible by the government. If you want certainty, stay away from UAE for now.

 

[uranium]

Well after Fred saying good bye to DLS Dubai....
Seems there is no hope now
Better to accept reality....and move on...
..If they want to give tax free status to tech and eCommerce....they will mention it on rule very clearly......sector is huge
Dubai CommerCity
Dubai Internet City
Dubai media city
Whole freezone is based on these sector....Seems all company in these zones are subjected to Tax...

Now let's see how Pavel Durov of telegram will react to this Corporate tax.....It is Telegram HQ after all....

I agree
Most of forum members live in Dubai and run fzco
I wonder what's going to be everybody's new destination

 

[jafo]

Well after Fred saying good bye to DLS Dubai....

What? @Fred is not around anymore?

Now let's see how Pavel Durov of telegram will react to this Corporate tax.....It is Telegram HQ after all....

This is a great point! I failed to connect the dots here. This is HUGE! What will he do?

 

[kekmaw]

Probably either. If you spend a lot of time in UAE while actively running your US LLC, you're doing business there.

Couldn't one just operate the US LLC as a passive entity and the UAE company as the active part of the business?

It might not work for everything, but let's say you operate a info business, selling courses.

The US LLC sells the courses and owns the IP but has no operations. Instead the UAE company is under contract by the US LLC to manage the day-to-day business and gets paid for that and by doing this, a decent chunk of the income would remain in the US LLC?

 

[Au999]

I agree
Most of forum members live in Dubai and run fzco
I wonder what's going to be everybody's new destination

I'm staying in Dubai. 9% tax on profits is not a deal breaker and there are so many legitimate ways and valid business expenses to bring this down to almost zero.

Probably get a golden visa in a few years and lose the FZCO, by which time all my income will be passive anyway so zero tax.

Autumn and winter in Dubai, spring and summer on a boat someplace nice.

Think that's a decent plan.

 

[sergeylim88]

please keep in mind it is possible to use small business relief for 3 years if your revenue (turn over) is not above 3 million AED
pwc opinion https://www.pwc.com/m1/en/tax/documents/2023/uae-ct-ministerial-decision-no-73-2023.pdf

 

[manukahoney]

Most of the expats in UAE with real money are not running low-cost "self-employment" FZCOs, they are either employed by big corps or on "golden" visas.
So no, Dubai won't notice the exodus of digital nomads or one-man show companies, at least as long the Ukraine war is here and Russian money keep sales pumping.

On personal lever there are only few jurisdiction that have a high quality of life and 0 personal taxes - namely Monaco and Dubai. Everything else is a either a compromise or requires a clever tax structure that can be not reasonable for many.

 

[Konstanz]

Most of the expats in UAE with real money are not running low-cost "self-employment" FZCOs, they are either employed by big corps or on "golden" visas.
So no, Dubai won't notice the exodus of digital nomads or one-man show companies, at least as long the Ukraine war is here and Russian money keep sales pumping.

On personal lever there are only few jurisdiction that have a high quality of life and 0 personal taxes - namely Monaco and Dubai. Everything else is a either a compromise or requires a clever tax structure that can be not reasonable for many.

Yes, I think UAE government is thinking that current inflow of Russians and Ukrainians will cover a lot for very few who will leave

I still think Caribbean is quite good alternative, but also few places. Maybe Cayman, St Barts. Some places in Bahamas. Others is not so nice..

 

[jafo]

Most of the expats in UAE with real money are not running low-cost "self-employment" FZCOs, they are either employed by big corps or on "golden" visas.
So no, Dubai won't notice the exodus of digital nomads or one-man show companies, at least as long the Ukraine war is here and Russian money keep sales pumping.

On personal lever there are only few jurisdiction that have a high quality of life and 0 personal taxes - namely Monaco and Dubai. Everything else is a either a compromise or requires a clever tax structure that can be not reasonable for many.

Hmmm.... I don't know about others, but my personal issue with this is TRUST!!! They promised 50 years tax free! They broke their promise without even an apology!

Hear me out:

Say you marry a girl who promises to be faithful for at least 50 years. You go all in! You invest heavily in a marital home in her home country. You establish your business in her home country! Then all of a sudden, on your third wedding anniversary, she flips on you and tells you: "Dear husband, starting in 2024, I'll be faithful with the exception of 9 guys per year. Look at it this way, honey...other wives are sleeping with at least 50 other guys per year, so you don't really have a better choice."

It's NOT the 9% that bothers me. It's the lack of integrity and honor! Our word should be our bond! Once a traitor, ALWAYS a traitor!

If they scribble some words on paper today and can all of a sudden charge you an extra 9%, what stops them from scribbling some more words on paper e.g. in 2026 and charge 45% CIT, 25% PIT, and an exit tax of 50%???

 

[troubled soul]

If they scribble some words on paper today and can all of a sudden charge you an extra 9%, what stops them from scribbling some more words on paper e.g. in 2026 and charge 45% CIT, 25% PIT, and an exit tax of 50%???

Can not agree more....UAE for company registration is hopeless now ........It is trap now

 

[uranium]

Can not agree more....UAE for company registration is hopeless now ........It is trap now

@troubled soul let's go to cayman islands. Buy home on beach with crypto. Register at enterprise city. Use Emi for business. Visa 5 years. Tax free 100%

 

[Sols]

Couldn't one just operate the US LLC as a passive entity and the UAE company as the active part of the business?

It might not work for everything, but let's say you operate a info business, selling courses.

The US LLC sells the courses and owns the IP but has no operations. Instead the UAE company is under contract by the US LLC to manage the day-to-day business and gets paid for that and by doing this, a decent chunk of the income would remain in the US LLC?

Are you sure you want to commit tax evasion in UAE? They aren't exactly known for fair rule of law.

Hmmm.... I don't know about others, but my personal issue with this is TRUST!!! They promised 50 years tax free! They broke their promise without even an apology!

If you can't trust a totalitarian monarchy, who can you trust?

 

[manukahoney]

Hmmm.... I don't know about others, but my personal issue with this is TRUST!!! They promised 50 years tax free! They broke their promise without even an apology!

Yep, and US dollar was once backed with gold. And 15 years ago you could get a Swiss bank account for a banana island company with a bearer share.
Rules change, adapt of die.

 

[kekmaw]

Are you sure you want to commit tax evasion in UAE? They aren't exactly known for fair rule of law.

I'm not sure about anything about this lol

But if it's inline with transfer pricing, I'm not sure what would be wrong about it.

 

[jafo]

Yep, and US dollar was once backed with gold. And 15 years ago you could get a Swiss bank account for a banana island company with a bearer share.
Rules change, adapt of die.

Horrible outlook on life!
US dollar = Don't trust them anymore
Swiss bank account = Don't trust them anymore
banana island company = Don't trust them anymore.
Rules change = Don't trust them anymore!
Ever heard of the Fair-Warning Doctrine?

I WILL NOT violate my principle because others with NO principle engage in synthetic happiness to cope with a lack of morality!

I can't even believe this has to be explained!

PS. I will REFUSE to talk or do ANY business with anyone who takes this stance! As Charlie Munger used to say: "You can't unring that bell!"

 

[Sols]

I'm not sure about anything about this lol

And neither is UAE!

But if it's inline with transfer pricing, I'm not sure what would be wrong about it.

OK, let's break it down a little.

Couldn't one just operate the US LLC as a passive entity and the UAE company as the active part of the business?

It might not work for everything, but let's say you operate a info business, selling courses.

The US LLC sells the courses and owns the IP but has no operations. Instead the UAE company is under contract by the US LLC to manage the day-to-day business and gets paid for that and by doing this, a decent chunk of the income would remain in the US LLC?

LLCs are normally pass-through entities, meaning they do not retain the profit. You cannot defer distribution. At least that's how it's viewed under US law. Unclear how UAE will interpret LLCs, though.

If this is a one-man operation, the US LLC has its nexus, permanent establishment, center of economic interest, place of effective management, and so on in UAE. This means the US LLC is subject to UAE corporate tax, unless it's treated as as pass-through entity, in which case only personal income would apply, which for the time being remains zero in UAE.

 

[Cloudbanck]

If this is a one-man operation, the US LLC has its nexus, permanent establishment, center of economic interest, place of effective management, and so on in UAE. This means the US LLC is subject to UAE corporate tax, unless it's treated as as pass-through entity, in which case only personal income would apply, which for the time being remains zero in UAE.

If it's treated as pass-through by the UAE doesn't that mean it's like a natural person doing business. Then UAE corp tax applies but only if turnover is above 1M AED.

Just to add to how unclear things are! I think I'll stay below 91 days in the UAE until we know what happens in practice with the UAE corp tax.

 

[manukahoney]

Ever heard of the Fair-Warning Doctrine?

Don't marry to a country, that's it. Consider everything a tool, use the tools that suit your interest best, change them when they break and don't get attached to anything. I spent a lot of time in the UK with the most straightforward and reasonable government-business approach as far as I know. And yet, in the last 10 years they changed the rules so many times I lost count. Don't let me start on EU or any "developing" country.

Some people here are lauding Cyprus and somehow forget to mention the banking crisis 14 years ago where many lost their life savings. Nothing lasts 50 years these days, in 20 years there will be CBDC everywhere, cash will be abolished and all the tax heavens out of business. You will end up in one or another power alliance (USA, China or whatever there will be by then) or find yourself completely off-grid.