UAE clarification of Freezone Qualifying Income

[bedouin]

I agree with this being a rugpull.

Regarding to what @Fred posted on the side, I don't know how on Earth exactly it's been determined that Marketing Services can be -in any way- "Manufacturing or Servicing of Goods". I mean, come on. Ecom, marketing, etc are not included in any way.

Also, another absolute stabbing point is the fact that -even if we could consider the above to be "qualifying activity", most marketing services etc would disqualify because they would be selling their services to individuals. For example in my case, we sell services to companies, sure, but some are not "companies", just regular dudes. We would not be able to sell to them. And if you have an ecom store eg buying apparel, you're also screwed because 100% of the clientele are individuals.

We are trying to cheat playing solitaire here by blindly trying to make our expectations pass as truth. The solution is -for now, as they will most likely limit it-, to just pay out big salaries/bonuses to avoid meeting the 375k threshold.

But please do your own research, because I believe the conclusions posted by @Fred in this case to be dangerously erroneous. He is right most of the time, but I believe not this time. I could of course be mistaken, I am trying to open a healthy debate out of respect here and not confrontation, so no offense intended. I am genuinely looking forward to hearing @Fred 's explanation on how exactly we're supposed to consider Digital Marketing as a Qualifying Income, as "manufcatured/servicing of goods" and maybe prove me wrong. I know he doesn't have anything to prove me or anyone, of course, but it would be actually nice to hear what he has to say in further detail.

Thanks again.

Also as a side note, I believe moderators should revise threads like that one setting dubious statements that can lead to very bad decisions and assumptions. I don't think it helps anyone in this forum, quite the opposite. @JohnLocke

 

[troubled soul]

“Free Zone”This term is relevant to Article 18, which enables juridical persons that are formed or registered in a geographicarea that has been designated in a Cabinet Decision as a “Free Zone” to benefit from a 0% Corporate Tax rateon income from certain qualifying activities and transactions.

I am not expert But
We are only focusing on qualifying activities ....but there is a one more word in law which says "transactions"
What kind of transactions ? Do this "transactions" word pointing toward the Foreign income ?
Can any expert simplify this ?

 

[Marzio]

I am not expert

But you have plenty of stars! I'm jelous!

 

[lacomaco]

View attachment 4852

Thanks, I saw it on Kaleej Times

 

[luap]

I believe Fred's post can put some people in a dangerous position. Why was that thread locked rather than allow discussion or challenges? I agree with many others that he has published a lot of great advice and helped many on here over the years. I'm sad to see how this will effect his business, however with that post, it's difficult to not feel like it's a last push to get some more customers and silence existing ones, before we start seeing people forced to pay tax next year.

Suggesting getting creative, ie pushing your salary really high and expensing your meals every day? The people earning amounts that this salary/expenses solution is for, could also be better served with a non-UAE setup. Additionally I don't see anybody getting away with rebranding their SEO or Marketing as "Manufactured Products Marketing" and getting away with it. Also the virtual offices almost certainly wont suffice for what's required to be a QFZP.

Even if you somehow receive only Qualifying Income, which most of us here don't - they simply need to demonstrate that just 5% is non-qualifying, and you are subject to tax on all profits regardless, for a minimum of 5 years.

Remember the government can easily go back 4-5 years, so some providers can keep giving false assurances for a year or two, to keep their revenue coming in, hoping that you don't get investigated (This is for all providers, not specifically Fred). Once that happens though? You're screwed, you're getting penalties (max 300%), back taxes or even jail. Will the UAE be strict on enforcement? At the beginning at least, almost certainly not, but it's not a great strategy to hope they decide not to check, with the risks being what they are.

The law is mostly clear, with few exceptions. Yes they can change it, but as it stands most will be forced to pay. I say this as somebody that wanted to setup in the UAE, but have since changed my plans (unless they come out with significant changes). I understand the sentiment above that we should keep things positive, but we also also need to be real about what's happening.

Paying 9% tax also isn't really the end of the world, and for many, it will still be a great low tax option compared to their home countries. I believe all service providers should focus on these benefits still left rather than trying to hold on to the 0% they had before.

 

[Fred]

I agree with this being a rugpull.

Regarding to what @Fred posted on the side, I don't know how on Earth exactly it's been determined that Marketing Services can be -in any way- "Manufacturing or Servicing of Goods". I mean, come on. Ecom, marketing, etc are not included in any way.

With all respect but can't you read english?

Marketing Services Qualifying Activity: "Any activities that are ancillary that are listed in paragraphs (a) to (l)""

Why shouldn't a "Manufacturing or Service of Goods" Company use a Marketing Services Company to promote there Goods?

And at the same time Marketing Services isn't mentioned on the List of Excluded Business Activities - if you want to make a "negative test" as well.

We are looking at a nice and big grey area at least we gonne utilise for our clients - which most are not here commenting anyway.

Or just use your brain and ask yourself why did they made all this here if they want everyone to pay 9% CT?

They could have just said - 9% CT for everyone - done.

It's not my job to convince here everyone - my job is to mention how DLS Dubai handles the situation for there existing clients and future clients.

In the weekend direction we extend our current statement and do put more links and quotes on it.

 

[JustAnotherNomad]

Or just use your brain and ask yourself why did they made all this here if they want everyone to pay 9% CT?

They could have just said - 9% CT for everyone - done.

Because they want to encourage physical manufacturing operations in the UAE that will actually lead to employment in the UAE?
It really doesn't make sense to me why marketing or software development services should be considered "ancilliary" to manufacturing when that manufacturing doesn't happen in the UAE, especially when you're serving multiple clients.

 

[bedouin]

Why shouldn't a "Manufacturing or Service of Goods" Company use a Marketing Services Company to promote there Goods?

Sorry but I don't see how any Marketing Company's "marketing services" could genuinely qualify as "ancillary to a manufacturing or goods" company. Unless you own a Manufacturing company and have a side activity to promote it, I don't see how the case applies here. I think you're trying to twist things a lot to make ends meet, but in no case are marketing services ancillary to any manufacture of goods company. Sounds almost like an offense to intelligence, sorry.

Again, I don't understand why you would get hostile towards my remarks, I am trying to discuss something of serious matter here, there is no need to challenge my English-reading capabilities, etc., and I'm not willing to challenge yours.

Or just use your brain and ask yourself why did they made all this here if they want everyone to pay 9% CT?

They could have just said - 9% CT for everyone - done.

That's exactly what they have done. Except for a handful of activities, which do not, in any way, include anything Ecom/digital/marketing related.

It's not my job to convince here everyone - my job is to mention how DLS Dubai handles the situation for there existing clients and future clients.

If your intention is to solely explain how your company handles this, why would you need to do a statement here then? How is it relevant to post publicly and not inform your clients directly instead, makes no sense unless you're trying to self-promote, in which case allow-me-to-ask. Doing bold and risky statements like the one in your thread and locking it for further discussion is not cool to say the least. The very definition of "forum" is sharing diverse opinions and encouraging discussion around them, not to say your piece and lock everyone out of further participating. Just saying.

 

[alessio]

I agree with this being a rugpull.

Regarding to what @Fred posted on the side, I don't know how on Earth exactly it's been determined that Marketing Services can be -in any way- "Manufacturing or Servicing of Goods". I mean, come on. Ecom, marketing, etc are not included in any way.

Also, another absolute stabbing point is the fact that -even if we could consider the above to be "qualifying activity", most marketing services etc would disqualify because they would be selling their services to individuals. For example in my case, we sell services to companies, sure, but some are not "companies", just regular dudes. We would not be able to sell to them. And if you have an ecom store eg buying apparel, you're also screwed because 100% of the clientele are individuals.

We are trying to cheat playing solitaire here by blindly trying to make our expectations pass as truth. The solution is -for now, as they will most likely limit it-, to just pay out big salaries/bonuses to avoid meeting the 375k threshold.

But please do your own research, because I believe the conclusions posted by @Fred in this case to be dangerously erroneous. He is right most of the time, but I believe not this time. I could of course be mistaken, I am trying to open a healthy debate out of respect here and not confrontation, so no offense intended. I am genuinely looking forward to hearing @Fred 's explanation on how exactly we're supposed to consider Digital Marketing as a Qualifying Income, as "manufcatured/servicing of goods" and maybe prove me wrong. I know he doesn't have anything to prove me or anyone, of course, but it would be actually nice to hear what he has to say in further detail.

Thanks again.

Also as a side note, I believe moderators should revise threads like that one setting dubious statements that can lead to very bad decisions and assumptions. I don't think it helps anyone in this forum, quite the opposite. @JohnLocke

+ 1000

Awaiting statements from @Fred, let's all work together to understand the rules better.

In my opinion, the majority of free zone owners who operated their companies as consultants, marketing services, or in e-commerce will now be subject to taxation as mainland companies. They will need to choose this option when filing their taxes for the first time.

However, they may still benefit from the Small Business Relief (SBR) or at least a 0% tax rate for taxable income up to AED 375,000 if duly select to be traitted as Mainland from taxation point of view. Please see the following information:

"A free zone entity that is not a Qualifying Free Zone Person (QFZP) should be eligible for the small business relief. Free zone business owners should assess their eligibility as a QFZP and the corresponding tax benefits."

It's important to note that the 0% tax rate for taxable income up to AED 375,000 does not explicitly cover QFZPs or non-qualifying income. This is because separate corporate tax rates have been specified for qualifying free zone persons.

Regarding @Fred's comment about income from individuals, it seems that all of those incoming still be classified as non-qualifying income for free zone entities. It may be challenging to find any grey areas in this regard.

The good news is:

• Personal income is still not subject to tax.
• Dubai remains highly attractive for startups and freelancers with 0% tax. Others will get a very favorable tax rate of 9% for those who prioritize safety and quality of life. Many high net worth individuals impacted by the tax changes may be willing to contribute as they benefit from the unique multicultural environment and opportunities for growth. Living the Dubai's means being part of building a new way of living between all different cultures. I guess the problem of taxation for people is how our European countries use the money and why we do not enjoy of the expected quality of public services that we would like to get.
• As @Fred mentioned, it is still relatively easy to manage salary and to potentially cash out from a company to an individual business owner around 300,000 USD/EUR income not subject to tax/yearly.

Now, we can expect some negative reactions from:

1. Those who hold negative judgments about Dubai based on media or influencer, leading to exaggerated stereotypes that do not reflect the reality of living there.
2. There may be individuals who exhibit jealousy towards successful businesses and the effective attraction of people achieved by @Fred on this forum.

Looking ahead, some positive aspects will come to light:

1. The UAE is now taking significant measures to grow and gain full recognition worldwide as a non-"offshore tax haven."
2. With the implementation of corporate tax, there will be less pressure on banks regarding money laundering issues, making it potentially easier to engage with banking services.

 

[Fred]

If your intention is to solely explain how your company handles this, why would you need to do a statement here then? How is it relevant to post publicly and not inform your clients directly instead, makes no sense unless you're trying to self-promote, in which case allow-me-to-ask. Doing bold and risky statements like the one in your thread and locking it for further discussion is not cool to say the least. The very definition of "forum" is sharing diverse opinions and encouraging discussion around them, not to say your piece and lock everyone out of further participating. Just saying.

Because we are bombed with messages here from guys who did used NO Corporate Service Provider and feel now left alone now.

DLS Dubai's Statement is easy to share and later this week we publish an blog article on our website as well.

We invest this week the time once and then it's a closed book.

I feel sorry for everyone going back in the jungle or an island now but then it is what it is.

 

[bedouin]

Because we are bombed with messages here from guys who did used NO Corporate Service Provider and feel now left alone now.

DLS Dubai's Statement is easy to share and later this week we publish an blog article on our website as well.

We invest this week the time once and then it's a closed book.

I feel sorry for everyone going back in the jungle or an island now but then it is what it is.

So basically you open a thread to say your piece and lock everybody out of further reply and discussion? How is that compatible with the basic dynamics of an open forum? If you don't like to be "bombarded with messages that didn't use your service", what are you doing here in the first place apart from just pushing your services?

You made very, very misguiding remarks in your last interventions / threads but now just use the "I'm-very-busy-leave-me-alone-youre-not-a-client" card, instead of sticking to the point, which is how a digital service/marketing would ever qualify for exemption. What you said about it being ancillary to a "manufacturing or goods" is, no offense, absolutely ludicrous.

 

[JustAnotherNomad]

@Fred What is the freezone's stance on this? Previously it sounded like they had basically told you "Don't worry, there still won't be no tax if you don't have UAE clients" - what is their stance on this now?

 

[bedouin]

@Fred What is the freezone's stance on this? Previously it sounded like they had basically told you "Don't worry, there still won't be no tax if you don't have UAE clients" - what is their stance on this now?

IFZA (and any other freezone regulator) are obviously crapping their pants because they know that, as it stands now, a FZCO is absolutely useless and even worse than a mainland company (as of now). However this doesn't mean that it can not change, but right now it is what it is, they have also been rugpulled, just like most other freezones have. The fact that they have not made a single statement regarding this and not even sent a single email to their partners regarding this matter means that the house is on fire.

Institutional silence is actually a very loud statement.

Why would anyone set up a freezone company now is beyond me, unless you are ACTUALLY manufacturing goods or building ships.

People like "Wealthy Expat" -another IFZA reseller who says he will optimize your taxes blabla but in the end he's just flipping an IFZA license for 4x more than you'd get it dealing directly through them- hasn't made a video on this, absolute silence. Instead he's posted other useless content but regarding this... absolute silence.

 

[Fred]

So basically you open a thread to say your piece and lock everybody out of further reply and discussion? How is that compatible with the basic dynamics of an open forum? If you don't like to be "bombarded with messages that didn't use your service", what are you doing here in the first place apart from just pushing your services?

You made very, very misguiding remarks in your last interventions / threads but now just use the "I'm-very-busy-leave-me-alone-youre-not-a-client" card, instead of sticking to the point, which is how a digital service/marketing would ever qualify for exemption. What you said about it being ancillary to a "manufacturing or goods" is, no offense, absolutely ludicrous.

That was agreed with the Admin as this Thread here is already going on and the mods don't want to moderate several threads about the same topic.

It was made sticky as it seems that a lot of people are interested in our position.

As you can see - we are discussing here - at least till an certain point.

@Fred What is the freezone's stance on this? Previously it sounded like they had basically told you "Don't worry, there still won't be no tax if you don't have UAE clients" - what is their stance on this now?

Our statement was worked out with there tax lawyers - obviously they can't go out like we can do but basically our Statement is the breakdown.

There seems to be indeed some issues with the Arabic/English translation.

At least everyone agrees about the fact that no one is sure about one thing:

1. Was this a genius move to get rid of a bad reputation as international tax heaven?

or

2. Just missmanaged execution and poor translation.

At least the past 30 years they made it here in the UAE - so let's see

IFZA (and any other freezone regulator) are obviously crapping their pants because they know that, as it stands now, a FZCO is absolutely useless and even worse than a mainland company (as of now). However this doesn't mean that it can not change, but right now it is what it is, they have also been rugpulled, just like most other freezones have. The fact that they have not made a single statement regarding this and not even sent a single email to their partners regarding this matter means that the house is on fire.

Institutional silence is actually a very loud statement.

Why would anyone set up a freezone company now is beyond me, unless you are ACTUALLY manufacturing goods or building ships.

People like "Wealthy Expat" -another IFZA reseller who says he will optimize your taxes blabla but in the end he's just flipping an IFZA license for 4x more than you'd get it dealing directly through them- hasn't made a video on this, absolute silence. Instead he's posted other useless content but regarding this... absolute silence.

Can't comment on others pricing but I met him once random in a mall - was a good conversation with a down to earth guy. Obviously he has pressure now and need to have more clarity for his audience - Video Production takes time.

About everything else you have mentioned - yes as I said earlier then you have to go in the jungle or an island - report us back how it is once settled there.

 

[bedouin]

That was agreed with the Admin as this Thread here is already going on and the mods don't want to moderate several threads about the same topic.

The fact that the moderators accept this because youre promoting a lot of things here through banners and other paid ads doesn't change the fact that you opened a thread to say your piece, and locked everybody out of further discussion and challenges. This wouldn't be that much of an issue if the statements in that thread weren't extremely misguiding to say the very, very least. The seriousness of such statements could have at least benefited from some caution before posting them, but I sense you felt it was urgent to make everybody understand your services were "as good as always and the best option in the world" before making sure they were right, as several of us here believe them not to be.

Video Production takes time.

Specially when the content to be discussed renders one's business pointless. Why would he make a video where he explains "yeah, actually my IFZA setup makes no sense now, hire me"?

Our statement was worked out with there tax lawyers - obviously they can't go out like we can do but basically our Statement is the breakdown.

IFZA does not have "tax" lawyers. They have an in-house lawyer, not by any means an expert on "tax". It's either that or they've lied to other partner's who have directly asked for such a figure recently.

But most importantly: why "can't they go out like we do"? Shouldn't we expect clear, transparent, to-the-point statements from them instead of resellers? At least we would expect internal communication from them to the partners, which they haven't done, only silence. What are they hiding? What are they afraid of?

Certainly if they were sure that the exemption could be applied to the core of the companies in their jurisdiction (that is a lot of Digital/Marketing companies), they would.

As I already said, institutional silence can really be a very loud statement.

About everything else you have mentioned - yes as I said earlier then you have to go in the jungle or an island - report us back how it is once settled there.

There is nothing to report. It's pretty simple: digital/marketing companies and basically 99% of the companies under FZCO (specially IZFA) will have to pay the 9%. It's not the end of the world, just pay out big salaries while its possible. But let's not BS people about them not having to pay the 9% because it can get them into serious trouble.

I find it so wreckless that you have a thread categorized as "news" and passing it for the absolute truth, when in reality you don't seem to care much about it, only about keeping your business and telling potential clients what they want to hear. I get it, but there is a limit. I hope me and other members that clearly see this issue will be here to challenge these dangerous misguiding assumptions while we are allowed to participate.

 

[Au999]

Suddenly all freezone companies become manufacturers with print as you go teeshirts...

#genius

 

[JustAnotherNomad]

Come on, @Fred is still commenting in this thread. I don't see why it's such a big issue that the other thread was locked.

What I find interesting is that I have a business partner with an IFZA company (he lives in the UAE full time) and he told me already 2 months ago or so that he was preparing for 9% corporate tax, he was also in touch with IFZA about this. Back then I thought he was just misinformed, but now it seems like he actually got it right back then already.

 

[troubled soul]

Ground reality Like it or hate it : Nothing is very clear about tax free foreign income......Even top accounting firm do not have update on their respective website. about this......Better to wait and watch....

The good news is:

• Personal income is still not subject to tax.
• Dubai remains highly attractive for startups and freelancers with 0% tax. Others will get a very favorable tax rate of 9% for those who prioritize safety and quality of life. Many high net worth individuals impacted by the tax changes may be willing to contribute as they benefit from the unique multicultural environment and opportunities for growth. Living the Dubai's means being part of building a new way of living between all different cultures. I guess the problem of taxation for people is how our European countries use the money and why we do not enjoy of the expected quality of public services that we would like to get.
• As @Fred mentioned, it is still relatively easy to manage salary and to potentially cash out from a company to an individual business owner around 300,000 USD/EUR income not subject to tax/yearly.

@alessio
Really wise word....

 

[latindev]

Careful bedouin you are treading on dangerous waters here like lifeisfun used to do before he got banned. I didn't have time to read his thread last night but today it's already deleted. He was the one who openly criticized tactics of perhaps the biggest source of advertising income for this forum

Is not the first time that happens btw, I have seem people here being banned after challenging advertisers but I mean, we're in an offshore forum, do we really expect fairness? xd

We know the kind of water we're in

 

[JackAlabama]

Agree. If they wanted to include software they could say "software" somewhere but they didn't.

Let's be real guys, you don't "manufacture software"

You manufacture it like any engineered other good. Processes, quality control etc is all the same stuff like for manufacturing a motor.
I am well aware that not in every part of the world tho
But it is really that simple