UAE (Dubai) Expats: What moves will you make with the new UAE tax laws?

[Fred]

UAE (Dubai) Expats: What moves will you make with the new UAE tax laws?

Many of us didn't expect the UAE to start taxing income on free zone companies.

What steps will you take to lower/minimize your tax liability?

Curious to know.

Utilising the Small Business Relief to have 3m AED (750k$) Turnover is Tax Free. This comes handy for a high margin Business. Afterwards having me and my better half employeed in the Company and pay a solid salary of 60k AED and 30k AED to have together with the 375k AED Tax Free Amount ongoing something like 350k$ per Year Tax Free. That's enough for me at least.

Taking the pill the upcoming year and paying a bit more using the IFZA Accounting Service (having trust in them at this point as there Accounting Manager is basically our former Employee) but we all know anyway that latest next Year we see a massive decrease in Trade License Pricing as the UAE otherwise is becomming uncompetitive.

I estimate it to be 5k$ per Year for Trade License and Basic Accounting with 25-50 Transactions per Month in the mid run similar to Cyprus.

Had by the way a call with the CEO of the Caymen Enterprise City. Quite expensive talking 20k$ Setup and 15k$ Maintenance is not necessarily cheap especially most guys looking here for a cheap price. Met several guys lived on Cayman and even the 50+ Year Old Guys said it's just super boring and you start Island hoping or being most time in Miami. Can be however an expensive diverisification for some guys. Not talking about Banks. Spoke to a Guy who got rejected after 3 months of blabla from Butterfield Bank in the Caymans so prepare yourself either for EMI Banking with High Fees or some 7 figure Balance with the usualy Guys in Switzerland/Liechtenstein.

 

[yngmind]

For the love of god guys.

Operating a UAE FZ LLC is still going to be tax-free if you know how to use it.
9% CIT doesn't apply on profits of a FZ entity that doesn't do any business with UAE mainland. If your business operates only abroad or within a freezone then your profits are still tax-exempt.

No, it's not.

 

[Helkins]

No, it's not.

Been in Dubai 6 years, work in legal, had a meeting with EY and Clyde & Co early July about it. I stand firm about my statement.

 

[yngmind]

Been in Dubai 6 years, work in legal, had a meeting with EY and Clyde & Co early July about it. I stand firm about my statement.

Only if you receive a qualifying income.

 

[AbsetJW]

Been in Dubai 6 years, work in legal, had a meeting with EY and Clyde & Co early July about it. I stand firm about my statement.

Got any official publications of this? Or just gossip?

 

[Helkins]

Only if you receive a qualifying income.

You qualify for the exemption as long as you don't do any business with mainland companies or natural persons. If you only use UAE FZ as a way to optimize foreign income and meet the requirements, there is nothing to worry about, consult your advisor to make the set-up air tight.

 

[uranium]

Utilising the Small Business Relief to have 3m AED (750k$) Turnover is Tax Free. This comes handy for a high margin Business. Afterwards having me and my better half employeed in the Company and pay a solid salary of 60k AED and 30k AED to have together with the 375k AED Tax Free Amount ongoing something like 350k$ per Year Tax Free. That's enough for me at least.

Taking the pill the upcoming year and paying a bit more using the IFZA Accounting Service (having trust in them at this point as there Accounting Manager is basically our former Employee) but we all know anyway that latest next Year we see a massive decrease in Trade License Pricing as the UAE otherwise is becomming uncompetitive.

I estimate it to be 5k$ per Year for Trade License and Basic Accounting with 25-50 Transactions per Month in the mid run similar to Cyprus.

Had by the way a call with the CEO of the Caymen Enterprise City. Quite expensive talking 20k$ Setup and 15k$ Maintenance is not necessarily cheap especially most guys looking here for a cheap price. Met several guys lived on Cayman and even the 50+ Year Old Guys said it's just super boring and you start Island hoping or being most time in Miami. Can be however an expensive diverisification for some guys. Not talking about Banks. Spoke to a Guy who got rejected after 3 months of blabla from Butterfield Bank in the Caymans so prepare yourself either for EMI Banking with High Fees or some 7 figure Balance with the usualy Guys in Switzerland/Liechtenstein.

I'm glad that you took my proposal about cayman islands enterprise city seriously.
Even with high cost for setup, it is still good option for many people.
They basically copied dubai business model.
Only thing is missing is establishing relationships with local banks in Cayman islands.
If you can get a business account with a local bank in cayman islands, setup will be complete.

 

[Helkins]

Got any official publications of this? Or just gossip?

I have fat binders of papers related to this prepared by EY and PWC, working closely with Meydan and HFZ authorities. Sure, avoiding CT is harder but definitely doable with the correct set-up, work and operations planning.

 

[Konstanz]

Even for South Asian like me its not worth it, I spent around 7 years here. Who is stopping me to move to US or EU where taxes can be high but less headache and more opportunities to grow. Its not only about taxes, the expenses of accountants, audit, lawyers, gov fines will further increase cost of doing business.

As Fred said big law and accounting firms lied to him. That is another concern working in UAE, I dont trust anyone here, not banks, not consultants not even real estate agents. Dubai is good for personal stuff, where business is concern its not a good place to do business specially online business because no eco system here.

You should never trust real estate agents anywere! They are biggest liars ever
I agree. If you have normal companies else and like Dubai vibe/place it's good place. In such case you will not pay tax for capital gains, dividends (some cases), salary

 

[Checkmelater]

How can we do it ? Open offshore company ?

I have fat binders of papers related to this prepared by EY and PWC, working closely with Meydan and HFZ authorities. Sure, avoiding CT is harder but definitely doable with the correct set-up, work and operations planning.

 

[AbsetJW]

I have fat binders of papers related to this prepared by EY and PWC, working closely with Meydan and HFZ authorities. Sure, avoiding CT is harder but definitely doable wit not either show us the papers or explain the "correct setup"?

Why not show the papers or explain the "correct setup"?

It sounds more like you're trying to confuse people to set them up to sell something...

 

[JustAnotherNomad]

HK, Singapore, US for example.

None of those places has 0% corporate tax. Not one of them.
You can only get to a position where they will say "we should pay your tax elsewhere, not to us". It's completely different from being taxed at 0%.

9% CIT doesn't apply on profits of a FZ entity that doesn't do any business with UAE mainland. If your business operates only abroad or within a freezone then your profits are still tax-exempt.

This is, unfortunately, completely false. Whoever told you this either had no idea or you were lied to.

 

[uranium]

None of those places has 0% corporate tax. Not one of them.
You can only get to a position where they will say "we should pay your tax elsewhere, not to us". It's completely different from being taxed at 0%.



This is, unfortunately, completely false. Whoever told you this either had no idea or you were lied to.

HK 0% taxes on profits generated outside HK

 

[JustAnotherNomad]

You qualify for the exemption as long as you don't do any business with mainland companies or natural persons.

Not true, you can read it on the official FTA website. Clients outside the UAE are treated exactly like mainland clients, even if it's all B2B.
The only exception would be if it's income from a qualifying activity and you have substance in the freezone.

 

[uranium]

Not true, you can read it on the official FTA website. Clients outside the UAE are treated exactly like mainland clients, even if it's all B2B.
The only exception would be if it's income from a qualifying activity and you have substance in the freezone.

Identify qualifying activities

 

[JustAnotherNomad]

HK 0% taxes on profits generated outside HK

No. You would not be able to obtain a tax residency certificate for your company.
HK does not apply 0% tax. Instead, HK says "this income is not subject to HK tax". It's completely different.
It's like having a company in France selling services to a company in Italy and you ask the Australian tax authority how much taxes you owe. That doesn't mean you paid "0% tax in Australia" for your company. It just means Australia says "this is not our business".

Identify qualifying activities

There are like 300 pages about this in the other thread, you even posted there. Just use Google and look up the official corporate tax FAQ. It's all explained there.

 

[uranium]

No. You would not be able to obtain a tax residency certificate for your company.
HK does not apply 0% tax. Instead, HK says "this income is not subject to HK tax". It's completely different.
It's like having a company in France selling services to a company in Italy and you ask the Australian tax authority how much taxes you owe. That doesn't mean you paid "0% tax in Australia" for your company. It just means Australia says "this is not our business".



There are like 300 pages about this in the other thread, you even posted there. Just use Google and look up the official corporate tax FAQ. It's all explained there.

If I go with HK service provider and register my company, I should first ask for tax certificate for my company?

 

[JustAnotherNomad]

You can ask if they will be able to provide a tax residency certificate for the company. I can already tell you that the answer will be no if you don't want to pay tax.
A tax residency certificate is a confirmation that the company has its "tax home" in that country. This also gives you access to tax treaties. But it also means you pay taxes (unless it's a 0% tax country).
A HK tax residency certificate would confirm that you "do business in HK". But in order to avoid taxes in HK, you can't "do business in HK".
The 0% HK company is an "offshore company", it does not really do business in HK. So it doesn't "reside" in HK either. It's similar to a US LLC, which is also registered in the US and you have to do some accounting, but it is not taxed at 0% in the US, it is simply not subject to tax. If you had activity in the US, you would pay 20-30% in taxes + withholding tax.

So you get a company, but that company isn't taxed in HK because HK thinks you should pay taxes somewhere else. For example, if you live in Dubai, you will have to pay corporate tax for the HK company in Dubai (due to management and control/PE).
If you live in Thailand, Panama or Paraguay, you may not have to pay tax for your HK company, simply because they don't care if you don't have Thai clients.
But what happens is that you have double non-taxation because none of the countries involved wants to tax the company. That's different from being subject to tax at a rate of 0%, which you would have with a company in Qatar or the BVI, for example (as far as I know, haven't done much research on those countries).

 

[uranium]

You can ask if they will be able to provide a tax residency certificate for the company. I can already tell you that the answer will be no if you don't want to pay tax.
A tax residency certificate is a confirmation that the company has its "tax home" in that country. This also gives you access to tax treaties. But it also means you pay taxes (unless it's a 0% tax country).
A HK tax residency certificate would confirm that you "do business in HK". But in order to avoid taxes in HK, you can't "do business in HK".
The 0% HK company is an "offshore company", it does not really do business in HK. So it doesn't "reside" in HK either. It's similar to a US LLC, which is also registered in the US and you have to do some accounting, but it is not taxed at 0% in the US, it is simply not subject to tax. If you had activity in the US, you would pay 20-30% in taxes + withholding tax.

So you get a company, but that company isn't taxed in HK because HK thinks you should pay taxes somewhere else. For example, if you live in Dubai, you will have to pay corporate tax for the HK company in Dubai (due to management and control/PE).
If you live in Thailand, Panama or Paraguay, you may not have to pay tax for your HK company, simply because they don't care if you don't have Thai clients.
But what happens is that you have double non-taxation because none of the countries involved wants to tax the company. That's different from being subject to tax at a rate of 0%, which you would have with a company in Qatar or the BVI, for example (as far as I know, haven't done much research on those countries).

From what I understood this tax residency certificate would confirm that I am a resident of another country and that I'm running HK company offshore.
So I need to be resident of a tax free company to avoid paying tax
I am correct?

 

[yngmind]

You can ask if they will be able to provide a tax residency certificate for the company. I can already tell you that the answer will be no if you don't want to pay tax.
A tax residency certificate is a confirmation that the company has its "tax home" in that country. This also gives you access to tax treaties. But it also means you pay taxes (unless it's a 0% tax country).
A HK tax residency certificate would confirm that you "do business in HK". But in order to avoid taxes in HK, you can't "do business in HK".
The 0% HK company is an "offshore company", it does not really do business in HK. So it doesn't "reside" in HK either. It's similar to a US LLC, which is also registered in the US and you have to do some accounting, but it is not taxed at 0% in the US, it is simply not subject to tax. If you had activity in the US, you would pay 20-30% in taxes + withholding tax.

So you get a company, but that company isn't taxed in HK because HK thinks you should pay taxes somewhere else. For example, if you live in Dubai, you will have to pay corporate tax for the HK company in Dubai (due to management and control/PE).
If you live in Thailand, Panama or Paraguay, you may not have to pay tax for your HK company, simply because they don't care if you don't have Thai clients.
But what happens is that you have double non-taxation because none of the countries involved wants to tax the company. That's different from being subject to tax at a rate of 0%, which you would have with a company in Qatar or the BVI, for example (as far as I know, haven't done much research on those countries).

What you wrote here doesn't make much sense, but I said you could achieve a 0% tax setup, living as PT, or living in a 0% personal income country using those structures.

If you would like in Singapore, you would pay SG taxes, same with HK and US.