UAE to introduce 9% corporate tax on business profits from June 1, 2023 (FZCO REMAINS 0%)

[JustAnotherNomad]

Starting in 2024, there will be a UBO register in the US.

And you're probably right, but I'm not sure if the UAE is a country where I'd want to be caught breaking the law.

 

[clemens]

interesting news.. UAE to introduce 9% corporate tax on business profits from June 1, 2023

It is as low as they have in Switzerland which was the reason I start operating from there!

 

[kekmaw]

Starting in 2024, there will be a UBO register in the US.

And you're probably right, but I'm not sure if the UAE is a country where I'd want to be caught breaking the law.

https://mercator.net/our-thinking/l...-for-requirements-to-register-ubo-in-the-usa/
The UBO information will not be publicly available and any flagrant breach of the UBO reporting requirements is punishable by civil or criminal sanctions, including civil fines of up to $500 per day of violation and criminal fines of up to $10,000 and/or two years in prison, or both.

At least it doesn't seem like it will be public information. But I hear ya, not ideal.

 

[JustAnotherNomad]

The big question is what will constitute a UAE PE. If you don't have UAE clients and you only work from home, would they really claim there's a PE?

 

[Marzio]

The big question is what will constitute a UAE PE

OECD's PE definition is pretty standard

The question is not "what constitues a PE" because that's clear

The question is "will they go after you if you manage your US LLC from UAE"?

@justanothernomand nice to see you around again

 

[JustAnotherNomad]

The definition is very vague though. In some countries, even a web server or a billboard could constitute a PE, according to a tax attorney I once spoke to.
This is especially interesting with remote work. If the work could be done from anywhere, is it really a PE? If you live in Poland, where your company and office is located, but you have a vacation home in Spain where you spend in total 3 months per year, and you reply to client emails from there, is it a PE?
I have heard that sometimes countries rule that it shouldn't be a PE if the work could have been done from anywhere, you don't meet clients there etc. But who knows.
Hopefully the risk is low if you don't have clients in the UAE and you stay less than 183 days per year in the UAE. Time will tell... Probably they will make an example of someone first, so there should be enough time to adapt if necessary.

@Marzio Nice to see you again too - good to be back! I actually only signed back on because I wanted to see if someone had written about this. ;-)

 

[Martin Everson]

And you're probably right, but I'm not sure if the UAE is a country where I'd want to be caught breaking the law.

Very true.

 

[Dandyline]

In reality though, would the UAE even know that you are the owner of the US LLC's if the LLC is registered in Wyoming or something like that where shareholders don't have to be in public records?

Not ideal, I get that but still.

In reality, they would never care. If you have live in UAE, you know it's pretty lax on ground.

 

[JustAnotherNomad]

In reality, they would never care. If you have live in UAE, you know it's pretty lax on ground.

There's no rule of law. It's a complete banana republic when it comes to stuff like this. It's only "bro science". "Yo dawg, I've been doing this for a long time, trust me, bro, it's fine!"
You will never know if it's fine because people were not caught or because you're actually compliant. There's a constant risk of receiving a hefty fine or even going to jail. At least for every case that is not extremely straight-forward.

 

[Fred]

In reality, they would never care. If you have live in UAE, you know it's pretty lax on ground.

Thats' it - nothing else.

Even Cyprus has a huge gap between the written law and the law enforcement when it comes to CFC rules - we see this in practice with Dubai Companies distributing tax free Dividends to Cyprus Residence without a local Resident DIrector for the Dubai Company.

I would go as far as claiming that it's technical not even possible for them to chase or crack down on CFC rules - if even any.

 

[JustAnotherNomad]

Thats' it - nothing else.

So you don't see a risk for UAE residents (actually living in Dubai) with offshore companies, that they'd have to register a branch or FZE for that company?

we see this in practice with Dubai Companies distributing tax free Dividends to Cyprus Residence without a local Resident DIrector for the Dubai Company.

Why do people use such a setup? Wouldn't it be easier for them to just be UAE residents? Or do they actually prefer living in Cyprus over living in Dubai...?

 

[Dandyline]

So you don't see a risk for UAE residents (actually living in Dubai) with offshore companies, that they'd have to register a branch or FZE for that company?



Why do people use such a setup? Wouldn't it be easier for them to just be UAE residents? Or do they actually prefer living in Cyprus over living in Dubai...?

It all depends on the situation. If you have a business that is dependent on PSPs and your customers are EU based, then it's good to have a EU residence.

 

[algotrader]

Why do people use such a setup? Wouldn't it be easier for them to just be UAE residents? Or do they actually prefer living in Cyprus over living in Dubai...?

Asset protection, jurisdiction risk diversification, CBI program, clients in Europe, etc.

 

[Au999]

So you don't see a risk for UAE residents (actually living in Dubai) with offshore companies, that they'd have to register a branch or FZE for that company?

A lot of Dubai residents set up a FZCO to get the residency in the first place. May as well put it to good use

 

[Fred]

So you don't see a risk for UAE residents (actually living in Dubai) with offshore companies, that they'd have to register a branch or FZE for that company?

To be honest - for me after living a half decade in Dubai it's almost funny to discuss potential CFC rules or there enforcement when you know how things work on the ground and if you take in consideration that there was never before any kind of tax beside of VAT - which is still not fully introduced / enforced and in some kind of ample time since 5 (!) years.

It will take a decade to have the CT in the UAE full up and running if even - it took decades to model in high tax countries the legal frame work and even there are regulations the OECD only wants to enforced starting 100s of Million of Dollars - such complex legislations and rules are just not workable and the GoV knows this.

Do you guys really expect in 5 weeks from now FTA employees on the level of HMRC or Finanzamt? I can't imagine who actually should deal with it and that they start importing British and German Tax Authority Guys.

Why do people use such a setup? Wouldn't it be easier for them to just be UAE residents? Or do they actually prefer living in Cyprus over living in Dubai...?

1. No accounting in Dubai for unregulated activities like Crypto Trading
2. For doing Business with outside EU counterparties as Cyprus Banks require a lot of paperwork for international payments
3. Saving Taxes

Just to name a few from what we see in practice and yes some require an EU Company for Business, they like Cyprus or EU for whatever reason more or they live with families on Cyprus or they just moved there and settled somehow and playing around with the idea of moving over to Dubai etc.

 

[JustAnotherNomad]

Do you guys really expect in 5 weeks from now FTA employees on the level of HMRC or Finanzamt?

No, what I'm worried about is that in 5 years, someone decides you had a PE in Dubai all the time and slams you with a $125k fine for not registering for CIT during those past 5 years. And they have a lot more data available than any Western taxman could dream of.
Similar to what they pulled off with this UBO stuff, where they even made freelancer license holders register their "UBO", or face steep fines.
For me, the biggest gripe with the UAE is all of this unclear legal framework, where you can ask three different people and get five different answers, of which probably all turn out to be wrong.
You are one of few people whose word I actually trust to some degree, at least you seem like an honest person, in contrast to other people I've dealt with in Dubai, who lie to your face just to make a sale.

they like Cyprus or EU for whatever reason more or they live with families on Cyprus or they just moved there and settled somehow and playing around with the idea of moving over to Dubai etc.

Ok. I was just surprised that they didn't just move to Dubai, as the quality of life seems better to me.

 

[Fred]

No, what I'm worried about is that in 5 years, someone decides you had a PE in Dubai all the time and slams you with a $125k fine for not registering for CIT during those past 5 years. And they have a lot more data available than any Western taxman could dream of.
Similar to what they pulled off with this UBO stuff, where they even made freelancer license holders register their "UBO", or face steep fines.
For me, the biggest gripe with the UAE is all of this unclear legal framework, where you can ask three different people and get five different answers, of which probably all turn out to be wrong.
You are one of few people whose word I actually trust to some degree, at least you seem like an honest person, in contrast to other people I've dealt with in Dubai, who lie to your face just to make a sale.

But that's the same with Cyprus - you talk to 3 lawyers - you get 3 different answers and at the end of the say is everyone right because there is no law enforcement.

Yes I mean UAE has it all for me and I see a lot of possibilities which we share here with the forum from the very beginning - so let's see where it goes because I don't see any attractive alternatives.

Ok. I was just surprised that they didn't just move to Dubai, as the quality of life seems better to me.

Same to me however I do understand that it's personal taste and circumstances however if you are bureaucracy lazy - which I am - just make your 3 months in Dubai and call it a day and spend the rest of the year wherever.

 

[JustAnotherNomad]

3 months? I think with ejari, now under the new rules it's even less than that to get a tax residency certificate?

 

[Fred]

3 months? I think with ejari, now under the new rules it's even less than that to get a tax residency certificate?

No - it's 3 months since 01.03.2023

 

[JustAnotherNomad]

It seems like the rules are like this:

• The individual’s usual or principal place of residence is in the UAE, and the center of their financial and personal interests are in the UAE or other conditions and criteria provided in a specific decision (to be) issued by the UAE MoF.
• The individual has been physically present in the UAE for a period of 183 days or more in a consecutive 12-month period.
• The individual has been physically present in the UAE for a period of 90 days or more over a consecutive 12-month period and is a UAE citizen, UAE resident or GCC national who either (i) has a permanent place of residence in the UAE or (ii) carries out a job or business in the UAE.

Source: UAE issues resolution on tax residency

So the third rule stipulates 90 days for residents with a place to live for residents. What about the first option?