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

[Fred]

Expect the UAE to enact tax anti avoidance legislation at some point maybe even adopt GAAR. This behaviour you describe will fall under GAAR as an abusive practice to reduce your tax base by using an excessive salary. I wouldn't do this in a place like UAE until they publish there CT compliance obligations and penalties.


Maybe the below is true but who knows. But knowing UAE you will have to wait and see if any FZ tax breaks given to investors are honored.

https://www.natlawreview.com/article/update-uae-introduces-corporate-tax
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Companies incorporated in UAE’s free zones or financial free zones will also be subject to the federal corporate tax. However, it appears that such companies will continue to enjoy applicable tax breaks and incentives in the manner and for the duration set out under the legal framework of the relevant free zone authority.

For instance, Dubai International Finance Centre (DIFC) law and the Abu Dhabi Global Market (ADGM) law provide that a DIFC- or ADGM-incorporated company is subject to a zero tax rate for a period of 50 years from the time the law in question enters into effect. Accordingly, DIFC- and ADGM-incorporated companies could expect to remain subject to zero tax rate until 2071 and 2063, respectively.


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And so it is with all other Freezones at least in Dubai.

If you read well what you says is true only for "other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE.""

But if you are actively managing your investments from UAE online/trading as most people do and think they are safe by doing so, professional tools and a frequency above some yearly threshold, coudln't this in theory be seen as a professional commercial activity ?...

Like @rowena says - managing your personal investment is not a business activity.

Guys come on - stop doing as UAE would be starting from 1st June of 2023 another Germany.

 

[MiddleEuroAsia]

In theory yes - however it's the same with the VAT already.

Nobody enforces anything - the VAT is in a soft launch since the very beginning.

I would say 10% file a VAT return as 0 and the other 90% don't do anything - this are at least the numbers I can see.

This plane dumb theory is very hardly working here in the UAE - because no one bothers with enforcing to file a anyway 0 everywhere return.

FZCO remains 0% tax and if we are forced to file once a year a 0 across all fields - so let it be.

It's the same with a UK LLP, US LLC etc. - that's the whole point of this announcement - going into a Western direction and handling things smart.

I can make here only a transfer from the existing VAT and how things are enforced - next 18 months remain the same anyway - it does not really make sense to announce this CT and having not even a legal framework for - so like the guys before me said - it's PR - we guess PR for the FATF.

The problem is not the filing, it's the paperwork, and by paperwork, I mean auditing,

damn, can you imagine the 100s of people who were not keeping proper records and suddenly need to "make sense" of their financials to the tax authority. What a massive shitshow that will be

I for my self always say: "keep proper records, even if not required" but nobody listens, because "other people do it, so why not me". This mentality will seriously f**k a lot of people, and I hope that people are preparing for what's about to come.

In case you are resident in UAE, and actively managing your investments (online from UAE thus) , or even trading/day trading, could it requalify you as a professional commercial activity (above a certain number of yearly transactions) and thus put you under the scope of this new taxation ?

No, if it's under your name, you won't be taxes because it's treated as "personal investments" and thus taxed at the personal level which is 0%.

If you invest under an foreign LLC and you manage it from the UAE, you would trigger PE laws and you would be taxed at the corporate level, and in the past the tax would be 0%. would this change? who tf knows, only time will tell.

 

[RealDude]

The German Angst rulez the forum

 

[zzzzzz]

I just watched a video on youtube of a vlogging couple relocating from UK to Dubai. They went to a company service provider and decided to open a freezone company. Lawyer mentioned that you have to visit UAE once every 365 days and that it used to be once every 180 days. @Fred do you know anything about that? Fakenews? I checked u.ae website and they still mention once every 180 days.

 

[ShillGates]

investor visa is once every 365 days i know that, but whats the point if you cant even do 1 in 180, might as well send the money to charity instead. If you count every penny dont bother

Quite frankly, dont do dubai or any offshore blablabla route for anything less than 100-200 k of income and accept the upheaval. Better to have 25% tax of 10 million then to have 0% of 300k

 

[zzzzzz]

investor visa is once every 365 days i know that, but whats the point if you cant even do 1 in 180, might as well send the money to charity instead. If you count every penny dont bother

Quite frankly, dont do dubai or any offshore blablabla route for anything less than 100-200 k of income and accept the upheaval. Better to have 25% tax of 10 million then to have 0% of 300k

The question is not about money, if you read closely.

 

[Fred]

I just watched a video on youtube of a vlogging couple relocating from UK to Dubai. They went to a company service provider and decided to open a freezone company. Lawyer mentioned that you have to visit UAE once every 365 days and that it used to be once every 180 days. @Fred do you know anything about that? Fakenews? I checked u.ae website and they still mention once every 180 days.

If you go the property route you can get an investor visa which indeed allows you to visit only every 365 days the UAE - however that's not possible through FZCO incorporation - Ras Al Khaimah did issued in the past investor visas through FZE incorporation - however they had still the requirement of the 180 days. Which makes sense as the Visa through the company always follow the fact that you are employee of the company somehow.

 

[ShillGates]

llc mainland gets you a partner visa, also 365 days - as its an investor, albeit they give the visa with the once in 185 days warning for some reason.

 

[karishi]

I really don't think that a 9% tax will get the UAE out from the blacklist, at least not from UE countries. You would need at least 15 or 20 and for sure Freezones too. I think this is a move to get more money from people who are exploiting the system, and get more money from companies which are to radicated in the UAE to move. It's like Netflix raising prices or Google Maps API asking for money after years of giving away the service for free, you start low and then start raising prices when people are used to the ecosystem.
Also this is to counteract the fact that you could abuse freelance permits or remote working visas with LLCs, where you could have a cheap LLC, a remote working visa, and clean a lot of money with 600$ a year, so I guess that, like @Fred said in another topic, they will start to be picky about who gets a tax certificate: I would say that up to 200k with a remote work visa and LLC would be ok, but above that they want your money and you have to open a freezone company. Which is ok if you are making 200k or more of profit, you can take the hit. Remember that the UAE is not a democratic country, they issuing of a tax certificate is discretionary, so playing by the unwritten rules is mandatory.
In any case what makes the UAE broken, in a digital nomad / ecommerce world, is the enter once every 180 days and still be resident with no CRS rule, in a country which is a 5h direct flight from most UE capitals.

 

[Fred]

I really don't think that a 9% tax will get the UAE out from the blacklist, at least not from UE countries. You would need at least 15 or 20 and for sure Freezones too. I think this is a move to get more money from people who are exploiting the system, and get more money from companies which are to radicated in the UAE to move. It's like Netflix raising prices or Google Maps API asking for money after years of giving away the service for free, you start low and then start raising prices when people are used to the ecosystem.
Also this is to counteract the fact that you could abuse freelance permits or remote working visas with LLCs, where you could have a cheap LLC, a remote working visa, and clean a lot of money with 600$ a year, so I guess that, like @Fred said in another topic, they will start to be picky about who gets a tax certificate: I would say that up to 200k with a remote work visa and LLC would be ok, but above that they want your money and you have to open a freezone company. Which is ok if you are making 200k or more of profit, you can take the hit. Remember that the UAE is not a democratic country, they issuing of a tax certificate is discretionary, so playing by the unwritten rules is mandatory.
In any case what makes the UAE broken, in a digital nomad / ecommerce world, is the enter once every 180 days and still be resident with no CRS rule, in a country which is a 5h direct flight from most UE capitals.

I can't agree on some points.

As of now the UAE is whitelisted everywhere - no matter if EU or FATF.

If you put everything in an perspective - not many are "exploiting" the system - the deal for the average joe - thinking about all the Brits in the Real Estate is that they earn the 2-3x compared to the UK while living in the dessert - all this guy's living 30-45 minutes away from prime locations to have the same rent price like somewhere in a village in the UK by earning more.

Should this change - simply no one is living any longer in the dessert the whole year - same for the Real Estate - it has to be further tax free otherwise it would be simply the beginning of the end.

UAE is far away from being another Germany that can exploit the people and makes them impossible to leave after years of living there.

UAE needs to attract new people and new money otherwise they can't realize there own goals - look at Dubai 2040.

What they are actually doing is already working very well - tourism has already taxes per night, service charge here and there - Real Estate has the 4% Dubai Land Department Fee per Transaction etc.

So for now nothing has changed and if things change dramatically you hear it here first - actually we are far away from this - everything is full full and full - "sorry fully booked out" is what you get for the weekend if you not going to book 1 week upfront for a good restaurant.

 

[Konstanz]

FATF list they might not avoid. We will see this by the end of this month.
Regarding tax I don't think their goal is to collect "tax". They still live of oil economy.
About freezones I agree. I don't think "freezone" status will allow just to pull back FATF
Anyway, I believe they would introduce stickter measures for tax residence certificates both individuals and companies.
They can simply stop issuing tax certificates for those who do not stay those 183 days. For freezone companies they can start requiring real offices and real employees.
Both case it's a problem because nobody stay there 183 days and freezones are just another "Seychelles IBC"

 

[ivars]

If you check GDP of Dubai, oil is super small proportion. It's not 2000s anymore.

 

[Konstanz]

If you check GDP of Dubai, oil is super small proportion. It's not 2000s anymore.

Yes, but its like economy engine. Having oil money they can avoid introducing tax'es
How the government would collect funds if not oil money or tax
And yes, it's temporary. This city has no long term future. After oil end , the UAE will end as we see today, because it's not the place for person to live in a desert

UAE is not Germany, where you introduce 45% and people pay and stay. Most of people in UAE are imigrants from India, Pakist. They just return home

 

[Fred]

FATF list they might not avoid. We will see this by the end of this month.
Regarding tax I don't think their goal is to collect "tax". They still live of oil economy.
About freezones I agree. I don't think "freezone" status will allow just to pull back FATF
Anyway, I believe they would introduce stickter measures for tax residence certificates both individuals and companies.
They can simply stop issuing tax certificates for those who do not stay those 183 days. For freezone companies they can start requiring real offices and real employees.
Both case it's a problem because nobody stay there 183 days and freezones are just another "Seychelles IBC"

As for now - Dubai FZCO is a Seychelles IBC on steroids and we as a good CSP aim to keep this as long as possible.

What I can say for sure is that the "you get everything for nothing" attitude won't work out any longer.

 

[karishi]

If you check GDP of Dubai, oil is super small proportion. It's not 2000s anymore.

Dubai AFAIK has no oil, the other emirates have oil.

I can't agree on some points.

As of now the UAE is whitelisted everywhere - no matter if EU or FATF.

If you put everything in an perspective - not many are "exploiting" the system - the deal for the average joe - thinking about all the Brits in the Real Estate is that they earn the 2-3x compared to the UK while living in the dessert - all this guy's living 30-45 minutes away from prime locations to have the same rent price like somewhere in a village in the UK by earning more.

Should this change - simply no one is living any longer in the dessert the whole year - same for the Real Estate - it has to be further tax free otherwise it would be simply the beginning of the end.

UAE is far away from being another Germany that can exploit the people and makes them impossible to leave after years of living there.

UAE needs to attract new people and new money otherwise they can't realize there own goals - look at Dubai 2040.

What they are actually doing is already working very well - tourism has already taxes per night, service charge here and there - Real Estate has the 4% Dubai Land Department Fee per Transaction etc.

So for now nothing has changed and if things change dramatically you hear it here first - actually we are far away from this - everything is full full and full - "sorry fully booked out" is what you get for the weekend if you not going to book 1 week upfront for a good restaurant.

In My home country Dubai is blacklisted both for people and companies. TYhat means that people moving to Dubai have the burdenb of proving that they left the country, not the opposite. This will not change with a 9% tax. And I'm not saying I am not bullish on the future of Dubai, it still amazes me that people want to go there on vacation, but it's a great place where to live

 

[troubled soul]

In My home country Dubai is blacklisted both for people and companies.

which country???

 

[karishi]

which country???

Italy. But it's the same in spain

 

[zzzzzz]

Dubai AFAIK has no oil, the other emirates have oil.

In My home country Dubai is blacklisted both for people and companies. TYhat means that people moving to Dubai have the burdenb of proving that they left the country, not the opposite. This will not change with a 9% tax. And I'm not saying I am not bullish on the future of Dubai, it still amazes me that people want to go there on vacation, but it's a great place where to live

Is there any difference if you first move to acceptable country (and cut economic and social ties with your home country + providing proofs), stay there for a year and then move to UAE?

 

[karishi]

Is there any difference if you first move to acceptable country (and cut economic and social ties with your home country + providing proofs), stay there for a year and then move to UAE?

I have no idea about this, one year might not be enough, 3-4 years better. I have never moved my residence to dubai, I keep it outside of my home country but didn't put it in Dubai

 

[Martin Everson]

UAE is not Germany, where you introduce 45% and people pay and stay. Most of people in UAE are imigrants from India, Pakist. They just return home

That's what I was thinking. A lot of people are in Dubai for economic reasons. Not many people would choose to live under a dictatorship that taxes you right?

But maybe I am wrong and a low tax dictatorship works for some foreigners .