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Tax on trading in the UAE

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Tom85

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Nov 23, 2023
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#1
Hello! Through the help of this forum I figured that the UAE maybe imposed 9% corporate tax on day/swing traders.

The UAE government recently released conditions stating that a natural person (individual) who conducts 'Business' or 'Business Activity' will be subject to the 9% corporate tax (even without running a company), if their turnover is more than 1 million AED. Source: paragraph 29 in https://mof.gov.ae/corporate-tax-faq/

Cabinet Decision No. (49) of 2023 clarifies what is considered as 'Business' or 'Business Activity' by individual person. It states that wage, personal investment and real estate income are not 'Business' or 'Business Activity'. We can argue that day/swing trading falls under personal investment income. However, the Cabinet Decision defines personal investment as an activity that is not considered as commercial business in accordance with the Federal Decree-Law No. 50 of 2022. Article 4 from that Decree Law says that commercial business is "Speculation works practiced by a person, whether or not a trader, for purpose of realizing profit".

So it looks like day traders in the UAE are subject to the 9% corporate tax if their turnover is more that 1 million AED (~272 000 USD). And it is very easy to generate that turnover by just trading 1000 USD every day in a year.
Turnover is defined as "The gross amount of income derived during a Gregorian calendar year" in Cabinet Decision No. (49) of 2023. Though I'm not sure how the turnover will be counted. Will the revenue in the brokerage account included in turnover or only cash hitting the bank account?
And in case of crypto, will crypto-crypto trading revenue apply to turnover, or crypto into fiat exchange will be counted?

I am interested to know if day traders in the UAE indeed need to pay corporate tax now? Please, help.
 
#2
AFAIK most traders just trade on personal accounts ATM and therefore "bypass" this. There's no tax on capital gains as well as PIT.

taxsummaries.pwc.com

United Arab Emirates - Individual - Other taxes

Detailed description of other taxes impacting individuals in United Arab Emirates
taxsummaries.pwc.com

If you plan to sponsor your visa via your "trading company" might be more suitable to find another solution for VISA and don't open up a company.

It obv. depends on if you need a company for your "activities" or just trading your personal funds.
 
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#3
Tom Taylor said:
Hello! Through the help of this forum I figured that the UAE maybe imposed 9% corporate tax on day/swing traders.

The UAE government recently released conditions stating that a natural person (individual) who conducts 'Business' or 'Business Activity' will be subject to the 9% corporate tax (even without running a company), if their turnover is more than 1 million AED. Source: paragraph 29 in https://mof.gov.ae/corporate-tax-faq/

Cabinet Decision No. (49) of 2023 clarifies what is considered as 'Business' or 'Business Activity' by individual person. It states that wage, personal investment and real estate income are not 'Business' or 'Business Activity'. We can argue that day/swing trading falls under personal investment income. However, the Cabinet Decision defines personal investment as an activity that is not considered as commercial business in accordance with the Federal Decree-Law No. 50 of 2022. Article 4 from that Decree Law says that commercial business is "Speculation works practiced by a person, whether or not a trader, for purpose of realizing profit".

So it looks like day traders in the UAE are subject to the 9% corporate tax if their turnover is more that 1 million AED (~272 000 USD). And it is very easy to generate that turnover by just trading 1000 USD every day in a year.
Turnover is defined as "The gross amount of income derived during a Gregorian calendar year" in Cabinet Decision No. (49) of 2023. Though I'm not sure how the turnover will be counted. Will the revenue in the brokerage account included in turnover or only cash hitting the bank account?
And in case of crypto, will crypto-crypto trading revenue apply to turnover, or crypto into fiat exchange will be counted?

I am interested to know if day traders in the UAE indeed need to pay corporate tax now? Please, help.
Click to expand...
Slowly but wider approach of taxation is coming to UAE.
At this stage I think crypto traders would not fall under CIT
 
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#4
apres777 said:
AFAIK most traders just trade on personal accounts ATM and therefore "bypass" this. There's no tax on capital gains as well as PIT.
Click to expand...
Agree on that. Just afraid of getting taxed on personal trading in the UAE after I move there. Since their definition of business activity done by a person without a company is very broad.
apres777 said:
If you plan to sponsor your visa via your "trading company" might be more suitable to find another solution for VISA and don't open up a company.
Click to expand...
Thanks! Yes, was thinking about getting a freelance visa just to get residence ID and trading on personal account.
Konstanz said:
At this stage I think crypto traders would not fall under CIT
Click to expand...
Thank you for the feedback! I hope they won't impose taxes on crypto traders as well.
 
#5
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#9
apres777 said:
AFAIK most traders just trade on personal accounts ATM and therefore "bypass" this. There's no tax on capital gains as well as PIT.

taxsummaries.pwc.com

United Arab Emirates - Individual - Other taxes

Detailed description of other taxes impacting individuals in United Arab Emirates
taxsummaries.pwc.com

If you plan to sponsor your visa via your "trading company" might be more suitable to find another solution for VISA and don't open up a company.

It obv. depends on if you need a company for your "activities" or just trading your personal funds.
Click to expand...
PwC: "There is currently no personal income tax in the UAE. As such, capital gains tax is not imposed on UAE national or resident individuals." = at press time, i.e. view 2023, not 2024.
 
#10
#11
Thomas67 said:
The point is that I don't know what is meant by commercial transactions (the scope of the document); if it necessarily implies clients, or even without (in which case speculative trading on financial markets would be concerned).
Click to expand...

Reading that document it seems that if speculation is your source of income then you pay tax.
Maybe if you open a prop crypto trading company you can reduce the tax base by 375k AED plus a salary.
 
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#12
zaybxc said:
Reading that document it seems that if speculation is your source of income then you pay tax.
Maybe if you open a prop crypto trading company you can reduce the tax base by 375k AED plus a salary.
Click to expand...
Had a last doubt today indeed. This is my current understanding too - Art. 4 p.2 seems quite clear.

If it can matter for comparison purposes, note that the 375k AED tax base reduction also applies to natural persons (see example 3, p.14 of the corporate tax guide - taxation of natural persons under the corporate tax law).

Distributed salary/dividends and limited liability from a company are an advantage, the very expensive fees (setup/license, renewal fees, accounting/audit) specific to financial freezones are a drawback I'd say (also depends on your capital).
 
#13
Thomas67 said:
Had a last doubt today indeed. This is my current understanding too - Art. 4 p.2 seems quite clear.

If it can matter for comparison purposes, note that the 375k AED tax base reduction also applies to natural persons (see example 3, p.14 of the corporate tax guide - taxation of natural persons under the corporate tax law).

Distributed salary/dividends and limited liability from a company are an advantage, the very expensive fees (setup/license, renewal fees, accounting/audit) specific to financial freezones are a drawback I'd say (also depends on your capital).
Click to expand...
it raises the more general question on what are the advantages in general to trade as a person or as a company. (where your company is your vehicle of investments, crypto, stocks, bonds, all your assets)
I think with a company it can be a problem because tradfi brokers will treat you as a professional and you will pay more fees ? (real time data fees)
what else to consider ? (out of the accountancy and tax matters)
 
#14
Bill D said:
it raises the more general question on what are the advantages in general to trade as a person or as a company. (where your company is your vehicle of investments, crypto, stocks, bonds, all your assets)
I think with a company it can be a problem because tradfi brokers will treat you as a professional and you will pay more fees ? (real time data fees)
what else to consider ? (out of the accountancy and tax matters)
Click to expand...
I'd say setup/license fees that you could avoid, stuff like the ultimate beneficiary owner, physical substance and any other regulatory aspect to be examined/followed up (possibly with a lawyer), the difficulty to open a bank account (esp. for crypto trading),... Never fully thought about it, these are first points coming to my mind at least. Your point is very relevant too.
 
#15
If you will do crypto trading as a natural person, you'll still (most likely) need to pay corporate tax and so will need to withdraw crypto profits into UAE bank to pay the tax. In this case UAE bank may not like crypto deposits, especially if your tax amount is quite large (50k+ USD).
So the main problem is finding UAE bank that could accept deposits from crypto trading.

I guess depositing a small amount (<50k USD) of crypto profits into bank will be easier with individual bank account than business one. For large deposits though, I think it's better to find a bank that will accept your crypto trading activity to be sure you'll be able to convert crypto to AED to pay taxes in the future.

Bill D said:
what else to consider ? (out of the accountancy and tax matters)
Click to expand...
Salary and dividends from the company will be useful for proving source of funds and source of wealth.
 
#17
Thomas67 said:
If it can matter for comparison purposes, note that the 375k AED tax base reduction also applies to natural persons (see example 3, p.14 of the corporate tax guide - taxation of natural persons under the corporate tax law).
Click to expand...
I don't think the example applies to our case: in the example they consider a self-employed (working through a license) who provides services to third-parties; in our case there's no need for a license as we trade our own funds and don't provide services to third-parties.
See comment Physical substance of visa motivated freezone companies in UAE

Now I'm wondering if crypto-to-crypto swaps are tax events in the UAE.
For example, in most countries a BTC-ETH swap is seen as a double swap, BTC-fiat and fiat-ETH, where the first swap is a tax event. In such case it's going to be tough to keep the accounting.
 
#18
zaybxc said:
I don't think the example applies to our case: in the example they consider a self-employed (working through a license) who provides services to third-parties; in our case there's no need for a license as we trade our own funds and don't provide services to third-parties.
See comment Physical substance of visa motivated freezone companies in UAE

Now I'm wondering if crypto-to-crypto swaps are tax events in the UAE.
For example, in most countries a BTC-ETH swap is seen as a double swap, BTC-fiat and fiat-ETH, where the first swap is a tax event. In such case it's going to be tough to keep the accounting.
Click to expand...
The example I mentioned was to show that the 375k AED threshold also applied to natural persons, being a self-employed, employed, investor, etc.... ; )

I've also confirmed (from an official source) in a recent post that no license was needed.

I didn't know some countries considered such swaps as tax events, others consider that crypto to crypto swaps aren't (e.g. Cyprus, to my current knowledge). It seems that IFRS rules do not (yet?) cover such cases. Some clarity should come, in one way or another, from UAE's FTA then I guess.
 
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