UAE clarification of Freezone Qualifying Income

[Marzio]

You manufacture it like any engineered other good

Manufacture by definition is an industrial term: "to produce goods in large numbers, usually in a factory using machines"

manufacture

1. to produce goods in large numbers, usually in a factory using machines: 2…

dictionary.cambridge.org

There isn't any mention about software because software is developed, not manufactured.

 

[andrew28fl]

I am more concerned about the Excluded activities listed in:

https://mof.gov.ae/wp-content/uploads/2023/06/Ministerial-Decision-No.-139-of-2023-Regarding-Qualifying-Activities-and-Excluded-Activities.pdf

Article (3) Excluded Activities

(f) Ownership or exploitation of intellectual property assets.
(g) Any activities that are ancillary to the activities listed in paragraphs (a) to (f) of this Clause.

Any software - domains, websites, apps - are intellectual properties.

To me, all software related activities including FBA/Ecom/digital marketing etc fall under this, which is excluded. Unless they come out with clarifications, this would be huge risk to take. All IMHO, happy to be proven wrong.

 

[Au999]

I am more concerned about the Excluded activities listed in:

https://mof.gov.ae/wp-content/uploads/2023/06/Ministerial-Decision-No.-139-of-2023-Regarding-Qualifying-Activities-and-Excluded-Activities.pdf

Article (3) Excluded Activities

(f) Ownership or exploitation of intellectual property assets.
(g) Any activities that are ancillary to the activities listed in paragraphs (a) to (f) of this Clause.

Any software - domains, websites, apps - are intellectual properties.

To me, all software related activities including FBA/Ecom/digital marketing etc fall under this, which is excluded. Unless they come out with clarifications, this would be huge risk to take. All IMHO, happy to be proven wrong.

Website is a fixed asset / intangible asset. Definitely not intellectual property. Perhaps it's
logo and colour scheme or other elements are IP but the website itself and its content and value definitely an asset on a balance sheet.

With the argument that these things are themselves IP (or related to IP and therefore excluded) would exclude any designed or copyright product, as they too have elements of IP - and by extension any company doing anything with any IP. Which would just be silly.

 

[Marzio]

Definitely not intellectual property.

Anything you write could be considered an intellectual property exactly like a script, a book, a line of code.

Which would just be silly.

It's not silly at all if UAE were forced to align to OECD standards.

 

[andrew28fl]

Website is a fixed asset / intangible asset. Definitely not intellectual property. Perhaps it's
logo and colour scheme or other elements are IP but the website itself and its content and value definitely an asset on a balance sheet.

With the argument that these things are themselves IP (or related to IP and therefore excluded) would exclude any designed or copyright product, as they too have elements of IP - and by extension any company doing anything with any IP. Which would just be silly.

I have gone through litigation with a tax department in an asian country, over a period of 9 years. Software, including websites, was considered intellectual property in that matter. To each his own. Do your own research and make decisions based on your risk tolerance. For me, Dubai Free Zone is a no-go till some major clarifications. 9% isn't much for peace of mind, instead of shooting for 0% while leaving so much room for interpretation.

 

[Au999]

It's not silly at all if UAE were forced to align to OECD standards.

I meant it would be silly to exempt anything connected to IP as there's intellectual property in absolutely everything that's written, designed or made. So everything would be exempt from qualifying the way Dubai has written the rule. Which would be silly.

IP in the Dubai rules is I understand to catch those special offshore companies who own IP like the design of a logo and charge the onshore trading company their entire onshore profits to use said logo. That old chestnut the multinationals did for years

 

[TheCryptoAnt]

@Mercury @bnpsu

DBS wants 250k invested through the bank (not cash). They dont care on what its that you put the money on, just invest it.

Crypto ok any amount so far I can show where it comes from. Trading records ok but preferably some sort of report from Koinly/Cointracker so its easier to understand.

Multicurrency debit/credit cards available.
IBAN in different currencies available too.

Some services charges here and there but cheap overall.

 

[troubled soul]

Free Corporate Tax Assessment For Freezone Companies

Fill out this form.

forms.rvguae.com

Found tool for Tax eligibility checker.....

 

[Marzio]

Surprise surprise.

I wonder if CDB dropshipping is considered ancilliary to ships operations or aicract financing

 

[troubled soul]

Surprise surprise.

I wonder if CDB dropshipping is considered ancilliary to ships operations or aicract financing

Why not as CBD Oil is required oiling the ship and aircraft...... ship operator and aircraft maintenance people required CBD product for daily life ...It is completely ancillary business

 

[bountymounty]

8 pages thread about paying or not paying tax in UAE!

Can I ask if someone know what will the tax rate be if I have to pay tax?

 

[troubled soul]

8 pages thread about paying or not paying tax in UAE!

Can I ask if someone know what will the tax rate be if I have to pay tax?

9%

 

[andrew28fl]

I meant it would be silly to exempt anything connected to IP as there's intellectual property in absolutely everything that's written, designed or made. So everything would be exempt from qualifying the way Dubai has written the rule. Which would be silly.

IP in the Dubai rules is I understand to catch those special offshore companies who own IP like the design of a logo and charge the onshore trading company their entire onshore profits to use said logo. That old chestnut the multinationals did for years

You might have misread what I posted. Intellectual Property and ancillary activities are not "Exempted Activites", they are "Excluded Activites". Meaning, this activity will incur the 9% tax.

https://mof.gov.ae/wp-content/uploads/2023/06/Ministerial-Decision-No.-139-of-2023-Regarding-Qualifying-Activities-and-Excluded-Activities.pdf

 

[bountymounty]

That's good to know. Why is that a problem?

Compared to all the many other benefits from creating a Dubai company as an foreigner I can't see why it should be a problem! IF you handle the profits right you may still get down to something close to zero or at least avoid higher taxes where you live because you can proof you pay tax there!

 

[troubled soul]

That's good to know. Why is that a problem?

Compared to all the many other benefits from creating a Dubai company as an foreigner I can't see why it should be a problem! IF you handle the profits right you may still get down to something close to zero or at least avoid higher taxes where you live because you can proof you pay tax there!

Dubai is a monarchy that operates under Sharia law. The government is seen as being always right, and the courts are often seen as being biased in favor of the government or local businesses. This makes it difficult for businesses to get a fair hearing if they are involved in a dispute with the government or a local business.

As a result, many businesses prefer to operate in countries with more democratic systems and fair justice systems. For example, Singapore has a 17% corporate tax rate, but businesses are willing to pay this rate because they know that they will receive a fair hearing if they ever have a dispute with the government.

Dubai's tax-free status was one of its main attractions for businesses, but this status has now been revoked. As a result, businesses are now looking to other countries to set up their operations. Dubai is now seen as being nothing more than an over-glorified tourist destination with everything artificial under the sun.

https://www.turnerlittle.com/offshore-company-formation/why-you-should-move-your-company-away-from-the-uae/

worth reading Master piece written before many months

 

[alessio]

Dubai is a monarchy that operates under Sharia law. The government is seen as being always right, and the courts are often seen as being biased in favor of the government or local businesses. This makes it difficult for businesses to get a fair hearing if they are involved in a dispute with the government or a local business.

As a result, many businesses prefer to operate in countries with more democratic systems and fair justice systems. For example, Singapore has a 17% corporate tax rate, but businesses are willing to pay this rate because they know that they will receive a fair hearing if they ever have a dispute with the government.

Dubai's tax-free status was one of its main attractions for businesses, but this status has now been revoked. As a result, businesses are now looking to other countries to set up their operations. Dubai is now seen as being nothing more than an over-glorified tourist destination with everything artificial under the sun.

https://www.turnerlittle.com/offshore-company-formation/why-you-should-move-your-company-away-from-the-uae/

worth reading Master piece written before many months

"

As a result, businesses are now looking to other countries to set up their operations."

Not one post yet about anyone searching for another place to setup - but apparently you can predict the future -

ps : link is from March 2022 -

Since thousands of companies are registered and performed

 

[JackAlabama]

Dubai is a monarchy that operates under Sharia law. The government is seen as being always right, and the courts are often seen as being biased in favor of the government or local businesses. This makes it difficult for businesses to get a fair hearing if they are involved in a dispute with the government or a local business.

As a result, many businesses prefer to operate in countries with more democratic systems and fair justice systems. For example, Singapore has a 17% corporate tax rate, but businesses are willing to pay this rate because they know that they will receive a fair hearing if they ever have a dispute with the government.

Dubai's tax-free status was one of its main attractions for businesses, but this status has now been revoked. As a result, businesses are now looking to other countries to set up their operations. Dubai is now seen as being nothing more than an over-glorified tourist destination with everything artificial under the sun.

https://www.turnerlittle.com/offshore-company-formation/why-you-should-move-your-company-away-from-the-uae/

worth reading Master piece written before many months

Paying that tax is one thing. At the end of the day, its anyway the customers who pay it or just another cost of doing business.
Thinking thru all of that, way more important aspect is, what kind of paperwork is being required?

Can I just self report and assess everything myself?
Do I need audits? Who can do these?
Do I need detailed accounting or is just a basic one (like what Panama wants) enough?
Do I need to hand in my paperwork like a school essay or will they be demanded at a future date if/when tax audits take place?

Anyone has ideas on these points?

 

[troubled soul]

Can I just self report and assess everything myself?
No

Do I need audits?
Yes

Do I need detailed accounting or is just a basic one (like what Panama wants) enough?
Detail one

Do I need to hand in my paperwork like a school essay or will they be demanded at a future date if/when tax audits take place?
Proper Tax paper work

 

[bnpsu]

@Mercury @bnpsu

DBS wants 250k invested through the bank (not cash). They dont care on what its that you put the money on, just invest it.

Crypto ok any amount so far I can show where it comes from. Trading records ok but preferably some sort of report from Koinly/Cointracker so its easier to understand.

Multicurrency debit/credit cards available.
IBAN in different currencies available too.

Some services charges here and there but cheap overall.

Oh great, thanks! So you have to give them $250k to invest?

So there’s really no limit? 6-9 figures? There must be a limit no?

 

[Martin Everson]

Any thought on this cayman freezone Offshore Cayman Special Economic Zone ? Please recommend similar freezones.

Covered in below thread. So lets stick to topic here thanks.

Cayman Enterprise City - Offshore company and work permit in the Cayman Islands

https://www.caymanenterprisecity.com What do you guys think? It is quite expensive, however if you have the money it looks like a great opportunity to get an offshore company with zero direct taxes, be in a reputable jurisdiction, live in a tropical paradise and have a direct path to permanent...

www.offshorecorptalk.com

There seems to be a lot of cognitive dissonance here. The law as it's written is clear when it comes to Qualifying Activities yet people are stretching definitions and grasping at straws in disbelief of what they read and that they will now be paying 9% tax. This is a normal human reaction when such an abrupt change in taxation has occurred to a historically tax free status quo.

UAE did not just overlook mentioning the entire tech and eCommerce sector by accident...lol. In reality the UAE is more likely expecting some disgruntled people but anticipating that 9% tax will not be a deal breaker for most as its still a highly competitive tax rate and they may feel people love living in UAE enough to pay - rightly or wrongly....lol.