I was just told by an accountant of a friend that if EU company pays UAE company for anything non-tangible (like consulting etc) you owe tax in EU on those wires? While it would make sense, since otherwise it would be too easy to offset all your profit in EU by just paying it all to an UAE company for "consulting" it's first time I hear about such "exit" tax? So is it true and how exactly is called this law so I can read up on it? What exactly it includes?
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If EU company wires money to Dubai (UAE) company for consulting/etc there is tax on the EU side? True?
- Thread starter PinkCat
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I don’t think this is true, it’s just a company expense, it doesn’t make any difference where the receiving company is located.
This would be the case for royalty payments. There are withholding taxes on such payments.
https://taxsummaries.pwc.com/germany/corporate/withholding-taxes
Also some countries like Germany have 5% tax on anything artistic (which includes webdesign and translations), it is called Künstlersozialkasse.
https://www.kuenstlersozialkasse.de/unternehmen-und-verwerter/kuenstlersozialabgabe
Especially in Germany, you would need to be very careful on how you declare such payments. They have many, many ways to tax you on it indeed. If you do not fall into the ones above and maybe invoice "webdevelopment", you most likely would have them consider it an investment which is to be amortised over 3, 5 or 10 years. If you invoice "happy time" for 100k, they most likely will contest the fair market value and tell you that it is not a company expense but profit shifting.
If the German and UAE company is controlled by the same people, you will alost certainly get into very big troubles.
Summary: You need to be careful, but if it is a consulting fee to a unrelated party at a fair market value and you are not the only customer of him, there generally are no issues. If it is fishy in any way, you can assume them to have the means to tax the hell out of you.
There is no such general rule on an EU level, but some countries have a list of blacklisted tax havens. Invoices from such countries are usually not accepted.
Furthermore, like @daniels27 explained, you have to respect transfer pricing rules if the parties are related.
Other than that, you only have to be able to prove that the business really exists and that the services that the invoice is for were really performed, and also where they were performed.
That's pretty much it.
Furthermore, like @daniels27 explained, you have to respect transfer pricing rules if the parties are related.
Other than that, you only have to be able to prove that the business really exists and that the services that the invoice is for were really performed, and also where they were performed.
That's pretty much it.
True
Just like for Belgian companies, any payment to UAE over 100,000 € must be declared to tax authorities with supporting evidence showing there is a "true and sincere" operation in order to have the payment eligible as deductible business expense.
Is this only for a one time payment greater than 100k or for example also when the threshold of 100k in multiple invoices is reached in 1 year ?
As there is no specifications about the time frame involved , it is obviously applied on each individual transaction , now would be better to get more details about practical directives the administration has received, ... if any !
This accountant most probably does not understand international tax planning, otherwise would say that in some countries there is a withholding tax on some service payments sent to the UAE and there are some countries which do not. As a general declaration it is rubbish.
agree so much with you. He does not know what he is talking about the accountant.
I don’t think that’s accurate. There’s no straight-up “exit tax” on sending payments to a UAE company for something like consulting. It would depend on a few different things, though. Here’s what I know:
Withholding Tax: Some countries in the EU might hit you with a withholding tax when you’re paying a company outside the EU for services. But there are tax treaties between most EU countries and the UAE, which usually reduce or even wipe out those taxes on stuff like consulting fees. You’d have to check the specific treaty between the country you're dealing with and the UAE.
Transfer Pricing: Now, if the two companies are somehow related (like part of the same group), they’re going to look at transfer pricing. That means the price you’re paying the UAE company has to be what you’d pay if they weren’t related. If you’re trying to shuffle profits around, tax authorities could catch on and adjust the numbers.
Anti-Avoidance Rules: There are also anti-tax avoidance rules in the EU, especially with the Anti-Tax Avoidance Directive. They’re on the lookout for people trying to dodge taxes by sending profits to low-tax countries like the UAE. If they think that’s what’s going on, they might make you pay up, but that’s not really a “tax on wires” or anything,it’s more about preventing shady business practices.
Substance Requirements: If the UAE company is just a shell with no real operations, that could be a problem. Some countries will see through that and treat it like the payments were going somewhere else with actual substance.
Bottom line, It’s not about an “exit tax,” but if you’re making big payments to the UAE for services, you might trigger other taxes or rules, depending on the specifics. If you want to dig into it, look up withholding tax laws in the country you’re working with, the double tax treaty with the UAE, and EU anti-avoidance rules. Should give you a clearer picture.
Hope that clears it up.
Nonsense. Exit tax has nothing to do with payments.
Nonsense. No country applies withholding taxes to payments for services.
Nonsense. Such things would not be regulated by a treaty.
Nonsense. Anti-avoidance rules are on the national level.
Hey, I think there's been a bit of a misunderstanding here.
Exit Tax: Yeah, you’re right,exit tax doesn’t apply here. I was more talking about taxes that might hit when money moves between countries, but exit tax as a term is off the mark, I’ll give you that.
Withholding Tax: Not all countries apply withholding taxes on services, sure. But it can happen in specific cases, depending on the country’s tax laws. It’s not universal, but it’s worth checking. The devil’s in the details with these laws, especially with cross-border payments. Some EU countries have withholding taxes on service payments to non-residents,just depends on the jurisdiction. for example, Italy applies a withholding tax on payments for services rendered by non-resident companies, including consulting fees. The standard rate is 30%, but if there’s a tax treaty in place (like with the UAE), it can lower that rate or eliminate it. Not every country does this, but it's not uncommon either. It just depends on the country's specific laws and the nature of the service being provided.
Tax Treaty: Yeah, treaties don’t regulate payments directly, but they often have clauses to avoid double taxation on cross-border payments. While they don’t dictate whether withholding applies, they can reduce or eliminate taxes in certain cases. It’s not something you just ignore when moving money between countries.
Anti-Avoidance Rules: These are both at the national and EU level. The EU Anti-Tax Avoidance Directive (ATAD) exists, but each member country also has its own anti-avoidance measures. It’s not purely one or the other.
So, yeah, it's a bit more nuanced. I wasn’t trying to say these apply across the board, but they’re definitely things to look at when making payments like this.
It depends what you send the money there for. See my post above. For dividends, royalties, interest, etc. there is WTH. Some countries also charge you if you hire translator as they are artists like Germany with the Künstlersozialkasse. If you pay invoices to your friends that are inflated, they will consider it dividends, salary, etc. If you take out a loan from your German company to your UAE one and you pay less than the required amount of interest back to Germany, they will also charge you WHT on the unpaid interest as it effectively is dividends.
Long list of ways to get taxed. If you buy services from an unrelated party at fair market value, they won't tax you.
Depends where the services are considered to be delivered. If the services are cosidered delivered at the place of payer company, the foreign (UAE) company might have to pay an income tax for the income derived from payer’s country. If this situation is triggered, the payer must withold the taxes owed by the foreign company.
The DTA must specify this
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