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Does UAE classify foreign companies as local Taxable residents?

BerlusconiSchmidt

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I managed to set up a company in a reputable jurisdiction that will not tax any of my company income thanks to an approved Tax exemption.
I am NOW looking to move into the UAE, my wife will have a job there and there is no income tax along with other benefits, we are originally from NZ.

My main question is: can I keep the same offshore company structure I am using, to run my online business and pay myself a salary while I live in the UAE?


I do not want to set up a UAE company for the following reasons:
- I am already paying and have paid a lot of money to set up my offshore company structure
- Payment gateway options are way less available and more restricted, I know this since I have been in the ecom business for 10 years
- I do not want to go through all those audits and BS with UAE tax department
- I do not want to pay 9% corporate tax, I am paying 0% corporate tax now thanks to the exemption I got, I wouldn't move to Dubai to pay more tax, sounds insane.

Can I live in the UAE 9 months a year, and pay myself from the offshore company dividends and a salary tax free without the UAE considering
my offshore company a tax resident of the UAE and forcing me to pay the 9% corporate tax?


Company turnover: $3M a year
100% ecommerce and online services
100% of clients are outside of the UAE
 
Correct way for doing this would be to register a branch office for the offshore company in the UAE.
A branch of a foreign juridical person registered in the UAE
would generally not be considered a Tax Resident of the UAE.
This means you would have to go through all the audits, etc., in UAE. Its more burdensome than opening a local company.

You might be able to structure your business as an unincorporated partnership with your company and you as a sole proprietor. Then you can benefit from the tax exemption and small business relief.
 
I managed to set up a company in a reputable jurisdiction that will not tax any of my company income thanks to an approved Tax exemption.
I am NOW looking to move into the UAE, my wife will have a job there and there is no income tax along with other benefits, we are originally from NZ.

My main question is: can I keep the same offshore company structure I am using, to run my online business and pay myself a salary while I live in the UAE?


I do not want to set up a UAE company for the following reasons:
- I am already paying and have paid a lot of money to set up my offshore company structure
- Payment gateway options are way less available and more restricted, I know this since I have been in the ecom business for 10 years
- I do not want to go through all those audits and BS with UAE tax department
- I do not want to pay 9% corporate tax, I am paying 0% corporate tax now thanks to the exemption I got, I wouldn't move to Dubai to pay more tax, sounds insane.

Can I live in the UAE 9 months a year, and pay myself from the offshore company dividends and a salary tax free without the UAE considering
my offshore company a tax resident of the UAE and forcing me to pay the 9% corporate tax?


Company turnover: $3M a year
100% ecommerce and online services
100% of clients are outside of the UAE
the case is clear on this.
Your company is going to be treated as Uae company hence making it, which I quote you "to go through all those audits and BS with UAE tax department".

Youd need manager and employees offshore and you just getting dividend checks to be in the clear.
 
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Can I live in the UAE 9 months a year, and pay myself from the offshore company dividends and a salary tax free without the UAE considering
my offshore company a tax resident of the UAE and forcing me to pay the 9% corporate tax?
So, what/where will be the Place of Effective Management (POEM) for your offshore company? The answer to that question will determine the tax status. There are so many ifs, and UAE corporate tax enforcement is still unclear and unknown. Going through your dividend receipts, UAE may check the BO of your offshore company and consider it as effectively managed from Dubai.
 
the case is clear on this.
Your company is going to be treated as Uae company hence making it, which I quote you "to go through all those audits and BS with UAE tax department".

Youd need manager and employees offshore and you just getting dividend checks to be in the clear.
Who says this? are there any official government links from the UAE website that clearly states this statement?

so far I have found nothing stating that offshore companies are now treated as local UAE companies if the sole director is a resident of the UAE.

So, what/where will be the Place of Effective Management (POEM) for your offshore company? The answer to that question will determine the tax status. There are so many ifs, and UAE corporate tax enforcement is still unclear and unknown. Going through your dividend receipts, UAE may check the BO of your offshore company and consider it as effectively managed from Dubai.
Are you saying the UAE just became like any other western country that imposes tax on offshore businesses that do not operate within the UAE ?

The sole director (me) would be in the UAE, but the actual work is entirely done from overseas (shipping products, marketing and advertising, design, customer service, etc...).
I'm the one that ultimately decides the fate of the company but I have several workers under me who are not residents of the UAE.

I can only get paid in dividends if that makes things easier.
 
Who says this? are there any official government links from the UAE website that clearly states this statement?

so far I have found nothing stating that offshore companies are now treated as local UAE companies if the sole director is a resident of the UAE.
you need to dig deeper then. Its written rather clearly even in the well known tax summaries and familiarize yourself with the term PE.
Same applies for business in a personal capacity.

Who says this? are there any official government links from the UAE website that clearly states this statement?

so far I have found nothing stating that offshore companies are now treated as local UAE companies if the sole director is a resident of the UAE.


Are you saying the UAE just became like any other western country that imposes tax on offshore businesses that do not operate within the UAE ?

The sole director (me) would be in the UAE, but the actual work is entirely done from overseas (shipping products, marketing and advertising, design, customer service, etc...).
I'm the one that ultimately decides the fate of the company but I have several workers under me who are not residents of the UAE.
Yep. That case is a 100% clear then.
 
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Are you saying the UAE just became like any other western country that imposes tax on offshore businesses that do not operate within the UAE ?
They had to, no other options for them. The whole corporate tax drama was for OECD and FATF as they had to get off the FATF Grey List.

Article 11(3)(b) of the Corporate Tax Law deems as a tax resident ‘a juridical person that is incorporated or otherwise established or recognized under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the State’.

As per UAE MoF
FAQ related to Corporate Tax , please refer Question #20, wherein it is stated "A foreign company may be treated as a Resident Person for UAE Corporate Tax purposes if it is “effectively managed and controlled” in the UAE. All facts and circumstances must be considered in determining where a company is effectively managed and controlled, but a relevant indicator may include the place where the board of directors of the company make the strategic decisions affecting the company."

Page 24 & 25 of
UAE Corporate Tax Guidance issued by UAE Federal Tax Authority, provides some clarification on this:

  1. ‘Whether a juridical person is effectively managed and controlled in the UAE needs to be determined with regard to the specific circumstances of the juridical entity and its activities’.
  2. A key factoris ‘where key management and commercial decisions concerned with broader strategic and policy matters necessary for the conduct of the company’s business as a whole are regularly and predominantly made and given. This will ordinarily be where a company’s board of directors (or any equivalent body for other types of juridical persons) make these decisions’.
  3. ‘However, depending on the specific circumstances, other factors such as where the controlling shareholders make decisions, the location of another Person or body to which the board has delegated its decision-making functions, or the location where the directors or executive management of the juridical person reside may also need to be considered’.
  4. ‘For a juridical person to be considered effectively managed and controlled in the UAE, it is not necessary for its board members (or equivalent) to be domiciled or resident in the UAE’.
 
I managed to set up a company in a reputable jurisdiction that will not tax any of my company income thanks to an approved Tax exemption.
I am NOW looking to move into the UAE, my wife will have a job there and there is no income tax along with other benefits, we are originally from NZ.

My main question is: can I keep the same offshore company structure I am using, to run my online business and pay myself a salary while I live in the UAE?


I do not want to set up a UAE company for the following reasons:
- I am already paying and have paid a lot of money to set up my offshore company structure
- Payment gateway options are way less available and more restricted, I know this since I have been in the ecom business for 10 years
- I do not want to go through all those audits and BS with UAE tax department
- I do not want to pay 9% corporate tax, I am paying 0% corporate tax now thanks to the exemption I got, I wouldn't move to Dubai to pay more tax, sounds insane.

Can I live in the UAE 9 months a year, and pay myself from the offshore company dividends and a salary tax free without the UAE considering
my offshore company a tax resident of the UAE and forcing me to pay the 9% corporate tax?


Company turnover: $3M a year
100% ecommerce and online services
100% of clients are outside of the UAE
I don't see any reason for you to setup branch in uae
You want to move to uae and need to sponsor you visa, best is to apply for uae golden visa cost around 500k real estate investment where you can live with your family. Problem solved!
Do you mind telling us about jurisdiction where you did establish tax free company?
 
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I don't see any reason for you to setup branch in uae
You want to move to uae and need to sponsor you visa, best is to apply for uae golden visa cost around 500k real estate investment where you can live with your family. Problem solved!
You can also get a residence permit in UAE as a service. - you pay a service fee, and a UAE company officially hires you.
Another option is obtaining a freelancer residence permit. This allows you to trade in your name in UAE, which can be helpful, for example, if you want to invoice other companies (375k AED is tax-free).
 
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You can also get a residence permit in UAE as a service. - you pay a service fee, and a UAE company officially hires you.
Another option is obtaining a freelancer residence permit. This allows you to trade in your name in UAE, which can be helpful, for example, if you want to invoice other companies (375k AED is tax-free).
You are right, freelancer visa only 3k a year an he can run his offshore company but he said his annual revenue is 3 million, does he need to pay taxes in uae 9% ?
In my opinion no, because his company is not uae.
 
You are right, freelancer visa only 3k a year an he can run his offshore company but he said his annual revenue is 3 million, does he need to pay taxes in uae 9% ?
In my opinion no, because his company is not uae.
Whether a company is exposed to tax depends on various factors, including the place where effective management occurs.
 
He has e-commerce business in other country and with freelancer visa can run it without paying any tax in uae.
That's what many are doing uae residency + usa llc to pay 0% tax
Correct me if I'm wrong
As of now, as I have said previously, no one knows how much and to what extent UAE may enforce Tax compliance. If they do, then the US LLC will be considered to be effectively managed from UAE, and hence the 9% tax. Everything will be clear after a year or so, when they go through your audit report.

The only way to get out of the tax net is to invest the surplus income (over AED 375000 threshold) in stable coins, hold them for a year and then sellout, in that case it will be a qualifying activity and hence 0% tax.

Again, if ecommerce can be modified into a high sale activity ( you have to go through the finer points and devise your plan accordingly), then it will be a qualifying activity and 0% tax.

There are so many other ways, 90% of the audit guys in UAE aren't even aware of them.

N.B. The above strategies are meant only for Freezones.
 
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Who says this? are there any official government links from the UAE website that clearly states this statement?

so far I have found nothing stating that offshore companies are now treated as local UAE companies if the sole director is a resident of the UAE.


Are you saying the UAE just became like any other western country that imposes tax on offshore businesses that do not operate within the UAE ?

The sole director (me) would be in the UAE, but the actual work is entirely done from overseas (shipping products, marketing and advertising, design, customer service, etc...).
I'm the one that ultimately decides the fate of the company but I have several workers under me who are not residents of the UAE.

I can only get paid in dividends if that makes things easier.
Let's summarize the current situation based on the facts we have so far:

There are *no* clear guidelines or precedents on how effective management and control will be assessed in UAE. This area remains unclear, the fact - we are making assumptions.

We supposed to address several questions regarding the local FTA's potential actions:

1. Can they pursue you?
2. Do they want to pursue you?
3. Will they pursue you?
4. What are the real risks for you? - AED 10K at the moment if the registration term has been missed

Importantly, in theory, the FTA could expect you to pay tax only on the portion of the profit generated through management and control activities conducted, but while you are in the UAE only. They should not tax all of your company's profits, especially those generated or managed from other locations or if profit comes from contracts or management which was done before you came to UAE. It should be included in the double taxation agreement between the UAE and the country where your company is registered.

The question arises: how will the FTA determine and calculate this taxable amount? How will they differentiate between profits from activities managed in the UAE and those managed elsewhere?

For instance, if you signed a significant and profitable contract during a summer trip to the Vanuatu, you wouldn't owe corporate tax on the profits from that contract.

My question is, has anyone here experienced a real situation where the tax authorities of one country (Country A) demanded that a company registered in another country (Country B) pay corporate tax because the company's director resides in Country A?
 

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