Dubai company tax reduction via salary

[Henn and Rich]

to be fair, it will take a while before they start bothering you I feel. The UAE is not some time-honored jurisdiction with an established tax man in place. It has just been implemented and will take a while before the tax man would catch you for not paying 9% in accordance to the corporate tax laws. So I do believe some creative accounting can help you increase your costs and reduce taxable profit.

Of course taking all your revenue and paying it out as 1 big salary to the sole owner of the company would not fly through maybe for now yes, but I am sure years down the line they will catch this and impose a nice fat fine.

 

[Martin Everson]

Does it mean that any salary to a sole owner operator willtrigger the Article 50 anti abuse rules, and that all salary payments will be taxed at 9%?
or a more reasonable and moderate salary of, say, 300k on 1M of profit (as per the example), would result in 0% tax on personal salary income, and 9% corporate tax on 700k?

It means a salary way in excess of market averages/ranges for the duty being performed and which results in the corporate tax base being eroded will cause you issues. The UAE may decide to penalize you,tax you anyway or both. You need to check what the punishment is before even contemplating doing something you KNOW is morally wrong.

 

[Fred]

Now that most free zone dubai companies have to pay a 9% tax on their profits, can some or all of it be offset via a salary payout to a resident sole owner?

For example:
one is a resident of dubai and the sole owner, director, and employee of their own dubai company.
The dubai company makes 1M USD in profit, then pays a 1M USD salary to the person, reducing its corporate income to 0, paying 0 in tax.
The person receives the 1M USD and pays 0% on their salary (personal income in dubai is taxed at 0%)

is this correct, or is there a nuance with personal taxation with the new taxation rules?

Covered this here in our latest Blog Article as well:

99% of Freezone Companies formed by DLS Dubai remain 0% Corporate Tax – Why?

From June 1, 2023, the UAE authorities have introduced a corporate income tax, for taxable individuals and companies with a tax rate of 9%. What does this mean for you?

dls-dubai.com

 

[Sigma]

It's not that difficult. UAE taxes local operations. Declare a salary and you have local operations. If at some point in the future they decide to introduce income tax, how believable would you be if you say you no longer have UAE operations?
By structuring your affairs in a different way, you have been a passive shareholder all along. Nothing wrong with letting the UAE know you make money abroad.

People work remotely. If you pay salaries it doesn’t mean the the person is working from the UAE.

 

[JustAnotherNomad]

People work remotely. If you pay salaries it doesn’t mean the the person is working from the UAE.

That's not how it works.
If you live in a typical Western country, you can't just register your company in the BVI, travel around the world five days a week, working remotely, and not pay tax.
"I was only at home in my apartment for the weekend, I didn't work during that time!"
It's just not how it works. If the company doesn't have a fixed office elsewhere, your home will be considered the base of operations.
The UAE is pretty much the same now - on paper. Obviously it's highly unlikely that they will be anywhere near this strict in the near future, but they have the legal framework in place to do that.

 

[Sigma]

I believe that the vast majority of users commenting this and other threads about the 9% tax rule and the trashhold mentioned above of 3 million AED ~ 816K USD is something that won't hurt them. They would easily be able to navigate through to a nice 0% tax if they get professional help.

AMEN

Care to elaborate on possibilities?