Physical substance of visa motivated freezone companies in UAE

[Thomas67]

As a natural person using personal funds, can't be true. Let's wait more clarifications.

Have a look at the sources here above, or give arguments/facts/sources please.

 

[Thomas67]

I have the same question regarding the Turnover. As well as if the tax administration considers that the net profit from crypto to stable coins transactions is taxable or not (in many countries these transaction wouldn't be seen as taxable events, but I've no confirmation for UAE).

Has someone a view, document or link about these two points?


@Gediminas In the case of active trading (stocks, forex, crypto), the activity is likely to be categorized as commercial business, due to its speculative and profit seeking nature. Though, is there a source stating that such a commercial business necessarily requires a license/incorporation to be law compliant?

(the Commercial Transactions law doesn't state anything regarding licenses at first sight)

Has anyone a view on it?

Just called the Department of Economy and Tourism (Dubai Government), in charge of trade/commercial licenses.

A license is not needed when trading or investing personal funds - even as a main activity (explicitly asked). An extra confirmation can come from the SCA or CBUAE if needed. I would prefer to have a document though (if someone has one).

My view is the opposite. I also believe most tax accountants can't differentiate long term investment from day/swing trading, and will only consider that the activity is done using personal savings.

- The Commercial Transaction Law is quite clear to me about this: "Speculation works practiced by a person, whether or not a trader, for purpose of realizing profit" is a commercial business.
- Corporate tax guide (last part; see also @Mekan Gurbanov 's post above, partially answering the question): "Personal Investment income is not subject to Corporate Tax when derived by natural persons from investment activity conducted in their personal capacity that is neither conducted through a Licence or requiring a Licence from a Licensing Authority, nor considered as a commercial business in accordance with the Commercial Transactions Law"

On top of this, I believe UAE is a country where it's probably better to have a good surprise than the converse in terms of financial penalties/possible sanctions.

In terms of compliance, audit I'm (at this stage) not sure it's needed, but accounting yes. Then there is the pending question of license requirement for traders (personal savings, main activity and high level of sales proceeds) and for prop firm traders (a service is provided to a prop firm).

Still looking for a source regarding @Gediminas 's statement "The line between personal investments and business activities is not fully clear, but it depends on volume, your background (are you a professional trader or not), other sources of income (is this your only income), the time you spend managing these investments, and many more".

Based on this, a professional trader (main activity, high volume, expertise,...) is expected to run a business activity.

Even in the case where the Commercial Transaction Law didn't concern trading (own funds, no clients, main activity), not sure trading belongs to the Personal Investment category though.

Quite unfortunately, the corporate tax guide (natural persons) only mentions, as an example (p.21), the case of a long term investment in securities.

The second example related to the resale of a car is interesting though, as the argument is: no corporate tax "as the sale of the car is on the personal account of the natural person and does not require a License"

Still struggling with it, any help would be appreciated even in dm

Nb: the example of the car might not be sufficient though; buying cars cheap and reselling them at a higher price on a frequent basis could possibly be seen as a commercial business, even if a personal account is used.

 

[MarkusCostigan]

Just called the Department of Economy and Tourism (Dubai Government), in charge of trade/commercial licenses.

A license is not needed when trading or investing personal funds - even as a main activity (explicitly asked). An extra confirmation can come from the SCA or CBUAE if needed. I would prefer to have a document though (if someone has one).


Even in the case where the Commercial Transaction Law didn't concern trading (own funds, no clients, main activity), not sure trading belongs to the Personal Investment category though.

Quite unfortunately, the corporate tax guide (natural persons) only mentions, as an example (p.21), the case of a long term investment in securities.

The second example related to the resale of a car is interesting though, as the argument is: no corporate tax "as the sale of the car is on the personal account of the natural person and does not require a License"

Still struggling with it, any help would be appreciated even in dm

Nb: the example of the car might not be sufficient though; buying cars cheap and reselling them at a higher price on a frequent basis could possibly be seen as a commercial business, even if a personal account is used.

Thank you Thomas.

So can we say that trading/crypto trading with personal funds is tax-free even if the treshold is exceeded?

 

[Thomas67]

Thank you Thomas.

So can we say that trading/crypto trading with personal funds is tax-free even if the treshold is exceeded?

The current understanding is that trading can't be seen as a (passive) investment and, aside this, could also be seen as a commercial business. No license needed, but the personal investment exemption in the corporate tax law is unlikely to apply.

Any other view based on sources is obviously welcome. Also, still no view on the treatment of crypto to crypto transactions.