Possible workaround for new UAE Corporate Tax?

[Konstanz]

Holy s**t, this is so bad. So it's the end of 0% tax also on the personal level... what a shitshow.

Yes many don't realize that UAE has in practice introduced personal income tax
It's just hidden behind CIT

 

[JohnJ81]

but not on salary payments as long as gaar rules are kept

 

[BigUnicorn]

Yes many don't realize that UAE has in practice introduced personal income tax
It's just hidden behind CIT

Haven't read much but what about capital gains? Dividends?

I mean: income is still tax free, and if you make $1m profit in a year, you pay 9%/90k on corporate, and then you can distribute the remaining amount at 0% to the personal. It's still better than many other options.

There are people saying UAE killed their biz model etc, but I think they made a quite calculated decision here.

 

[JohnJ81]

you have 375k tax free so you pay 9% on 625k only

 

[BigUnicorn]

you have 375k tax free so you pay 9% on 625k only

Good point, my reasoning was more regarding a flow corporate to personal but that make the taxable net even lower.

 

[sinos]

Holy s**t, this is so bad. So it's the end of 0% tax also on the personal level... what a shitshow.

"The Corporate Tax Law fully exempts dividends derived from UAE entities, as well as dividends from foreign subsidiaries that qualify as a “Participation”. A Participation is a juridical person in which the UAE shareholder company owns a 5% or greater ownership interest (a “Participating Interest”) for at least 12 months, and that meets the conditions of the participation exemption regime."

 

[JohnJ81]

"The Corporate Tax Law fully exempts dividends derived from UAE entities, as well as dividends from foreign subsidiaries that qualify as a “Participation”. A Participation is a juridical person in which the UAE shareholder company owns a 5% or greater ownership interest (a “Participating Interest”) for at least 12 months, and that meets the conditions of the participation exemption regime."

can you define what a juridical person is?

 

[sinos]

can you define what a juridical person is?

In essence a legal entity.

 

[JohnJ81]

Is it basically saying that dividends to a Dubai parent company from a foreign subsidiary are exempt as long as it owns more than 5% of the shares for a minimum period of 12 months before any distribution is made?

So it seems that IFZA Freezone company is a juridical person

 

[sinos]

Is it basically saying that dividends to a Dubai parent company from a foreign subsidiary are exempt as long as it owns more than 5% of the shares for a minimum period of 12 months before any distribution is made?

So it seems that IFZA Freezone company is a juridical person

Correct.

The point here is, the source of your income, is it a salary/dividend or is it through a business/corporate activity? As you described above, UAE tax authorities, in that case, will consider you a freelancer. In short, the activity that results in an income is important.

There may be workarounds through Goods distribution, involving entities from two countries. Country A manufactures and Country B buys the product, you get paid, the profit is exempted. Country B company can be a parent company of a US LLC (Subsidiary, not a branch).

There are so many other creative ways.

I have already previously mentioned it in this thread. Salary and dividends are exempted, if any other income received even in personal bank account then it will be considered a business income and taxed at 9%.

 

[JohnJ81]

It seems that Dubai has changed its clientele. It will offer zero tax to people who use it as a headquarters and send the money in as foreign dividends. You can pay out tax free salaries as long as they are arms length and invest the other remaining money in Dubai, or send it back overseas to the subsidiaries as loans or investment.

As long as you dont grow too big, more than say 5m USD per year, you can stay at zero tax.

 

[sinos]

PE has also been clarified in detail, only Nexus will be clarified by the end of this month. The tax filing form will ask for all the bank accounts held by the resident (so as I have heard)

It seems that Dubai has changed its clientele. It will offer zero tax to people who use it as a headquarters and send the money in as foreign dividends. You can pay out tax free salaries as long as they are arms length and invest the other remaining money in Dubai, or send it back overseas to the subsidiaries as loans or investment.

As long as you dont grow too big, more than say 5m USD per year, you can stay at zero tax.

5m or 5% of the total as non-qualifying, whichever lower.

 

[JohnJ81]

what is Nexus

 

[troubled soul]

Any workaround or setup will cost your mental peace....You can not sleep well at night in Dubai....
@Konstanz
Can not agree more with you......unofficially person income tax is declared......Official announcement will be in some time...
And If you look into detail like IF I receive Interest or Dividend from any USA ETF.....It is already taxed in USA...(Yes Most incomes are taxable while living in dessert at personal level )
Only UAE based dividend and interest are not taxed.....(Who want to keep money in UAE bank account or want to invest in UAE company)

UAE is trap now. Ignore it

 

[JohnLocke]

UAE is trap now. Ignore it

Thank you for your personal opinion. I'm still not certain that Dubai or the entire UAE is dead or a trap as you call it.

Some people may still find it useful to have their business headquartered there because of tax reasons and IP rights or asset protection reasons. If you look through the entire discussion here you can see that with some tax knowledge you can easily (if you are a small business) navigate to some very low or even 0% taxes.

Maybe in the future there will be more changes in the UAE, but I believe more in major changes in the EU in the negative direction.

 

[troubled soul]

Thank you for your personal opinion. I'm still not certain that Dubai or the entire UAE is dead or a trap as you call it.

Some people may still find it useful to have their business headquartered there because of tax reasons and IP rights or asset protection reasons. If you look through the entire discussion here you can see that with some tax knowledge you can easily (if you are a small business) navigate to some very low or even 0% taxes.

Maybe in the future there will be more changes in the UAE, but I believe more in major changes in the EU in the negative direction.

Noted...
But you forget to mention ...Indirect tax which audit, accounting and as usual GOV fees....which same for small or big enterprise....USA LLC cost penny compare to UAE company.....Just move to territorial tax country i.e. Thailand.....
Time will tell...who is right and wrong ,,
meanwhile enjoy Dubai air

 

[JohnLocke]

I don't enjoy the Dubai Air since I'm not living there. I don't say you are wrong nor do I say I'm right. What I say is that each business has it's own requirements and is individual. What not works for me, may work for you

 

[troubled soul]

each business has it's own requirements and is individual. What not works for me, may work for you

True........Holding, wealth management etc companies are still tax free....For particular IT business, ecommerce , As of Now UAE is not worth headache....better solutions are in market

 

[JustAnotherNomad]

asset protection reasons

Lol. That must be the reason why no UAE resident keeps their money in UAE bank accounts.

 

[JohnLocke]

Assets, don't need to be money!