Questions about UAE Freezone

[JustAnotherNomad]

Assuming you're not a US citizen, are there any US taxes you need to pay, or any reporting requirements, or is it only UAE based legal requirements that are relevant?

If the US LLC is owned by the UAE company, then there can be up to 30% branch profit tax in the US.

 

[Au999]

If the US LLC is owned by the UAE company, then there can be up to 30% branch profit tax in the US.

No branch profit tax if no activity in US and sole member is a foreign company. I added a screen grab from the rules someplace else on this forum.

Edit just found it

 

[kurosaki4d]

If it helps a large chunk of my business is in affiliate marketing and I've been in Dubai a year now having used Fred to set up my FZ company, visa and banking. Cannot fault the service - and all the bank accounts I have are free with the exception of one of the biz accounts, WIO (which in my experience is the best by a mile)

Assuming most of your affiliate partners are in US the only real fly in the ointment when here is they're at the opposite side of the clock when it comes to calls/conferencing and nobody ever seems to make an allowance for that!

They all pay into my US LLC account, and every month that then transfers to Dubai etc. Clockwork.

So glad I made the shift, there's something just so positive and forward looking here that's completely lacking in the UK.

Your answer does actually help a lot more than you know Thanks a ton.

You assumed right, I have no partners or businesses in the UAE, mostly in the US.

However, I'm confused, why did you need to create a US LLC? Wouldn't it be easier to withdraw from your affiliate partners/platforms directly into your UAE bank account with no intermediary? (is there something I'm missing here ?)

The first part about the 375kAED exemption and being able to somehow play with how much is your salary is right, but this part I'm quoting above is wrong.

It's not about a list of "Excluded activities", it's about a list of "Accepted activities". Huge difference. Any activities that are outside the "Accepted activities" mentioned in the latest Cabinet Decision 55 (https://mof.gov.ae/wp-content/uploa...ifying-Activities-and-Excluded-Activities.pdf) WILL be taxed at 9%. ALL acitivities outside that scope and that includes "management", "social media marketing", "affiliates", etc. Period.

This is the case for most people on this forum who provides services that are outside of the accepted activities (I'll assume not many people here build planes or ships...).

This is huge. Indeed it makes all the difference in the world. Thanks for bringing that to our attention.

So, just to confirm, affiliate marketing activities will be subjected to the 9% tax no matter what? right?

If it is not in the "Accepted Activities", then where is it in the "Excluded Activities"?

I hear that there are different tax laws and exemptions across other free zone cities in UAE. Does this new law of activities apply to all those cities?

 

[JustAnotherNomad]

No branch profit tax if no activity in US

Correct, but if there are US clients, there is a risk that the IRS will say you have "activity in the US" (ECI).
A lot of people fly under the radar, but it's a risk. You can completely avoid that risk by either not having US clients or owning a US LLC as a person instead of as a company.

 

[lacomaco]

With 120k$ per Year your effective Tax Rate with a Dubai Freezone Company would be 0% - no matter what.

First 100k$ are Tax Free and the 20k$ you can payout as a Salary - it would be a even a joke of a salary.

So you have upside potential by paying yourself a 60k AED Salary + 10K AED Allowance per month - you can get easily 300k$ per year Tax Free out - not to mention the benefits of a Tax Free Residence on the Personal Income Level - no Capital Gain Tax either.

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I give the above example anyway only because that's the majority opinion of the forum members actually - in reality Affiliate Marketing is not mentioned on the Excluded Activity List - which is a finished List of Activities and therefore Affiliate Marketing remain 0% as a Business Activity within the scope of Qualifying Income.

Again if you or whoever sees this different - stick to above mentioned example - no matter what - you can pull out 300k$ Tax Free which would mean a 3X on your current Business Earnings - at 0% Tax - not that bad.

I quote from Ministerial Decision 139:

Article (3) Excluded Activities
1. For the purposes of Cabinet Decision No. 55 of 2023 referred to above, the following activities shall be considered Excluded Activities:
(a) Any transactions with natural persons, except transactions in relation to the Qualifying Activities specified under paragraphs (d), (f), (g) and (j) of Clause (1) of Article (2) of this Decision.

Article (2) Qualifying Activities
1. For the purposes of Cabinet Decision No. 55 of 2023 referred to above, and subject to Clause (2) of this Article and Article (3) of this Decision, the following activities conducted by a Qualifying Free Zone Person shall be considered Qualifying Activities:
(d) Ownership, management and operation of Ships.
(f) Fund management services that are subject to the regulatory oversight of the competent authority in the State.
(g) Wealth and investment management services that are subject to the regulatory over sight of the competent authority in the State.
(i) Treasury and financing services to Related Parties.

How can the "affiliate marketing" provided to individuals be CIT free then?

 

[Marzio]

How can the "affiliate marketing" provided to individuals be CIT free then?

Affiliate marketng is not provided to invidiuals but to businesses.

You don't "sell" to individuals.

It's the eCommerce that does the selling.

 

[mostafak]

So you have upside potential by paying yourself a 60k AED Salary + 10K AED Allowance per month - you can get easily 300k$ per year Tax Free out - not to mention the benefits of a Tax Free Residence on the Personal Income Level - no Capital Gain Tax either.

I asked my FZ and they said that I cannot pay myself a salary as I am an "investor" - So even If I paid myself a monthly salary, It will be still taxable 9%. Can you please confirm?

 

[JustAnotherNomad]

I asked my FZ and they said that I cannot pay myself a salary as I am an "investor" - So even If I paid myself a monthly salary, It will be still taxable 9%. Can you please confirm?

Wow, what a shitshow. The funny thing is, even for freelancers, some freezones give you an "investor" visa, and then you have to declare the UBO of your freelance business. And if it's true that you can't even pay yourself a salary on a freelance visa... lol.

 

[Au999]

I asked my FZ and they said that I cannot pay myself a salary as I am an "investor" - So even If I paid myself a monthly salary, It will be still taxable 9%. Can you please confirm?

That's bizarre. I've got an employee contract through my FZ - definitely not an investor

 

[mostafak]

Wow, what a shitshow. The funny thing is, even for freelancers, some freezones give you an "investor" visa, and then you have to declare the UBO of your freelance business. And if it's true that you can't even pay yourself a salary on a freelance visa... lol.

lol .. they published a half baked law that doesn't really make sense for many cases. Hope they make iterations to it to make sense for freezones and freelancers that don't conduct business in UAE.

I just registered my company here about 3 weeks ago, then after getting my personal/business bank accounts setuped and all that, I started having a remorse synonym lol.

That's bizarre. I've got an employee contract through my FZ - definitely not an investor

Do you have partners on your business? Or Is it just you?

 

[Fred]

I asked my FZ and they said that I cannot pay myself a salary as I am an "investor" - So even If I paid myself a monthly salary, It will be still taxable 9%. Can you please confirm?

That's correct - they did mess up your Residence Visa then.

That's bizarre. I've got an employee contract through my FZ - definitely not an investor

Because we did your Setup and strucured everything in the right way.


Getting an Investor Visa through a Freezone Company almost never makes sense - unless you need to have it for home country immigration like Phillipine Citizens - it has only downside with Banking, Insurance and now with structuring 0% Corporate Tax.

 

[mostafak]

That's correct - they did mess up your Residence Visa then.

That is sad .. Is there a way this could be changed or fixed? I am the only owner of the company.

 

[Fred]

That is sad .. Is there a way this could be changed or fixed? I am the only owner of the company.

Should be possible but best contact your Freezone about it - I assume it's a small Emirate Freezone - they are pushing - for whatever reason - Investor Visas.

 

[mostafak]

Should be possible but best contact your Freezone about it - I assume it's a small Emirate Freezone - they are pushing - for whatever reason - Investor Visas.

Thanks .. I asked the FZ today and they said it is possible but I have to introduce another partner with me on the company - so one is investor and the other one is employee or manager.

 

[alessio]

I asked my FZ and they said that I cannot pay myself a salary as I am an "investor" - So even If I paid myself a monthly salary, It will be still taxable 9%. Can you please confirm?

Confirmed -

And for your better understanding, you could have set up differently and to employed yourself. Many others advantages such as using bank leverage using your financial flux from UAE.

 

[Fred]

Thanks .. I asked the FZ today and they said it is possible but I have to introduce another partner with me on the company - so one is investor and the other one is employee or manager.

Change the Freezone or the current company - my recommendation.

 

[mostafak]

Confirmed -

And for your better understanding, you could have set up differently and to employed yourself. Many others advantages such as using bank leverage using your financial flux from UAE.

How can I employ myself? Like what would be the setup?

Change the Freezone or the current company - my recommendation.

Maybe next year before renewal - I just setup-ed and got my visa less than a month ago. I don’t want to pay another 16-20K AED for this again.

Will it be easy to migrate the company to another freezone with the same name, banking .. etc?

 

[bnpsu]

Thanks a lot for this valuable information. This is exactly the kind of information I needed to know. What you said makes a lot of sense.

I wasn't aware that you can pull out up to $300k tax free. That's really encouraging.

This is good news, I'd really love to learn from your experience how much in average would it cost in total between forming the company, and creating a bank account? What's the average estimate required for that?

I think if you are making less than $300-500k/yr in Dubai, it might not even be worth it though. Due to such high cost of living. Unless you're willing to grind it out at a 35m2 studio for $1k/mo. You'll be paying tax indirectly in everything else. $60 for a round trip Uber to the mall, $50 per meal out (for a single person) etc. To live a decent life, 1-2 bedrooms, eat out whenever you want etc, you'll easily spend $20k/mo here in Dubai vs $5k/mo in SEA or something.

Open to reasons why this might be incorrect way of thinking...

 

[mostafak]

I think if you are making less than $300-500k/yr in Dubai, it might not even be worth it though. Due to such high cost of living. Unless you're willing to grind it out at a 35m2 studio for $1k/mo. You'll be paying tax indirectly in everything else. $60 for a round trip Uber to the mall, $50 per meal out (for a single person) etc. To live a decent life, 1-2 bedrooms, eat out whenever you want etc, you'll easily spend $20k/mo here in Dubai vs $5k/mo in SEA or something.

Open to reasons why this might be incorrect way of thinking...

That is not exactly true - $20k in Dubai is way too much, of course it depends on your lifestyle but $20k is still too much for a single person.

I think $5k/mo is very reasonable amount for a single person on Dubai.

 

[JackAlabama]

That is not exactly true, $20k is Dubai is way too much. Of course it depends on your lifestyle but $20k is still too much for a single person.

I think $5k/mo is very reasonable amount for a single person on Dubai.

Id say around $ 10k/month. 5 is on the low end. Its not even 20k aed which disappear very fast.