Tax residency in UK

[Martin Everson]

UAE doesn't report the Company if he as the UBO is UAE Resident.

Again, he will NOT be a UAE resident. He will be living in UK. Thats the whole point of his post? Did you not read it correctly. He will not be in UAE. So that reporting will affect him as a non-UAE resident unless he meets ESR.

 

[turtle]

Do you generate US sales?

US sales don't matter because Apps Store sales are not subject to withholding tax in the US.

@rdevalex I wrote your wall, please check.

 

[Mercury]

Again, he will NOT be a UAE resident. He will be living in UK. Thats the whole point of his post? Did you not read it correctly. He will not be in UAE. So that reporting will affect him as a non-UAE resident unless he meets ESR.

From what I understand, UAE considers the UBO as UAE resident as long as he/she has been registered as such during the company formation. UAE will not check and report UBO's other (possibly multiple) residencies.

 

[Fred]

Again, he will NOT be a UAE resident. He will be living in UK. Thats the whole point of his post? Did you not read it correctly. He will not be in UAE. So that reporting will affect him as a non-UAE resident unless he meets ESR.

And this can be avoided by just keeping his current Visa and Emirates ID and flying in once every 6 months.

Again I get your point but it takes almost nothing to keep the UAE paper residence to not get reported.

I'm a bit surprised about the one dimensional view of things on this from your side as you know very well someone can have multiple residence.

 

[TheCryptoAnt]

I'm a bit surprised about the one dimensional view of things on this from your side as you know very well someone can have multiple residence.

We at the public side

 

[Martin Everson]

From what I understand, UAE considers the UBO as UAE resident as long as he/she has been registered as such during the company formation. UAE will not check and report UBO's other (possibly multiple) residencies.

Look at what he wrote below. Are you suggesting he don't say anything to UAE when he moves to UK?

I will be UK resident and will pay an income tax on salary in UK.

I'm a bit surprised about the one dimensional view of things on this from your side as you know very well someone can have multiple residence.

I am stating facts. He can have as many residencies as he wants and even multiple tax residencies...good luck with that.

 

[Fred]

Look at what he wrote below. Are you suggesting he don't say anything to UAE when he moves to UK?

Yes of course - technically he can't even say anything to the UAE beside of cancelling his current Residence Visa which I don't recommend him with a good past history in the UAE.

The whole forum here is about privacy and reducing taxes and such articles like the one earlier mentioned are just misleading people here and ruining opportunities.

Yes - when you do setup a RAKICC non-resident Offshore Company in the UAE in 2023 the earlier mentioned article is right - no one with a Brain is doing so in 2023 as the issue is not the reporting in first place but not getting any Business Bank Account opened.

The OP clearly asks if he should pay himself in the UAE which indicates he still have his local UAE Bank Accounts which again indicates he intends to keep his UAE Residence Visa anyway as otherwise this accounts would be shut down.

You know all this Martin - you claimed here once Citibank UAE did shut down your non-resident account already couple of years ago - when it comes to UAE we should aknowledge the ease of having and maintaining the Residence Visa - at least on the paper. So by just keeping what OP has already in place currently the whole article about 12 Countries starting non-resident Companies becomes irrelevant at least in regards to the UAE.

 

[Martin Everson]

He can keep his residency but it will not help him tax wise but complicate it. If he is managing and controlling the UAE company from UK as a one man band his company will have not meet ESR in UAE. Hence why he asks the below in regards to the UAE company. Any suggestion to not say anything to UAE side is not a good idea hence why he was suggesting the below.

1. Appoint a director (general manager) who will be responsible for the company management and control (make strategic decisions, etc). The director is UAE resident.

We have literally gone full circle. My original reply about doing things at arms length and meeting UAE ESR requirements is correct actions to take. Read my reply again I posted here:

Not high if you move to UK and claim non-domicile status for yourself and UAE company operates at arms length. So ensure the UAE company has real economic substance in UAE alongside corporate control and decision making being made in UAE with suitable qualified staff and costs in UAE. Economic substance is a major requirement anyway in UAE to stop your company being automatically reported to UK - as a non-UAE tax resident company under OECD rules...see below. As you will always be the UBO the entity needs to avoid been seen as a sham tax avoidance vehicle by HMRC which is the highest risk you face.

You can read more about UAE ESR below:

Economic substance regulations in the UAE

Overview of the requirements and compliance obligations

kpmg.com

https://mof.gov.ae/economic-substance-regulations/

P.S If anyone wants to follow the philosophy of "don't worry no one is checking this and that in UAE". I wish them good luck. As I always say I let people learn the hard way.

 

[rdevalex]

Some update for my case. We have relocated to UK and have plans to stay here at least for 1-2 years. So, I am already a UK tax resident with the non-dom status. I still own UAE FZE company which sells an Android mobile application on Google Play (in-app purchases and subscriptions). This company has an office, a bank account in UAE and I appointed a local director who manages the company in UAE. The company doesn't have any other employees because there is no active development at the moment (the latest version was released several months ago). So, I am just a passive investor who owns a foreign company but doesn't manage it and doesn't perform any work to not trigger PE in UK. Also, I don't remit any funds to UK other than clean capital.

Now, I would like to resume the app development. Ideally, I want to continue to develop the app myself in UK without hiring some other developers or outsourcing to a third party company. Obviously, there is a risk of triggering PE in UK. I was advised to open UK company and work as a contractor for UAE company. But it would be desirable to have some other clients except my UAE company to minimize the risk of PE triggering. Also, I am considering the option of opening a subsidiary company in UK for development purposes, so the owner of such UK company would be not me but my UAE company. Then I would work in this UK company as a developer. It is like some big IT companies have headquarter offices in US or UK and development centers in Eastern Europe. I am not sure about PE risks and tax obligations in this case but I think such IT companies don’t pay big taxes in countries where their development centers are located. I can always hire a developer in UAE or outsource the development but it would be less preferable for me. What would be your advice regarding this?

The next question is about my UAE company. After UAE introduced CIT 9%, I have doubts whether I should stay with it or improve my setup somehow. 9% is not a big number compared with most countries but for IT companies there are a lot of tax regimes that allow to pay less. For example, I think about Cyprus IP Box regime, but it requires that development has to be carried out by Cyprus company itself or by an independent outsource company. Also, I think about a manager-managed US LLC, but there is a problem with the manager residency. As I understand, the manager should live in some tax-free country like Bahrain, for example, and it will be difficult to fund such a person. I thought that US LLC’s manager can live in UAE and I would pay 9% CIT in UAE because such US LLC will be a UAE tax resident, but at least I can use US LLC for Stripe payments if I decide to integrate it. As I know, Stripe fees in UAE are bigger. Does it make sense to make such US LLC a subsidiary company owned by UAE company or UAE company is no longer needed in such setup? Maybe, there are some other options?

 

[Marzio]

I can use US LLC for Stripe payments if I decide to integrate it

AFAIK you must use Google Play’s billing system for your in app purchases or subscriptions and pay the 15% service fee for revenues < 1mln

Service fees - Play Console Help

Apps and in-app products sold through Google Play’s billing system or an Alternative Billing System (as defined below) in accordance with the Payments policy are subject to a service fee.

support.google.com

 

[rdevalex]

AFAIK you must use Google Play’s billing system for your in app purchases or subscriptions and pay the 15% service fee for revenues < 1mln

It is true when you allow to unlock Premium features from the app itself. It is not allowed to redirect a user to your website to proceed with payment. You must use Google Play billing in this case. But if your Premum funcltionality is linked to user accounts, you can allow to unlock it on the website even before a user install the app. Obviously, a user should know that there is possibility to unlock Premium via website. It is not allowed to advertise this in an app. Something like Plex Pass works.

 

[Marzio]

Before answering about the best setup for your case, are you 100% you are not paying 30% US WHT for your app subscriptions?

This guy from Romania sells subscriptions as you and Google is asking him to fill his tax informations.

Google Play Console - Fill tax information

I appreciate any help anyone can give me with this. I believe many other people are facing the same problem so this question could act as a reference point for them. I am trying to fill my tax

money.stackexchange.com

Did you ever file tax informations in your Google account?

That info is crucial to know because US and UAE don't have a double tax treaty in place.

 

[rdevalex]

Yes, I have submitted W-8BEN-E form. I am pretty sure Google doesn't deduct US withholding tax from in-app purchases and subscriptions in Google Play. I just have found "Consolidated Withholding Tax Information Statement" report in Google Play console and I see deductions of the withholding tax for such countries like Taiwan, Brazil, Egypt and some other, but there is no US among them.

 

[rdevalex]

Consider the next structure:

- I am non-dom UK resident and don't remit any funds to UK
- I have a manager-managed US LLC that sells a mobile app on Google Play and on a website via Stripe
- The manager of US LLC is UAE resident and he visits Bahrain 1-2 times per year to make strategic decisions for US LLC
- US LLC outsources the app development to some non-US company or opens a development subsidiary company in UK

What tax obligations would be in this case for US LLC? Should it pay some royalty withholding taxes?

 

[Marzio]

What tax obligations would be in this case for US LLC?

If UAE accepts that management is taking place outide UAE then your setup could be tax free but i guess it will be somewhat diffcult to prove that all business decisions are taken outside UAE if the manager only leaves 2 times per year.

Should it pay some royalty withholding taxes?

If you are 100% sure you didn't pay US WHT on royalties till now (which is strange imho) then you will continue to not pay US WHT.

 

[rdevalex]

If a manager of a manager-managed US LLC is a resident of a country that treats a US LLC as a transparent entity, should such US LLC pay the corporate income tax in that country according to the "management and control" rules?

 

[Marzio]

If the manager is creating a permanent establishment in that country, yes.

 

[rdevalex]

Do I understand correctly that a permanent establishment will be triggered due to a fixed place of management in that country? What taxes should pay such PE in that country, if all actual work (product management and development) is outsourced to some third country?

 

[Marzio]

What taxes should pay such PE in that country,

If there's a PE in that country then company is liable to that country's CIT.

You can outsource everything but at some point somebody will have to take some decision and where that decision is taking place is where the company will be considered tax resident.

 

[rdevalex]

If there's a PE in that country then company is liable to that country's CIT.

What profit is liable to country's CIT where PE is triggered? Profit from all app sales or from app sales in that country?

You can outsource everything but at some point somebody will have to take some decision and where that decision is taking place is where the company will be considered tax resident.

So, should US LLC pay CIT in this case despite such US LLC is treated as a transparent entity in a country where a manager taking decisions is a resident?