UAE clarification of Freezone Qualifying Income

[Konstanz]

That's correct.

See here our latest post:

DLS Dubai Statement: UAE clarification of Freezone Qualifying Income

1. CORPORATE TAX: You are only paying 9% Corporate Tax if you are running one of the Excluded Activities. List of Excluded Activities: (a) is referring to Mainland and International Business. No matter if you are doing E-Commerce or Marketing Services - it's a Qualifying Activity and...

www.offshorecorptalk.com

"3. BECOMING CREATIVE"

General Manager average salary is 60000 AED + another 10000 AED allowance per month - total 840000 AED per Year in addition to the 375000 AED Tax Free Profits.

So in total even assuming someone qualifies for 9% Corporate Tax can make the first 331000 USD Tax Free!

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We are working on some Blog Article but I share you here already a table we did created - calling it "worst case tax".

As much as I like this forum but this thread is just bashing the UAE - and it's even more funny if you know the numbers.

Just as a hint before you are looking at the below table - certain banks do some kind of enhanced KYC when you cross 4M AED turnover - we see this from clients less then 10% per year - it's questionnable why everyone is now acting as if they would make 100M AED turnover, 15M AED profit and having a 7 figure tax bill to pay.

Yes, yes... frame it again that we at DLS Dubai can't be neutral because of our business nature but as I mentioned earlier - "keep the church in the village"

"Worst Case Tax" Table

View attachment 4872


So if you are making 10M AED turnover you can get out 2.6M AED tax free which is 700K USD (!) tax free with an effective tax rate of 3.9% assuming 9% CT for 99% of FZCO's - which we still see different and elaborate in our blog article soon why! The salary is industry standard and no bulls**t with unrealistic salary - so even if they limit the salary this is still valid - not to mention every 2nd client has his wife employeed as well etc.

But yes let's move all now to Monaco and get hammered with 5000-10000 EUR rent for a 30m2 apartment to "just" have 0% income tax - which we have in Dubai anyway - in combination with 20-30% CT.

As I understand people who incorporate in Dubai don't want any accounting, reporting, audits or taxes (even 1%). Because it''s no point. Unless you are Russian and don't have other choice.
I just don't see this work

Some people just don't understand but in practice Dubai already has personal income tax. It's hidden behind lines. If you work with BVI, Deleware LLC, UK LP you are taxed UAE CIT 9%
Such rulings don't exist in Monaco, Cayman, Bahamas..

 

[Cloudbanck]

Yes you would be taxed 9% because deleware company would be managed in UAE

Well, it depends on profit and turnover. If profit is below 375k AED, or turnover below 1M AED there would be no tax I think - assuming it's a single member LLC. And even if you are above the limits, you can probably pay yourself a salary up to the GAAR limit tax free - and this will be deemed a distribution on the US side, and probably a salary on the UAE side.

 

[SasuT]

Well, it depends on profit and turnover. If profit is below 375k AED, or turnover below 1M AED there would be no tax I think - assuming it's a single member LLC. And even if you are above the limits, you can probably pay yourself a salary up to the GAAR limit tax free - and this will be deemed a distribution on the US side, and probably a salary on the UAE side.

What are the GAAR limits for salaries?

 

[sergeylim88]

As I understand people who incorporate in Dubai don't want any accounting, reporting, audits or taxes (even 1%). Because it''s no point. Unless you are Russian and don't have other choice.
I just don't see this work

Some people just don't understand but in practice Dubai already has personal income tax. It's hidden behind lines. If you work with BVI, Deleware LLC, UK LP you are taxed UAE CIT 9%
Such rulings don't exist in Monaco, Cayman, Bahamas..

you think Monaco will not care if you run your company registered in BVI, Seychelles or some other tax heaven?
did you try sending your self dividend to monaco bank account from one of companies like that?

 

[Konstanz]

you think Monaco will not care if you run your company registered in BVI, Seychelles or some other tax heaven?
did you try sending your self dividend to monaco bank account from one of companies like that?

Why you need Monaco account for this? You can use any account in the world.
The same with Cayman Islands, Bahamas.

Anyway, you have Andorra. Which have passive resident program. So, you can have 0% income tax living in Europe.

 

[jafo]

I had a similar system in France. 0% corporate tax.
The thing is, at some point you’ll have to pay yourself. And here you pay a good dividend tax. In France it’s 30%. What about your case?

With the money in corporate, I pay for almost all my expenses because they are related solely to the business.
I can go for the next 200 years at my current living expenses via the forfait. I have been doing DRIP since 2009. Why should I even entertain shooting myself in the foot thinking about paying myself dividends that I won't even use?

What am I missing here?

you think Monaco will not care if you run your company registered in BVI, Seychelles or some other tax heaven?
did you try sending your self dividend to monaco bank account from one of companies like that?

Why should they?
Call the law offices of these lawyers and get a Memorandum of Law from them:
PERSONAL TAXATION. Income tax Monegasque nationals and foreign nationals residing in Monaco are not subject to personal income tax in Monaco. French nationals residing in Monaco are, however, subject to French income tax (under Article 7-1 of the French-Monegasque bilateral convention of 18 May 1963). Dividends and capital gains are not subject to taxation..

PS. I still have an apt in Monaco since 2003.

 

[sergeylim88]

i am kind of lost here
so if you report to monaco authorities that you have some offshore company that you manage (do business through) does it get taxed or not?

 

[Konstanz]

i am kind of lost here
so if you report to monaco authorities that you have some offshore company that you manage (do business through) does it get taxed or not?

You don't have to report anything and there is no tax
Monaco model is based that they don't charge income taxes on individuals. And individuals don't need to disclose their assets (unless its Monaco real estate property or company incorporated in Monaco)
Country levies VAT tax on consumption inside country which is set at 20%.

But this is offtopic. This discussion is about UAE CIT!

 

[Marzio]

Hows different having freezone company than having company in Malta? I don't understand. Explain men in simple words.
If you have real business with real employees hows Dubai freezone better than Malta, Cyprus, Estonia?

Smple words?

OK!

Imagine that for some strange reason you actually need people working for you, no contractors, no freelancers.

I know that might sound mindblowing to some of you but employees are needed to run businesses.

But you not only need people.

You need skilled people.

You need talented people.

You are in competition with everyone to get the best people working for you.

Do you REALLY believe that having an offer for a position in Dubai could be anywhere near comparable with an offering for a position in Malta or Cyprus where there's fu@*ing 35% income tax bracket.

I get that money is not everything but for a young professional, spending few years in UAE and receiving tax free salary makes the difference.

Is that simple enough?

And the really funny part is that i'm coming across like a Dubai ambassador but nothing could be farther from the truth!

The bottom line is that from my point of view UAE makes sense for some businesses EVEN with 9% CIT

 

[Alonzo]

With the money in corporate, I pay for almost all my expenses because they are related solely to the business.
I can go for the next 200 years at my current living expenses via the forfait. I have been doing DRIP since 2009. Why should I even entertain shooting myself in the foot thinking about paying myself dividends that I won't even use?

What am I missing here?


Why should they?
Call the law offices of these lawyers and get a Memorandum of Law from them:
PERSONAL TAXATION. Income tax Monegasque nationals and foreign nationals residing in Monaco are not subject to personal income tax in Monaco. French nationals residing in Monaco are, however, subject to French income tax (under Article 7-1 of the French-Monegasque bilateral convention of 18 May 1963). Dividends and capital gains are not subject to taxation..

PS. I still have an apt in Monaco since 2003.

Ok wait how did you apply for the lump sum regime if you get wealth taxed??? For the lump sum you pay tax on a fictional income. You can't be income taxed or wealth taxed...
Swiss sourced income is taxed normally. Everything you own in Switzerland is taken into account in the lump sum. If the company is in Switzerland the salary you receive is taxed normally

Yeah! Good luck with that! I think you missed the part of the forfait.

Income received in Swiss companies get taxed normally I don't know what you are talking about

Also, Zurich abolished the lump sum regime. I don't know what advantage you get from living here.

 

[bnpsu]

As I understand people who incorporate in Dubai don't want any accounting, reporting, audits or taxes (even 1%). Because it''s no point. Unless you are Russian and don't have other choice.
I just don't see this work

Some people just don't understand but in practice Dubai already has personal income tax. It's hidden behind lines. If you work with BVI, Deleware LLC, UK LP you are taxed UAE CIT 9%
Such rulings don't exist in Monaco, Cayman, Bahamas..

Do you mean in Monaco, Cayman, Bahamas US LLCs are seen as tax transparent?

 

[Konstanz]

Do you mean in Monaco, Cayman, Bahamas US LLCs are seen as tax transparent?

I mean these countries don't care if you own let's say BVI company and do business through it. Or through LP's or other tax transparent entities.
Dubai now see these transparent entities as taxable in UAE

 

[bedouin]

"Worst Case Tax" Table

Whats the 15% marge? Youre considering a 15% margin over the revenue? And how does this work with your sticky where you say all this qualified income thing is jadda jadda and in reality digital marketing is manufacture of goods?

 

[Konstanz]

Smple words?

OK!

Imagine that for some strange reason you actually need people working for you, no contractors, no freelancers.

I know that might sound mindblowing to some of you but employees are needed to run businesses.

But you not only need people.

You need skilled people.

You need talented people.

You are in competition with everyone to get the best people working for you.

Do you REALLY believe that having an offer for a position in Dubai could be anywhere near comparable with an offering for a position in Malta or Cyprus where there's fu@*ing 35% income tax bracket.

I get that money is not everything but for a young professional, spending few years in UAE and receiving tax free salary makes the difference.

Is that simple enough?

And the really funny part is that i'm coming across like a Dubai ambassador but nothing could be farther from the truth!

The bottom line is that from my point of view UAE makes sense for some businesses EVEN with 9% CIT

Dubai has good quality employees is this a joke?
All these FZ are totally empty. I have been at couple of them. Some cases I even did not see electric sockets on work desks
All Dubai is just cheap labor workers from Pakistan and India who serve as slaves for local emiratis and rich residents

Job positions? This forum is not for job seekers in Dubai who work at hotels. Maybe you are in a wrong forum?
Yes you pay 35% tax in Malta, but maybe you get possibility to get pension and normal public health care? This is talking about job positions if you want

 

[alessio]

Whats the 15% marge? Youre considering a 15% margin over the revenue? And how does this work with your sticky where you say all this qualified income thing is jadda jadda and in reality digital marketing is manufacture of goods?

@Fred emphasizes that for the majority of his clients, it will not have a significant financial impact.

Most large multinational companies will be impacted and probably do not rely on Fred to establish their branches, as they have their own financial & taxation advisors or international firms such as PWC.

The presence of a corporate tax can indicate a shift towards greater tax transparency and compliance with international standards. This can enhance the trust of businesses and investors, contributing to Dubai's image as a serious and reliable business hub.

Lastly, a crucial aspect to consider is the taxation of foreign companies without sufficient substance, such as Delaware LLCs, which can subject them to corporate tax liabilities.

Let's work together all of us for :

- Confirming using law
- Figure it out any solutions

 

[jafo]

Ok wait how did you apply for the lump sum regime if you get wealth taxed??? For the lump sum you pay tax on a fictional income. You can't be income taxed or wealth taxed...
Swiss sourced income is taxed normally. Everything you own in Switzerland is taken into account in the lump sum.

True. I use the forfait and wealth tax interchangeably because that's how it was many years ago, but you are correct. It's just forfait. The 0.3% is what the ruling calculation did cost initially when the net worth was taken into account. We did this calculation on our own.

If the company is in Switzerland the salary you receive is taxed normally

That is the ZUG company!
Source:
Zug Corporate taxes

Income received in Swiss companies get taxed normally I don't know what you are talking about

That is correct! I do take CHF120K from the company yearly although I don't need it! This was agreed upon BEFORE I moved to CH. I would ONLY move there if certain conditions were met. They were met. I've had Swiss accounts for +2 decades before this. CH was making 0.00 off those accounts. Why would they NOT agree?

Also, Zurich abolished the lump sum regime. I don't know what advantage you get from living here.

Grandfathered provisions were agreed upon BFEORE they abolished this. Others can still live in many cantons including Zug. With the S24, you can be in Zurich in 30 minutes while traveling in comfort.

 

[Konstanz]

True. I use the forfait and wealth tax interchangeably because that's how it was many years ago, but you are correct. It's just forfait. The 0.3% is what the ruling calculation did cost initially when the net worth was taken into account. We did this calculation on our own.



That is the ZUG company!
Source:
Zug Corporate taxes


That is correct! I do take CHF120K from the company yearly although I don't need it! This was agreed upon BEFORE I moved to CH. I would ONLY move there if certain conditions were met. They were met. I've had Swiss accounts for +2 decades before this. CH was making 0.00 off those accounts. Why would they NOT agree?

Grandfathered provisions were agreed upon BFEORE they abolished this. Others can still live in many cantons including Zug. With the S24, you can be in Zurich in 30 minutes while traveling in comfort.

It's nice case. Lump sum is still possible, but it's quite expensive. I don't know if its worth to pay 100k CHF/year for being tax free and live in CH. Maybe for some people. I know person who do it, but he is very rich
There are only around 5k lump sum residents in CH:

Lump-sum taxation

Expenditure-based taxation, also referred to as lump-sum taxation, is a simplified assessment procedure for foreign nationals who are domiciled in Switzerland but are not gainfully employed here.

www.efd.admin.ch

For most people on this forum options are: Dubai, Panama, Cyprus, Malta, Bahamas etc

Some live in Andorra

 

[usdt]

certain banks do some kind of enhanced KYC when you cross 4M AED turnover

is Commercial Bank of Dubai among them?

 

[bedouin]

@Fred emphasizes that for the majority of his clients, it will not have a significant financial impact.

Most large multinational companies will be impacted and probably do not rely on Fred to establish their branches, as they have their own financial & taxation advisors or international firms such as PWC.

Sorry but we must not be talking about the same statements.

"No matter if you are doing E-Commerce or Marketing Services - it's a Qualifying Activity and therefore 0% Corporate Tax."

and

"
E-Commerce Qualifying Activity: Manufacturing or Processing of Goods (b)

Marketing Services Qualifying Activity: Any activities that are ancillary that are listed in paragraphs (a) to (l)"

finished by

"We are happy to confirm that 99% of DLS Dubai Clients remain 0% Corporate Tax !"


This is misguiding to say the very least. It's somewhat offensive and almost embarrassing to read.

 

[jafo]

- Confirming using law
- Figure it out any solutions

It would be nice for someone to volunteer for this and report back.

I'm too "comfortable" in CH to try this, but I will donate "thoughts & prayers" for those who are willing to take one for the advancement of free men.