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UAE clarification of Freezone Qualifying Income

#541
taxsummaries.pwc.com

United Arab Emirates - Corporate - Income determination

Detailed description of income determination for corporate income tax purposes in United Arab Emirates
taxsummaries.pwc.com
The following table sets out the aspects to consider when determining the nature of a Taxable person (i.e. Resident vs. Non-resident) as well as the applicable Tax base:



Resident PersonTax base
  • An entity that is incorporated in the UAE (including a Free Zone entity)
  • Worldwide income
  • A foreign entity that is effectively managed and controlled in the UAE
  • Worldwide income
  • A natural Person / individual who conducts a Business or Business Activity in the UAE
  • Worldwide income
  • Any other person (may be determined by a Cabinet decision)
  • Worldwide income
Non-resident PersonTax base
  • Has a permanent establishment (‘PE’) in the UAE
  • Taxable income attributable to the PE
  • Derives UAE Sourced Income
  • The UAE sourced income not attributable to the PE
  • Taxable income attributable to the Nexus
There are no separate capital gains provisions under the UAE CT law. Any gains/ (loss) on disposal of capital assets would form part of the taxable income which would be subject to 0% or 9% tax rate as the case may be.

can anybody explain this "Taxable income attributable to the PE"​

 
#547
Cloudbanck said:
Well what if you are a resident in the sense that you have an Emirates Id, but you spend less than 90 days in the UAE?
Click to expand...

If you spend less than 90 days you will not be considered UAE tax resident but i don't understand what's your point.

Actually does somebody knows how long is "time to PE" in UAE?

Becuase if time to PE > 90 days there could be a loophope right there.

I mean consider being the owner of a US LLC on a remote working visa in UAE.

You are considered UAE tax resident after 90 days but if the time to consider your US LLC a UAE permanent establishment is, lets say, 183 days you can game the system by leaving UAE on day 91 and managing your company from [put desidered location here] being careful about not triggering tax residency eleswhere.

Your passport is the proof that you stayed enought to get tax residency but not long enough to create a permanent establishment.

And futher, if you organize yourself in a way that you only close contracts while outside UAE you can substaintiate that while in UAE you only performed activities of a preparatory or auxiliary nature.

taxsummaries.pwc.com

United Arab Emirates - Corporate - Corporate residence

Detailed description of corporate residence rules in United Arab Emirates
taxsummaries.pwc.com
 
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#548
Marzio said:
If you spend less than 90 days you will not be considered UAE tax resident but i don't understand what's your point.

Actually does somebody knows how long is "time to PE" in UAE?

Becuase if time to PE > 90 days there could be a loophope right there.

I mean consider being the owner of a US LLC on a remote working visa in UAE.

You are considered UAE tax resident after 90 days but if the time to consider your US LLC a UAE permanent establishment is, lets say, 183 days you can game the system by leaving UAE on day 91 and managing your company from [put desidered location here] being careful about triggering tax residency eleswhere.

Your passport is the proof that you stayed enought to get tax residency but not long enough to create a permanent establishment.

And futher, if you organize yourself in a way that you only close contracts while outside UAE you can substaintiate that while in UAE you only performed activities of a preparatory or auxiliary nature.

taxsummaries.pwc.com

United Arab Emirates - Corporate - Corporate residence

Detailed description of corporate residence rules in United Arab Emirates
taxsummaries.pwc.com
Click to expand...
Generally speaking, the PE in UAE will be created based on the DTT or UAE CT law depending on the jurisdiction, as UAE has signed and ratified the BEPS Multilateral Instrument and chosen to retain the existing 'permanent establishment' definition in its DTTs. It has not elected to adopt the expanded 'permanent establishment' definition.

Under the UAE CT Law, the definition of a PE is aligned with the definition in the OECD Model Tax Convention. UAE and US have no treaty so we have to follow the local law.

In terms of the UAE CT law, a Non-Resident Person would generally be considered to have a PE in the UAE where it has a fixed or permanent place in the UAE through which the Business of the Non-Resident Person, or any part thereof, is conducted or where a Person has and habitually exercises an authority to conduct a Business or Business Activity in the UAE on behalf of the Non-Resident Person. This will also include cases where UAE persons exercise the authority to conclude contracts in the name of the foreign entity. An additional instance is included in the UAE CT Law whereby a PE can be created where the non-resident has any other form of nexus in the UAE as specified through a subsequent Cabinet decision.

In summary, being a sole manager of the us llc like this leaves you exposed to tax in most cases.
 
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#549
Don said:
In summary, being a sole manager of the us llc like this leaves you exposed to tax in most cases.
Click to expand...
Another wrinkle with having a US LLC, since a US LLC is disregarded/transparent, isnt it possible that it counts in the UAE as doing business as a natural person (as opposed to a foreign juridical person) and then there is no requirement to register for CT below 1M AED turnover.
 
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#551
Cloudbanck said:
Another wrinkle with having a US LLC, since a US LLC is disregarded/transparent, isnt it possible that it counts in the UAE as doing business as a natural person (as opposed to a foreign juridical person) and then there is no requirement to register for CT below 1M AED turnover.
Click to expand...
As far as I know there are no anti-hybrid rules in the UAE so it shouldn't be applicable.
 
#556
Marzio said:
If you spend less than 90 days you will not be considered UAE tax resident but i don't understand what's your point.

Actually does somebody knows how long is "time to PE" in UAE?

Becuase if time to PE > 90 days there could be a loophope right there.

I mean consider being the owner of a US LLC on a remote working visa in UAE.

You are considered UAE tax resident after 90 days but if the time to consider your US LLC a UAE permanent establishment is, lets say, 183 days you can game the system by leaving UAE on day 91 and managing your company from [put desidered location here] being careful about not triggering tax residency eleswhere.

Your passport is the proof that you stayed enought to get tax residency but not long enough to create a permanent establishment.

And futher, if you organize yourself in a way that you only close contracts while outside UAE you can substaintiate that while in UAE you only performed activities of a preparatory or auxiliary nature.

taxsummaries.pwc.com

United Arab Emirates - Corporate - Corporate residence

Detailed description of corporate residence rules in United Arab Emirates
taxsummaries.pwc.com
Click to expand...
Thinking the same few days ago...Also started the tread regarding this
www.offshorecorptalk.com

Tax Residency of USA LLC for Digital Nomad ?

Person is a non-US/EU passport holder. Person has been granted an Elite visa for Thailand, a Golden visa for Dubai, and a C321 visa for Bali. Person has registered a US LLC as a non-resident for person's web development business. Person has no employees and is a one-man show. Person has spent 3...
www.offshorecorptalk.com www.offshorecorptalk.com

Get Golden visa + spend minimum 90 days in UAE.....You are eligible to TRC....
May be this can avoid PE in UAE for USA LLC..
Marzio said:
Your're most likely correct and you gave me an idea for a (probably) even better tax structure.
Click to expand...
Can you share that structure idea ?
Thanks
 
#557
3. Notwithstanding Clauses 1 and 2 of this Article, a fixed or permanent place in the Stateshall not be considered a Permanent Establishment of a Non-Resident Person if it is usedsolely for any of the following purposes:a) Storing, displaying or delivering of goods or merchandise belonging to that Person.b) Keeping a stock of goods or merchandise belonging to that Person for the solepurpose of processing by another Person.c) Purchasing goods or merchandise or collecting information for the Non-ResidentPerson.d) Conducting any other activity of a preparatory or auxiliary nature for the NonResident Person.e) Conducting any combination of activities mentioned in paragraphs (a), (b), (c) and(d) of Clause 3 of this Article, provided that the overall activity is of a preparatoryor auxiliary nature.
Click to expand...

"Conducting any other activity of a preparatory or auxiliary nature for the Non Resident Person." do this sentence include "Conducting administrative activities in the UAE."....If it is true.....so may be USA LLC be not trigger PE
 
#559
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#560
troubled soul said:


"Conducting any other activity of a preparatory or auxiliary nature for the Non Resident Person." do this sentence include "Conducting administrative activities in the UAE."....If it is true.....so may be USA LLC be not trigger PE
Click to expand...
Due to PE regulation "non resident person" would become resident in UAE in terms of CIT
There is really no workarounds around that besides non resident has substance in foreign country (offices, employees etc)
 
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