Corporate tax in UAE free zones: All you need to know
In a landmark decision on June 1, the UAE introduced corporate tax businesses operating in the country. The move is a significant step in the UAE’s efforts..
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UAE clarification of Freezone Qualifying Income
- Thread starter joffreylol
- Start date
Hey just an update. My lawyer in New York said "again, a 1099 or a LLC owned by an individual or a foreign corporation would not be liable for tax if no operations physically in the US considering your situation. Your bank interest income is also taxed in your corporations residency country and no withholdings. Branch tax also does not apply to your situation. Wyoming ownership articles of incorporation do not mention any reference to an owner and your operating agreement can say your Dubai LLC if needed. "So then you think it's fine if you just send them a W8BEN? I have no idea how big the risk of the IRS claiming there is ECI really is.
Yes, W8BEN is what's relevant, we've established that.
He is the tax lead partner at a decent law firm.
Have to put my anxiety aside and take the plunge.
That's not new information though? That's what everyone, including the lawyer I spoke to, have been saying all along?
No ECI = no US tax = no branch tax.
The risk my lawyer mentioned was that the IRS would claim that something like a meeting in the US would constitute "physical operations in the US" (ECI), and that they could get the idea "hey, maybe we can get some tax out of this guy" after seeing a 1099. If you can prove you've never even set foot on US soil, then I think one should be good. The question is how the risk would change depending on how many days one spends in the US.
Still it seems like your lawyer considers that risk negligible, which is very good to know.
No ECI = no US tax = no branch tax.
The risk my lawyer mentioned was that the IRS would claim that something like a meeting in the US would constitute "physical operations in the US" (ECI), and that they could get the idea "hey, maybe we can get some tax out of this guy" after seeing a 1099. If you can prove you've never even set foot on US soil, then I think one should be good. The question is how the risk would change depending on how many days one spends in the US.
Still it seems like your lawyer considers that risk negligible, which is very good to know.
Hello, to stay on topic…Did the UAE government clarify something else? Taxation on Freezones is confirmed then?
The regulation is even more harsh than we discussed. So, even if you do qualifying income you still pay tax if your clients are physical persons.
So all B2C will pay 9% tax
If the clients will be physical persons 9% tax> 100k profits. in any case in any activity, because B2C is excluded activity!
If B2B you can look at qualifying income
I am also going to dive into this and incorporate a business in Dubai. In my case though, I will wear my financial bulletproof vest and I will set aside 9% of the profit in case there is an attempt at clawing taxes from me. I suggest we all create a piggybank with 9% labeled "9% Dubai taxes".
Let's face it, this 9% tax was NOT put into effect as a BENEFIT to us or to attract more business, so it's safe to accept that nothing is being done and nothing will be done for our benefit. It's better to be safe than sorry.
very true, 9% is still the lowest corporate tax worldwide as I know of.Let's face it, this 9% tax was NOT put into effect as a BENEFIT to us or to attract more business, so it's safe to accept that nothing is being done and nothing will be done for our benefit. It's better to be safe than sorry.
Many have zero. Aside from them, you have for example 5% in Malta (after tax rebate) and in Barbados is starts at 5.5% and goes down to 1% for income above 30 million BBD.
How about the small business relief? Up to 3 mil AED (and if the net earnings are under 375k AED - for example 2.7m of costs or dividends), what are the benefits? No accounting?
I'm not aware of any list on this forum which contains a list of jurisdictions with zero corporate tax. But it's not hard to find such lists elsewhere.
List of countries by tax rates - Wikipedia
Sort by Corporate Tax ascending. Verify findings by checking reputable sources.
Then there are places with territorial taxation or subnational divisions which have a different tax system from the country they're in.
If you have any specific questions or want to go into this in more detail, let's take it up in a separate thread. Don't want to derail this one too much.
Thanks for your answers. My only remaining questions:
- audit are now required every year ? Even for businesses under 100k profit (0% tax) ?
- To be considered fiscal resident, do we need to be in Dubai 183 days a year or only 90 ?
Thanks
- audit are now required every year ? Even for businesses under 100k profit (0% tax) ?
- To be considered fiscal resident, do we need to be in Dubai 183 days a year or only 90 ?
Thanks
So now, after these informations even if we have only customer in Europe not any client in GCC country and we have Free Zone company we are eligible to pay the 9% corporate taxe if benefits > 100k ?
What a time to live in a desert .. thinking about some new destination lol
What a time to live in a desert .. thinking about some new destination lol
They should now rename free zones to something like paid zone or sh*t zone or building ship zone or something else to reflect the reality
There is no sense anymore to own a free zone company, it’s same like Mainland company, you just have difficulty to open bank account now
I hope we will have more clarifications like « first 3 years you don’t have to pay anything »
EDIT : Now process to pay low tax is: Pay high salary and not exceed 375K AED benefits
For exemple I make 2.000.000 AED by a year, I’m giving a salary of 1.900.000 to myself I don’t have more than 375k benefits in my company so I don’t have to pay tax right ?
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What a mess, the only real good thing this desert had were free zones with a straightforward 0% tax environment - no question asked.
When you opened a free zone company they advertised it as a 50-year 0% tax entity guaranteed by the free zone authority and now we see this huge chaos.
UAE seems not that reliable anymore and they aren't doing anything to stop all these rumors and no sense.
When you opened a free zone company they advertised it as a 50-year 0% tax entity guaranteed by the free zone authority and now we see this huge chaos.
UAE seems not that reliable anymore and they aren't doing anything to stop all these rumors and no sense.
You cannot pay the salary you want. It has to be within certain limits and reasonable according to the standards otherwise it will be seen as a way to artificially erode and decrease the tax base (it is also written in the law).
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