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UAE company advice needed

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Estek

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May 30, 2020
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#1
Hi Everyone.

Long story short. I have a business in my country and wanted to reduce my taxes on personal income. So through on person here in forum I have found a lawyer and he gave me advice to open UAE company in IFZA zone and manage my business through this company. So that I will pay 0% on my personal income.
I did it. Now I have company. But only now ( yeahh correct I am stupid ) I started to think will it be correct from UAE legislation if I just manage my business from UAE company and pay myself salary/dividends? I have no spending in UAE company, all spends care my business and I want to send significant amount of my funds to my home bank account.
So I don’t wanna fall in troubles and make UAE government thinking that I am just laundering money.
So any comments appreciated.
 
#2
do you live in the UAE or how the hell will you make it 0% on personal tax if you live outside the UAE?

I mean if you live in a country where you already pat 0% taxes then you don't need that setup, so I understand you must live in a country where you pay tax.
 
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#3
erni said:
do you live in the UAE or how the hell will you make it 0% on personal tax if you live outside the UAE?

I mean if you live in a country where you already pat 0% taxes then you don't need that setup, so I understand you must live in a country where you pay tax.
Click to expand...

You understand correctly. I was just naive when lawyer said that I will have the visa and government in my country will treat this as I have residence in Dubai


TodMca said:
Hi, there are many more aspects to think trough before sending money to your home country. The one you ask is the least one providing the business has legitimate basis and documentation..

If your IFZA company complies with Economic Substance Rules (e.g. has office rent agreement and some employees) and you are just an investor-shareholder then all is easy and straightforward. Transfer money home, get taxed on profit distributions according home country rules and all done.

However if your IFZA co. does not comply with ESR or you are single shareholder and a single employee of it and don't spend time in UAE, then upon receiving money form there your country might question if it really was managed and controlled in UAE and most likely claim that it was not the case because all of its activities were done trough your home country by you, and all of the profits generated by the company should be taxed in your home country at corporate level, before taxing the withdrawals of profits.
Click to expand...

So if I withdraw cash outside UAE the UAE Government will judge me and this will lead to more problems?
 
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#4
TodMca said:
You should be be careful about your home country investigating as per CFC rules and whether they can disregard this arrangement and tax it all as if you earned it in your home country.
Click to expand...
Sorry but here I want to get involved, it is totally naive to think that you can put something up abroad that you own or which is 95% likely that you own and believe that the tax administration in 2020 jumps on this one.

They are going to rip you apart, you get fines and you may not even escape a prison sentence. All the crap I have read about various constellations that are obviously owned by a person who lives in a country where you pay taxes but make money in an offshore company is pure fiction and theroy. I have tried it and still have pain in the back.

I am not saying that there are no constellations where it is possible to avoid personal taxation but it is not as easy as it is suggested here!
 
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#5
TodMca said:
You should not have any problems with UAE provided you have well documented legitimate business.

You should be be careful about your home country (EE?) investigating as per CFC rules and whether they can disregard this arrangement and tax it all as if you earned it in your home country.
Click to expand...

Yes EE. So as per CFC rules my home company will know (knowing) that I am having company in UAE or the UAE government send (have sent) the information to my country as per CFC rules?
 
#6
Estek said:
that I am having company in UAE or the UAE government send (have sent) the information to my country as per CFC rules?
Click to expand...
if they participate and maintain CFC your home country know the company belonging to you now!! Think about it, I would hit this guy that set the company up for you hard!
 
#7
Admin said:
Sorry but here I want to get involved, it is totally naive to think that you can put something up abroad that you own or which is 95% likely that you own and believe that the tax administration in 2020 jumps on this one.

They are going to rip you apart, you get fines and you may not even escape a prison sentence. All the crap I have read about various constellations that are obviously owned by a person who lives in a country where you pay taxes but make money in an offshore company is pure fiction and theroy. I have tried it and still have pain in the back.

I am not saying that there are no constellations where it is possible to avoid personal taxation but it is not as easy as it is suggested here!
Click to expand...

Thank you for your reply admin.
Now I see how stupid I was to think that and I really feel pain for losing $12k for incorporation + trip to UAE.
I realised that here bank system is not stupid and my deeds will lead to more pain and even prison. That’s why I wrote here and wanted to get more information of that.
It seems that ordinary people here are smarter than some “lawyer” who wants just get the money and don’t care what clients will face later.
 
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#8
Estek said:
Yes EE. So as per CFC rules my home company will know (knowing) that I am having company in UAE or the UAE government send (have sent) the information to my country as per CFC rules?
Click to expand...
Exactly.

Even if you don't take out any cash for you personally from the UAE Company, as long as you are the only person who owns the company, worst case the financial authorities in your home country will rate it as a solo entrepreneurship thing and make the whole income fully taxable.

Also I assume you spent more than 183 days in your home country this year, this will make you fully taxable this year in your home country, unless you spent already 2month outside of your home country you won't make it this year.

This leaves you with 2 options

1) If you don't have any revenue in your UAE company this year, let the company rest till next year, then move away from your home country. In case you made any revenue this year, declare it to your authorities and really get help from an professional tax consutalt / accountant
2) If you don't want to leave your home country next year, you can keep the company but you need to report it to the authorities which makes the whole thing basically useless. Best option if you don't wanna leave is close it

If you wanna move to UAE there cheaper setups than the one you currently have.
 
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#9
Estek said:
Yeah but there is also social tax 33% )
Click to expand...
Yes you pay 50% tax on your ordinary salary. Lets say 4000 EUR Per months. Thats 48.000 EUR in salary Per year and of that you will pay 24.000 EUR tax. The rest you will pay out as dividends and only pay 20% tax.
If you dont earn significantly more than 4000 eur Per month then a UAE setup is never the way, or any other setup. Its simply too expensive to relocate.
 
#10
If you have a UAE residency visa, the UAE probably won’t report anything to your home country. So as long as you don’t pay out any money to yourself, your home country won’t know about it. Probably. There are no guarantees here. Of course it’s still taxable in your home country without substance in the UAE and if you try to hide the existence of the company, that’s probably illegal.
So in theory, it could work But if they find out, you might go to jail.

UAE + Estonia generally is a bad idea. Because Estonia will charge 20% tax if you haven’t paid any tax, even if you have substance. Pay just 1% tax and Estonia will usually be cool with it:
www.offshorecorptalk.com

Tax-free residency in Estonia

I think I've mentioned it before, but today I dove a bit more into the details. The Estonian income tax act can be found here (in English). Estonia has a relatively unique system where companies only pay corporate income tax when profits are distributed. Such dividends are only taxed at the...
www.offshorecorptalk.com www.offshorecorptalk.com

But again, that will also require substance.

Are you willing to move to a different country? If not, you can choose only 2 out of 3:
[ ] cheap
[ ] legal
[ ] big tax savings
Take your pick.
 
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#11
Estek said:
There is two options:
1. I am sending the money from UAE to Estonia bank account. Sooner or later bank will start asking questions.
2. Withdraw money from UAE bank account outside UAE. Question is: What can happen the next time when I arrive to UAE? I think there is no air conditioner in the prison.
Click to expand...
2) Sooner or later your local authorities will discover that. What should happen to you when you arrive in UAE? You didn't do anything wrong there
 
#12
UAE will not care AT ALL. Your only potential issue is Estonia.
If you have a company in the UAE and you don’t send any money to your accounts in Estonia, the Estonian authorities will probably never find out. But that doesn’t mean it’s legal or advisable.
If you use a UAE debit/credit card to buy stuff outside of Estonia, nobody will care. If you use such a card in Estonia, the risk is higher.
 
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#15
What you have done isn’t illegal if you didn’t save any taxes (see 2 out of 3 above - you can check cheap and legal, $12k would still be cheap). You can generally expect that the UAE won’t care about you at all. They are happy they got your $12k.
 
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#16
JustAnotherNomad said:
What you have done isn’t illegal if you didn’t save any taxes (see 2 out of 3 above - you can check cheap and legal, $12k would still be cheap). You can generally expect that the UAE won’t care about you at all. They are happy they got your $12k.
Click to expand...

Ok. And I cannot invoice my EE company with UAE company only with some another country to hide UAE company from EE government?
You think UAE bank won’t care also about that just I withdrawing cash (not in EE)?
 
#19
Estek said:
Ok. And I cannot invoice my EE company with UAE company only with some another country to hide UAE company from EE government?
You think UAE bank won’t care also about that just I withdrawing cash (not in EE)?
Click to expand...

1. Withdraw money from EE company and pay taxes in Estonia for that money
2. Close/Dont use EE company any more
3. Fix your residency visa and move to Dubai
4. Use your Dubai company and pay no taxes on future revenue

In Dubai you can of course withdraw in cash use company card or whatever you want, its your money, no taxes = no care.
 
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