UAE corporate tax from 2024 and reporting incomes of foreign entities

[Alenka]

We have been discussing UAE 9% corporate tax which will be effective on 1st June, and my lawyer told me “If the entity registered BEFORE June 1 2023, then your tax year will begin from 2024 year, so that all 2023 without tax”

Examples: ● A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023). ● A business that has a financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023).


Is it true correct the corporate tax will be actually effective from 1 January 2024 and first time companies will have to pay taxes is period of
1 January 2024 - 31 December 2024?
————————

Second question:
Also, for the owners who operate their business through US LLC but want to live in the UAE - is it okay to bring statements from the US LLC to UAE tax officer and audit those statements with UAE auditor to pay 9% UAE tax without forming legal entity in the UAE?

Because for me it seems strange: I have always been thinking that you need to register your entity according to local laws, otherwise it’s illegal entrepreneur activity.
Because of UAE earning a lot of money from issuing licenses it seems strange that you can do business without getting the expensive license just by forming entity in the US.

 

[JustAnotherNomad]

Is it true correct the corporate tax will be actually effective from 1 January 2024 and first time companies will have to pay taxes is period of
1 January 2024 - 31 December 2024?

Don't think so. @Fred should know more.

Also, for the owners who operate their business through US LLC but want to live in the UAE - is it okay to bring statements from the US LLC to UAE tax officer and audit those statements with UAE auditor to pay 9% UAE tax without forming legal entity in the UAE?

I think nobody knows. To be honest, if you do a lot of business in the UAE, I would register a freezone branch of the LLC to be sure. There are some freezones where this is quite cheap. If you don't need access to banking, it should work fine. And if you have local presence, then even banking might work.
But to be honest, I can't imagine they will come after US LLCs anytime soon if you don't have UAE clients. But who knows...

Because for me it seems strange: I have always been thinking that you need to register your entity according to local laws, otherwise it’s illegal entrepreneur activity.
Because of UAE earning a lot of money from issuing licenses it seems strange that you can do business without getting the expensive license just by forming entity in the US.

Exactly. I always found that extremely strange. Previously it was only license income, but now with CIT they have a real incentive to go after these companies.
I'm really frustrated that it's impossible to get a clear answer about such things in the UAE. I find the unclear legal framework a much bigger obstacle to doing business in the UAE than the CIT. How are you supposed to run a business when you never know if you're compliant or just flying under the radar?

 

[JustAnotherNomad]

UAE corporate tax: Why it pays to get ahead of potential requirements as deadline nears

Businesses must have an external audit conducted for the 12-month period before June 1, when the tax will be implemented

www.thenationalnews.com

Written by a partner in an accounting firm though...

 

[Alenka]

UAE corporate tax: Why it pays to get ahead of potential requirements as deadline nears

Businesses must have an external audit conducted for the 12-month period before June 1, when the tax will be implemented

www.thenationalnews.com

Written by a partner in an accounting firm though...

It means no one knows yet. Just need to wait for further updates from the tax authorities, may be they will upload them shortly, 1 June is really close.

 

[JackAlabama]

It means no one knows yet. Just need to wait for further updates from the tax authorities, may be they will upload them shortly, 1 June is really close.

David Daly is a partner at the Gulf Tax Accounting Group in the UAE.
Sales incentive right there.

 

[JustAnotherNomad]

David Daly is a partner at the Gulf Tax Accounting Group in the UAE.
Sales incentive right there.

Yes, like I wrote...

 

[JackAlabama]

Yes, like I wrote...

Yah, most of these articles seem to be sales pitches.

 

[Fred]

UAE corporate tax: Why it pays to get ahead of potential requirements as deadline nears

Businesses must have an external audit conducted for the 12-month period before June 1, when the tax will be implemented

www.thenationalnews.com

Written by a partner in an accounting firm though...

That's what we warn about.

Basically they just say nothing beside of "better pay us to be on the safe side".

Just had last week another call about this and while even some Freezones making claims like "we did negotiate with the UAE Government that our Freezone remains Tax Free" the reality is that most likely nothing is ready on the 01.06.2023 and we know as much as we know today.

I wouldn't be surprised if the "high table" is still undecided - they are not stupid and do know - if they make the wrong move - it's going downhill - just with tourism they can't hold things on the current level - not to talk about a raising economy.

 

[JustAnotherNomad]

Is it true correct the corporate tax will be actually effective from 1 January 2024 and first time companies will have to pay taxes is period of
1 January 2024 - 31 December 2024?

According to the UAE Federal Tax Authority, this is actually the case.
From what I understood, corporate income tax will be due only for "full" financial years.
So for a company with a financial year of January-December, corporate income tax will only apply from January 2024. The first corporate income tax payment would then be due by the end of September 2025 in such a case.

 

[bnpsu]

For US LLC - could one stay just 3 months to get personal tax residency, then operate the US LLC in another country without CFC rules?

 

[JustAnotherNomad]

For US LLC - could one stay just 3 months to get personal tax residency, then operate the US LLC in another country without CFC rules?

Sigh.

1. CFC rules are rarely relevant. There are many other rules that apply. Just because a country doesn't have CFC rules doesn't mean you don't pay taxes if you live there (Switzerland is an example).
2. If the country where you really live wants to tax you, then they won't give two shits about some piece of paper from another country. A tax residency certificate is not a magical get-out-of-jail-free card.
3. If the country where you really live doesn't want to tax you, then why would you care so much about UAE tax residency?

Doesn't make sense.

 

[Konstanz]

It depends on many circumstance, about previous residence, citizenship, business activity. Real situation. Where you would live in reality etc

 

[TheCryptoAnt]

Sigh.
[...]

This 100 times.

Assess your surroundings first, then plan your taxes around said assessment.

For example theres a bunch of crypto people in Thailand, and while the country is cool and all most are there cause the government lets them be, not because theres no cap gains taxes/crypto taxes

 

[bnpsu]

This 100 times.

Assess your surroundings first, then plan your taxes around said assessment.

For example theres a bunch of crypto people in Thailand, and while the country is cool and all most are there cause the government lets them be, not because theres no cap gains taxes/crypto taxes

Hmm in the case of Thailand and crypto, you could use a foreign corp like a US LLC to legally avoid taxes no? Since it’s territorial any gains you bring in the next year once distributed is tax free. If you own the crypto yourself, then it should be taxed..

Sigh.

1. CFC rules are rarely relevant. There are many other rules that apply. Just because a country doesn't have CFC rules doesn't mean you don't pay taxes if you live there (Switzerland is an example).
2. If the country where you really live wants to tax you, then they won't give two shits about some piece of paper from another country. A tax residency certificate is not a magical get-out-of-jail-free card.
3. If the country where you really live doesn't want to tax you, then why would you care so much about UAE tax residency?

Doesn't make sense.

Yes, you’re right - sorry, i should mention a country with CFC and territorial tax system - like Thailand or Panama.

 

[JustAnotherNomad]

You understood absolutely nothing. Not sure what else I could write to help you understand.

Every country makes its own laws and chooses how it applies them. I know next to nothing about Thailand and Panama, and I can already tell you that their tax code is extremely different. So pretending like they're the same is ridiculous. Even France has territorial taxation - think you don't pay taxes in France, as long as you bill through a US company?

Like I said, if they want to tax you, they will. If not, then why care about the tax residency certificate, unless there's something specific in that country's rules that would require you to have it? If Thailand is cool with you living there and not paying taxes (which, btw, probably violates the letter of the law), as long as you don't remit the money to Thailand the same year - why would you need a TRC from the UAE? Just set up your US LLC or UK LLP or whatever and enjoy your tax free life.

But if you live in France, then good luck trying to convince them you shouldn't pay tax for your US LLC because you have a piece of paper from Dubai.
And PLEASE don't mention CFC rules again and rather look up what permanent establishment is.

 

[TheCryptoAnt]

Hmm in the case of Thailand and crypto, you could use a foreign corp like a US LLC to legally avoid taxes no? Since it’s territorial any gains you bring in the next year once distributed is tax free. If you own the crypto yourself, then it should be taxed..

nobody cares g and nobody is checking nothing. This is what I mean by 'assess your surroundings first'

look up what permanent establishment is.

do this @bnpsu