UAE FZ TO MAINLAND TRANSFER REVENUE

[iansommersault]

Hi all, new here.

I'm currently in the process of forming a FZ company doing ecommerce, marketing, consulting and IT sercvices. (have my eyes on DIC, open to suggestions where you think is best)

My brother has a mainland company.

Wondering how or what way can we share/transfer profits/revenue in a safe and legal way between both companies.

My FZ will have more profits so money will most likely come from there.

Thanks in advance for any answers/help.

 

[overnbeyond]

Hi all, new here.

I'm currently in the process of forming a FZ company doing ecommerce, marketing, consulting and IT sercvices. (have my eyes on DIC, open to suggestions where you think is best)

My brother has a mainland company.

Wondering how or what way can we share/transfer profits/revenue in a safe and legal way between both companies.

My FZ will have more profits so money will most likely come from there.

Thanks in advance for any answers/help.

1- any particular reason to incorporate in DIC besides being an ICT hub?
2- what is the purpose of transfering profit to a different company FZ and the mainland?

 

[iansommersault]

1- any particular reason to incorporate in DIC besides being an ICT hub?
2- what is the purpose of transfering profit to a different company FZ and the mainland?

Hi, my FZ is an ecommerce business plus my home is near to it. any FZ suggestions if your business is mostly digital?

We will be expanding the mainland business and I want to fund that. We'll be adding more services and probably real estate under that LLC.

Thanks!

 

[overnbeyond]

Hi, my FZ is an ecommerce business plus my home is near to it. any FZ suggestions if your business is mostly digital?

We will be expanding the mainland business and I want to fund that. We'll be adding more services and probably real estate under that LLC.

Thanks!

Ok, so you plan to work from the FZ hub and use the business center?
E-commerce has been considered high risk, I would pick something in the same sense but not e-commerce to easily get your banking application approved.
The Mainland can act as an agent for your FZ, which shouldn't be an issue, you can't mix different categories of activities in the same license like real estate and dental practices, some activities require third-party approval from the government/authorities like the real estate regulatory agency

 

[iansommersault]

Ok, so you plan to work from the FZ hub and use the business center?
E-commerce has been considered high risk, I would pick something in the same sense but not e-commerce to easily get your banking application approved.
The Mainland can act as an agent for your FZ, which shouldn't be an issue, you can't mix different categories of activities in the same license like real estate and dental practices, some activities require third-party approval from the government/authorities like the real estate regulatory agency

Hi @overnbeyond .

thank you so much for your replies. I really appreciate it.
We may get a service desk or a co working space as a lot of this FZ offer that.
You're right, I wouldn't say e-commerce in my list of activities on my trade license. Actually, we mostly provide IT infra, web design, etc. to our clients so I will most likely put that. What can you say? we do marketplace or ecommerce on the side only.

If the mainland would act as an agent to my FZ, will there be taxes involved like VAT and the upcoming CT?

I understand your point on the real estate and that just makes sense, thank you for that.

 

[Gediminas]

Hi all, new here.

I'm currently in the process of forming a FZ company doing ecommerce, marketing, consulting and IT sercvices. (have my eyes on DIC, open to suggestions where you think is best)

My brother has a mainland company.

Wondering how or what way can we share/transfer profits/revenue in a safe and legal way between both companies.

My FZ will have more profits so money will most likely come from there.

Thanks in advance for any answers/help.

Hey,

Until now UAE did not have a corporate income tax, which will apply to mainland companies. It means that previously you could conclude almost any kind of cooperation agreement and simply pay for management fees or other services. Since both companies were not taxable, tax authorities basically were not interested in these payments and you can shift profits easily. On the other hand VAT on services is applied, but generally, it is fully deductible (depending on the activities of the company).

When corporate income tax is introduced there will be not so easy to pay funds from one UAE company (mainland) to another (especially in a free zone that is not subject to tax). The precise model can be designed only knowing all circumstances.

 

[rowena]

No one knows the rules because they're not announced yet but if you don't have a very high income then you can easily optimize your tax by paying a salary to yourself. Salaries are tax-free and I believe you can pay yourself $40-$50K per month without any problems and the same can be payable to your brother. This way you can get out $1.2M($600K salary * 2 people) of the company by paying 0% tax.

 

[iansommersault]

Hey,

Until now UAE did not have a corporate income tax, which will apply to mainland companies. It means that previously you could conclude almost any kind of cooperation agreement and simply pay for management fees or other services. Since both companies were not taxable, tax authorities basically were not interested in these payments and you can shift profits easily. On the other hand VAT on services is applied, but generally, it is fully deductible (depending on the activities of the company).

When corporate income tax is introduced there will be not so easy to pay funds from one UAE company (mainland) to another (especially in a free zone that is not subject to tax). The precise model can be designed only knowing all circumstances.

Hi @Gediminas , thank you for replying!

Can you cite an example of that agreement betweeen both companies? What scheme options can I choose from? You can dm me your thoughts if you prefer.

I agree with you on the last part when CIT will be implemented.

Thanks again for your reply.

 

[Gediminas]

Hi @Gediminas , thank you for replying!

Can you cite an example of that agreement betweeen both companies? What scheme options can I choose from? You can dm me your thoughts if you prefer.

I agree with you on the last part when CIT will be implemented.

Thanks again for your reply.

Welcome!

If activities are similar in nature, it might be a profit share agreement. Also management services or similar kinds of agreement depending on the business of both companies.

I hope this helps. In case you need help with legal agreements, we can prepare them for you.

Drop me an email if so.

 

[overnbeyond]

Hi @overnbeyond .

thank you so much for your replies. I really appreciate it.
We may get a service desk or a co working space as a lot of this FZ offer that.
You're right, I wouldn't say e-commerce in my list of activities on my trade license. Actually, we mostly provide IT infra, web design, etc. to our clients so I will most likely put that. What can you say? we do marketplace or ecommerce on the side only.

If the mainland would act as an agent to my FZ, will there be taxes involved like VAT and the upcoming CT?

I understand your point on the real estate and that just makes sense, thank you for that.

BTW, DIC requires an annual audit of financial records to be submitted annually.

 

[iansommersault]

No one knows the rules because they're not announced yet but if you don't have a very high income then you can easily optimize your tax by paying a salary to yourself. Salaries are tax-free and I believe you can pay yourself $40-$50K per month without any problems and the same can be payable to your brother. This way you can get out $1.2M($600K salary * 2 people) of the company by paying 0% tax.

Hi @rowena , Thank you for your reply! I have thought of this too, and I think it may be the easiest. I am just trying to think of any possible complications regarding this. Do you think of any?

 

[iansommersault]

BTW, DIC requires an annual audit of financial records to be submitted annually.

I was just told by one of their local development managers that it is not mandatory for them. It is highly recommended to keep audit reports but not submitted. I can confirm that from her.

 

[rowena]

Hi @rowena , Thank you for your reply! I have thought of this too, and I think it may be the easiest. I am just trying to think of any possible complications regarding this. Do you think of any?

CT rules are still not announced so we don't know but I'm pretty sure there will be no complications because a $40-50K salary is very common for managers and C level employees in UAE.

I was just told by one of their local development managers that it is not mandatory for them. It is highly recommended to keep audit reports but not submitted. I can confirm that from her.

Actually, FZ audit requirement will not be important anymore because if you want to benefit from 0% CT for your FZ company then you must have audited financials.

 

[iansommersault]

CT rules are still not announced so we don't know but I'm pretty sure there will be no complications because a $40-50K salary is very common for managers and C level employees in UAE.


Actually, FZ audit requirement will not be important anymore because if you want to benefit from 0% CT for your FZ company then you must have audited financials.

Hi rowena,

ok that's amazing. thank you.

Since you're here now, i have a question on the topic below. perhaps you have some thoughts about it. if you have any, please you may reply. thank you so much.


There is no EMI or bank that really supports crypto P2P - All Lies

 

[overnbeyond]

I was just told by one of their local development managers that it is not mandatory for them. It is highly recommended to keep audit reports but not submitted. I can confirm that from her.

Accounting is mandatory for license renewal.

 

[rowena]

Hi rowena,

ok that's amazing. thank you.

Since you're here now, i have a question on the topic below. perhaps you have some thoughts about it. if you have any, please you may reply. thank you so much.



There is no EMI or bank that really supports crypto P2P - All Lies

Sorry, I have no idea about anything crypto-related.

 

[iansommersault]

Accounting is mandatory for license renewal.

Alright I understand now. Thank you for this.

I also saw your reply about my question in the other topic. thanks for that. I have a follow up tho, is you wallet linked to a local bank here? How do you encash the crypto? Or do you use nexo? Thanks!

 

[overnbeyond]

Alright I understand now. Thank you for this.

I also saw your reply about my question in the other topic. thanks for that. I have a follow up tho, is you wallet linked to a local bank here? How do you encash the crypto? Or do you use nexo? Thanks!

There is no link between your wallet and your bank account, this is pretty much on the exchange side that your name must match the same name with your bank account if that's what you mean.
There are a few ways that might work for you and not for others; which bank account and type do you have in uae? crypto exchange? Amount to cash out? can you explain the source of funds, like trading records/history?
few months back, binance suspended transfers with RAK bank in UAE; however, you still could have withdrawn fiat using a different swift route, and the money would have landed in your RAK account
if you are doing something 6 figures + and the source is not cleared within the specified period, the transaction monitoring team will flag the account, and if the source is crypto, STR issued straight away.
you need to keep in mind what works today might not tomorrow.

 

[USDT]

No one knows the rules because they're not announced yet but if you don't have a very high income then you can easily optimize your tax by paying a salary to yourself. Salaries are tax-free and I believe you can pay yourself $40-$50K per month without any problems and the same can be payable to your brother. This way you can get out $1.2M($600K salary * 2 people) of the company by paying 0% tax.

Hi rowena,

is it safe to pay similar or larger amounts as dividends (in addition to salary)?

 

[rowena]

Hi rowena,

is it safe to pay similar or larger amounts as dividends (in addition to salary)?

What do you mean by safe? Paying dividends is standard practice for business owners.