UAE to introduce 9% corporate tax on business profits from June 1, 2023 (FZCO REMAINS 0%)

[calnana]

interesting news.. UAE to introduce 9% corporate tax on business profits from June 1, 2023

 

[Fred]

Maybe some of the UAE based Forum users here now understand why we work with Freezone Companies only - this move was expected to keep off the FATF Grey List.


---START QUOTE---

The United Arab Emirates is planning to introduce federal tax on corporate earnings for the first time, scrapping the levy-free regime that’s helped make it a magnet for businesses from across the world.

The government is set to introduce a 9% federal corporate tax on business profits from June 2023, state-run WAM news agency said on Monday. Corporate tax will not apply on personal income from employment, real estate and other investments, and incentives for free zones will continue.


---END QUOTE---

Source

https://www.bloomberg.com/news/arti...nment is set to,for free zones will continue.

 

[RealDude]

Freezone Companies are not affected, i.e. 0% CIT remains?

 

[Fred]

Freezone Companies are not affected, i.e. 0% CIT remains?

Yes - 0% - same for income tax and real estate.

 

[RealDude]

Freezone Companies need substance like an office, directors and employees?
I work alone as a freelancer…

 

[GPT]

Slowly but surely the UAE falls in line with global standards. This was to be expected.

Another source: UAE announces new tax to go into effect next year

 

[Fred]

Freezone Companies need substance like an office, directors and employees?
I work alone as a freelancer…

Yes that's why you are going with a Corporate Service Provider that get's you the necessary substance.

Slowly but surely the UAE falls in line with global standards. This was to be expected.

Another source: UAE announces new tax to go into effect next year

Luckily - they are much smarter then all the other Belize, Seychelles, Cayman etc.

Makes the UAE as a Business Environment stronger then ever before.

If thing are setup in the right way you can still achieve what everyone is looking for - 9% corporate tax to please the world but FZCO remains 0% - that's such a smart move.

 

[BlueMist]

As long as personal income stays unaffected, there are always ways to reduce the tax by paying yourself a salary, bonus, allowance or whatever else. Good to hear though it doesn’t affect free zones.

 

[Konstanz]

As long as personal income stays unaffected, there are always ways to reduce the tax by paying yourself a salary, bonus, allowance or whatever else. Good to hear though it doesn’t affect free zones.

It's clearly the effect of FATF possible grey listing.

Not exactly. If you operate business as individual you are subject to this tax.
"No corporate tax will apply on personal income from employment, real estate and other investments, or on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE."


We will see how this develop. It will be interesting to see if Freezone companies would not loose "resident" status. I image they will require stronger substance requirements. Well you have similar companies in BVI and Seychelles. They are called "international companies"

"Recognising the contribution of free zones to the UAE’s economy and competitiveness, the UAE corporate tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE."

 

[Fred]

We will see how this develop. It will be interesting to see if Freezone companies would not loose "resident" status. I image they will require stronger substance requirements. Well you have similar companies in BVI and Seychelles. They are called "international companies"

"Recognising the contribution of free zones to the UAE’s economy and competitiveness, the UAE corporate tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE."

Substance is key in this matter already and still the Company Formation grants you the Residence Visa which makes the difference especially in terms of banking compared to BVI and Seychelles.

 

[Konstanz]

Substance is key in this matter already and still the Company Formation grants you the Residence Visa which makes the difference especially in terms of banking compared to BVI and Seychelles.

Yes you can get visa, but you don't know if such Freezone company would get tax residence certificate and what those actual substance rules will be. Everything works nice until tax inspectors would ask for tax residence certificate

 

[Fred]

Yes you can get visa, but you don't know if such Freezone company would get tax residence certificate and what those actual substance rules will be. Everything works nice until tax inspectors would ask for tax residence certificate

That's off-topic but you always describe the scenario when you still have questionable substance in your home country - the majority of the people nowadays know that they have to cut as much as possible ties with there home country and to move out.

Anyway let's stick to the topic of the thread.

 

[rowena]

It looks like this is only affects companies that have income from UAE. FZ, freelance(sole trader) and DED sole proprietorship shouldn't be affected but need to wait. Lot's things will change before 2023, like their VAT or ESR introduction.

 

[CaptK]

It looks like this is only affects companies that have income from UAE. FZ, freelance(sole trader) and DED sole proprietorship shouldn't be affected but need to wait. Lot's things will change before 2023, like their VAT or ESR introduction.

Correct, profits over $100K are taxable, I'm sure everyone's expenses are going to be Sky High!!!
Substance is your most important aspect of this because you know that they will be coming for FZ companies soon.
There will be a Crypto tax coming as they will say it fall under the same rules for banking, 20% is what the banks pay.
Its time to look at Bahrain and Qatar as possible Plan B's.

I would take this as an opportunity to get set up and put as much money in the bank now before the curtain closes.

 

[calnana]

There will be a Crypto tax coming as they will say it fall under the same rules for banking, 20% is what the banks pay.

Personal crypto investments/trading at 20%? Seems unlikely.

 

[rowena]

Correct, profits over $100K are taxable, I'm sure everyone's expenses are going to be Sky High!!!
Substance is your most important aspect of this because you know that they will be coming for FZ companies soon.
There will be a Crypto tax coming as they will say it fall under the same rules for banking, 20% is what the banks pay.
Its time to look at Bahrain and Qatar as possible Plan B's.

I would take this as an opportunity to get set up and put as much money in the bank now before the curtain closes.

Even profits over $100K shouldn't be taxable for FZs or FZ-based freelance permits as longs they don't conduct business with UAE.

Substance is your most important aspect of this because you know that they will be coming for FZ companies soon.

What do you mean by substance? Residency visa or home address in UAE?

 

[Konstanz]

Even profits over $100K shouldn't be taxable for FZs or FZ-based freelance permits as longs they don't conduct business with UAE.


What do you mean by substance? Residency visa or home address in UAE?

Substance means real activity in Freezone. Real offices, real employees.
My bet it will be more difficult to get Tax Residence Certificates and local bank accounts for Free zone companies
Freezone company without tax residence certificate is nothing more than Seychelles IBC

 

[Fred]

Substance is your most important aspect of this because you know that they will be coming for FZ companies soon.

They are already in place.

I mean what more then having a Banker coming to the Office to make pictures and look around in terms of substance can be done? That's already some kind of Sh*tshow now - imagine the banker wants to sleep in your bed to check your apartment lol.

I don't see anything changing - it's not new that FZCO is thougher then Mainland for account opening and this will continue now - in difficulty lies opportunity.

 

[Konstanz]

What most people do is incorporate those Freezone companies in UAE without substance to avoid VAT ant corporate income tax in Europe while in reality owners and real operations remain in Europe.
So, I think this will end sooner or later. Either owners will have to leave or hire real persons in UAE. The same with BVI, Seychelles.
Everybody understand that even 95+% UAE ID's /residencies are just card/paper. No one live. It's just to avoid CRS

 

[Fred]

What most people do is incorporate those Freezone companies in UAE without substance to avoid VAT ant corporate income tax in Europe while in reality owners and real operations remain in Europe.
So, I think this will end sooner or later. Either owners will have to leave or hire real persons in UAE. The same with BVI, Seychelles.
Everybody understand that even 95+% UAE ID's /residencies are just card/paper. No one live. It's just to avoid CRS

@Konstanz that's simply not true - we have a very good insight.

Latest since start of COVID this has dramatically changed - believe it or not.