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

[karishi]

"Mahar Afzal is a managing partner at Kress Cooper Management Consultants. The above is not an official but a personal opinion of the writer based on the UAE corporate tax law. For any queries/clarifications, please write to him at [email protected]"

And he doesn't appear to have a clear grasp on the subject, I hope this article was written by an underpaid intern. AFAIK not much is clear so far on how things will work, but freezones should be unaffected

 

[Fred]

"Mahar Afzal is a managing partner at Kress Cooper Management Consultants. The above is not an official but a personal opinion of the writer based on the UAE corporate tax law. For any queries/clarifications, please write to him at [email protected]"

All Marketing

And he doesn't appear to have a clear grasp on the subject, I hope this article was written by an underpaid intern. AFAIK not much is clear so far on how things will work, but freezones should be unaffected

That's it.

 

[zzzzzz]

And he doesn't appear to have a clear grasp on the subject, I hope this article was written by an underpaid intern. AFAIK not much is clear so far on how things will work, but freezones should be unaffected

I got all information on official website:

https://mof.gov.ae/corporate-tax/

 

[Marzio]

WTF is qualifying income?

 

[hireblade89]

WTF is qualifying income?

Probably it is income which is not sourced from mainland, I read somewhere that if a Freezone has income from UAE mainland that income will be subject to CT so here they want to make a different between foreign income and UAE sourced income, probably.

On the first line in fact it says: "A Free Zone Person that is Qualifying Free Zone Person can benefit from a preferential Corporate Tax rate of 0% on their "Qualiying Income""

 

[Marzio]

I read somewhere that if a Freezone has income from UAE mainland that income will be subject to CT so here they want to make a different between foreign income and UAE sourced income, probably.

So income accrued by a freezone entity is considered foreign sourced income and foreign sourced income is qualifying income.

Now, what if i have a freezone entity that sells services to another freezone entity?

Would that income still be considered foreign sourced income? @Fred

 

[hireblade89]

So income accrued by a freezone entity is considered foreign sourced income and foreign sourced income is qualifying income.

Now, what if i have a freezone entity that sells services to another freezone entity?

Would that income still be considered foreign sourced income? @Fred

Transactions between free zones should be out of the scope of CT, but let’s wait the opinion of a more experience person regarding this matter.

 

[Larin]

WTF is qualifying income?

According to this page Qualifying income is any income receieved by the Qualifying Free Zone Person (which is defined as any freezone company, barring exceptions). UAE: Key highlights of the corporate tax law.

I would imagine that gets redefined as any income received from outside of UAE in the future.

 

[Marzio]

Qualifying income is any income receieved by the Qualifying Free Zone Person

So you are a qualifying free zone person if you receive qualifying income and qualifying income is any income.

I love how those emirates think about business.

 

[Larin]

So you are a qualifying free zone person if you receive qualifying income and qualifying income is any income.

I love how those emirates think about business.

I think its more like you are a qualifying free zone person if you have substance in the UAE and any income you receive is qualifying income, which just happens to be 0% taxed. As the article mentions the definition of qualifying income will probably be amended, otherwise all income of a free zone person would be outside of the scope of CT, which I suppose is what people in this thread have been saying all along...

 

[Marzio]

if you have substance in the UAE

Do anyone have a clue on which are minimal substance requirements?

 

[Larin]

Do anyone have a clue on which are minimal substance requirements?

There is a whole tutorial on this: https://mof.gov.ae/economic-substance-regulations/

Also here: Insights into the UAE Economic Substance Regulations

Although from my reading economic substance is only required for some activities. But, as noted above you will need substance to open a bank account anyway.

 

[Martin Everson]

"Mahar Afzal is a managing partner at Kress Cooper Management Consultants. The above is not an official but a personal opinion of the writer based on the UAE corporate tax law. For any queries/clarifications, please write to him at [email protected]"

So are you disagreeing or agreeing with article?

 

[JackAlabama]

So are you disagreeing or agreeing with article?

I Cannot say. I have no opinion on the article.
It is a personal opinion, which is whatever personal opinions are.

 

[Martin Everson]

I Cannot say. I have no opinion on the article.
It is a personal opinion, which is whatever personal opinions are.

Your totally right. KPMG and PWC also give personal opinions. I think there is a lot of personal opinion out there .

 

[Fred]

Probably it is income which is not sourced from mainland, I read somewhere that if a Freezone has income from UAE mainland that income will be subject to CT so here they want to make a different between foreign income and UAE sourced income, probably.

On the first line in fact it says: "A Free Zone Person that is Qualifying Free Zone Person can benefit from a preferential Corporate Tax rate of 0% on their "Qualiying Income""

Correct.

So income accrued by a freezone entity is considered foreign sourced income and foreign sourced income is qualifying income.

Now, what if i have a freezone entity that sells services to another freezone entity?

Would that income still be considered foreign sourced income? @Fred

Freezone to Freezone - no UAE Mainland sourced income - 0% CT.

So you are a qualifying free zone person if you receive qualifying income and qualifying income is any income.

I love how those emirates think about business.

I'm surprised that still so many guys are surprised about this fact - it's "good global standard" eye wishing "we are with OECD and FATF" bla bla bla.

Not to talk about the actual law enforement of CT - never seen expats getting pissed of by the UAE GoV who actually bring in all the money and forming the whole UAE real estate etc.

 

[bamboozlethemall]

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

UAE’s Tax-Free Allure Dims With New Corporate Profit Levy

The United Arab Emirates will impose a federal levy on corporate earnings for the first time next year, as it dismantles a tax-free regime that’s made it a magnet for global business but drawn scrutiny over transparency.

www.bloomberg.com

Hi Fred for a freelancer under one of the FZCOs will my income be taxed or it wont be?

 

[Dandyline]

Hi Fred for a freelancer under one of the FZCOs will my income be taxed or it wont be?

If your income is foreign sourced and you do proper bookkeeping and audit, then no tax.

 

[Bill D]

I am trying to understand, if Online Day Traders (trading on online brokers, securities, cryptos...), trading their own assets (in their personal capacity) will have to pay the 9% CT ?

In the new Decree they define :

https://mof.gov.ae/wp-content/uploads/2022/12/Federal-Decree-Law-No.-47-of-2022-EN.pdf

Business : « any activity conducted regularly on an ongoing and independant basis by any Person and in any location, such as industrial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible assets »



Business activity : « any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of Business »



So it would mean someone who Trade actively own assets would fit in this definition



However following to that the FAQ published by MOF says about Natural persons seems to contradict that point:

https://mof.gov.ae/corporate-tax-faq/



« UAE and foreign individuals will not be subject to UAE CT on dividends, capital gains and other income earned from owning shares or other securities in their personal capacity »
does it fit if you actively trade these ?


Corporate Tax in the UAE—Are You Ready? (Part 1)



The analyst in this article :said even though it is not 100% sure, that business which should be taxed should be these requiring a licence, but day trading your own assets (securities, cryptos) do not require a licence.



It seems there is a difference between natural persons and business on CT, but they did not decide which natural person will be shielded from that tax :"The Cabinet shall, upon a suggestion of the Minister and in coordination with the relevant competent authorities, issue a decision specifying the categories of Business or Business Activity conducted by a resident or non-resident natural person that are subject to Federal Decree-Law No. 47 of 2022 - Unofficial translation 15 Corporate Tax under this Decree-Law."

If you need to pay 9% on trading your own assets, with all the risks and audits necessities it bring it makes it not attractive.



Do you think this tax applies to natural persons resident who actively/regularly trade their own assets ? (securities, crypto, futures, …)

In case yes, how is the starting date going to be determined as there is no personnal income tax return currently, will it be &st january 2024 or 1st June 2023 ?

 

[Fred]

Hi Fred for a freelancer under one of the FZCOs will my income be taxed or it wont be?

FZCO remain 0% Tax.