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

[Martin Everson]

"The writer is Managing Director of AskPankaj Tax Advisors."

Paid advertising.

Whats your point here? Tax professionals can't publish paid for adverts in media?

Is there anything incorrect or not credible about what he said out of interest?

 

[A1988]

Whats your point here? Tax professionals can't publish paid for adverts in media?

Is there anything incorrect or not credible about what he said out of interest?

Dear Mr Martin Everson, since Mr Fred from DLS dubai is questioning the credibility of AskPankaj Tax advisors as a paid advert on gulf news. If you could please confirm if Mr Fred or DLS Dubai is doing paid advertisement on offshore Corp talk too?

your "trusted Accountant" in Deira / Bur Dubai is always available to take your money

Dear Fred, with all due respect you are insulting the indian guy by using this statement without providing any rebuttal or facts to support your argument? How can you say it will be 0% corporate tax for FZCO when there is still no clarification on qualifying income for freezone companies?

I have read the white paper word by word on the fta website, it doesn't treat freezone company as an offshore company atleast in the white paper published.

Page No. 16 of the corporate tax law from the Federal tax authority of UAE website.

 

[Fred]

Dear Mr Martin Everson, since Mr Fred from DLS dubai is questioning the credibility of AskPankaj Tax advisors as a paid advert on gulf news. If you could please confirm if Mr Fred or DLS Dubai is doing paid advertisement on offshore Corp talk too?


Dear Fred, with all due respect you are insulting the indian guy by using this statement without providing any rebuttal or facts to support your argument? How can you say it will be 0% corporate tax for FZCO when there is still no clarification on qualifying income for freezone companies?

I have read the white paper word by word on the fta website, it doesn't treat freezone company as an offshore company atleast in the white paper published.

Page No. 16 of the corporate tax law from the Federal tax authority of UAE website.
View attachment 4647

Sorry when you missed the private invitation event the FTA was hosting in the Dubai Marina couple of weeks ago.

I had the pleasure being there with the CFO of a bigger company who got invited.

You will see - don't worry.

 

[A1988]

Sorry when you missed the private invitation event the FTA was hosting in the Dubai Marina couple of weeks ago.

I had the pleasure being there with the CFO of a bigger company who got invited.

You will see - don't worry.

That's great, attend a few more private events then maybe you will be able to answer my questions in a more professional and mature way.

P.S Neither am I a CFO or an accountant or a tax consultant, I am just an entrepreneur who raised and asked you valid questions which any business owner would ask in this forum. You just proved your credibility with that reply. Thankyou and goodluck.

Sorry when you missed the private invitation event the FTA was hosting in the Dubai Marina couple of weeks ago.

I had the pleasure being there with the CFO of a bigger company who got invited.

You will see - don't worry.

Every employee needs to be trained to reach a certain respectable level, I believe you have started on the right track lol

Let me show you today what a paid advert looks like lol

 

[JackAlabama]

That's great, attend a few more private events then maybe you will be able to answer my questions in a more professional and mature way.

P.S Neither am I a CFO or an accountant or a tax consultant, I am just an entrepreneur who raised and asked you valid questions which any business owner would ask in this forum. You just proved your credibility with that reply. Thankyou and goodluck.


Every employee needs to be trained to reach a certain respectable level, I believe you have started on the right track lol

Let me show you today what a paid advert looks like lol
View attachment 4648

idk whats up with you, but @Fred delivered quite accurate and actionable advice here regarding UAE over quite a long period of time already.

Thats quite the difference compared to just a paid article in xyz-newspaper.

 

[A1988]

idk whats up with you, but @Fred delivered quite accurate and actionable advice here regarding UAE over quite a long period of time already.

Thats quite the difference compared to just a paid article in xyz-newspaper.

Nothings up with me, I don't think I posted anything that is wrong, I asked simple questions, you cannot demean another service provider by saying its a paid advert when you are doing the same thing here. If the Indian guy is saying something that is wrong kindly point it out rather than falsely claiming that someone is a CFO etc etc.

idk whats up with you, but @Fred delivered quite accurate and actionable advice here regarding UAE over quite a long period of time already.

Thats quite the difference compared to just a paid article in xyz-newspaper.

Look, let's stick to the topic rather than making personal or insulting statements which are completely useless, I'm a resident of dubai myself and interested to know the happenings or discussing the way forward about a lot of things. Goodluck

 

[algotrader]

Well, the reality is that everything related to the 0% FZ exemption is pure speculation at the moment and nobody can give a definitive answer until the "cabinet decision" is published (with just 2 months left until the new tax comes into force).
The best description of the situation I have found so far is from BDO:

The CT Decree–Law confirms that free-zone entities will be subject to CT at the zero-rate subject to certain conditions, as follows:

1. Maintaining adequate substance in the UAE – More clarity on this concept is expected in Regulations/Cabinet Decisions. The guidance from the existing economic substance regulations might indicate what will be required but at this stage, we should not assume the tests will be the same.
2. Earning Qualifying Income – Unfortunately, the Decree-Law does not give details of what is meant by “qualifying income.” This will be addressed in a Cabinet Decision, which is yet to be published. However, taking a cue from the public consultation paper, qualified income could be limited to income sourced from the same or other free zones or from outside the UAE. If the free zone business has both qualifying and non-qualifying income, the non-qualifying profits will be potentially liable to the 9% CT, subject to the normal rules.
3. Electing to be liable to CT – Free zone relief appears to be optional. Thus, subject to the regulatory allowances, free zone businesses can opt to be taxable. For example, free zone companies might elect to be liable to the normal CT rates in order to be eligible to join a tax group (which may be established under the new regime).
4. Complying with the Decree-Law requirements for transfer pricing – Along with the condition of establishing substance in the UAE, it will be necessary to have a transfer pricing policy and documentation to establish that transactions with UAE-based free zone-related businesses are carried out on arm’s length terms.
5. Other conditions – In addition to the above, the Decree-Law provides that the Minister can prescribe additional conditions.

If a qualifying person ceases to satisfy conditions at any time, they will be treated as ceasing to be a qualifying person from the beginning of that tax period.

Cabinet Decisions are expected to iron out the nuances of applying for a CT exemption, but an area that remains open is the impact of the OECD Pillar 2.0 proposals on UAE CT. As yet, there is no indication of how and when the UAE will implement the Pillar 2.0 proposals, which may result in some multinational corporations operating in the UAE being liable to a higher rate of CT. Therefore, it will be interesting to see how UAE free zone business will be treated from an OECD Pillar 2.0 perspective.

BDO Corporate Tax News Issue 65 - Feb 2023

UNITED ARAB EMIRATES - Decree-Law clarifies tax treatment of free zone businesses

www.bdo.global

So, this is not just about the source of income but a FZ company needs also to meet other conditions such as economic substance to qualify for 0%. Whether this is just about having an office, having a director or BO with residency or tax residency in the UAE or even a requirement to hire a local employee remains undetermined.
And then there is point 5 ("Other conditions"): The minister can "prescribe" additional conditions.
To me this looks like it got drafted like this to see the reactions of OECD and EU and being able to amend it quickly with further conditions should UAE be put on blacklists (as has happened).

 

[JackAlabama]

Nothings up with me, I don't think I posted anything that is wrong, I asked simple questions, you cannot demean another service provider by saying its a paid advert when you are doing the same thing here. If the Indian guy is saying something that is wrong kindly point it out rather than falsely claiming that someone is a CFO etc etc.

Just that its exactly not the same thing.
Fred has countless posts and statements here. And most (if not all?) were proven to be correct and actionable advice.

Whereas that cannot be claimed from that other guy, which I have no idea how they work and have my already formed opinion on it.

Look, let's stick to the topic rather than making personal or insulting statements which are completely useless, I'm a resident of dubai myself and interested to know the happenings or discussing the way forward about a lot of things. Goodluck

Then you know the usual way of how things work....

Well, the reality is that everything related to the 0% FZ exemption is pure speculation at the moment and nobody can give a definitive answer until the "cabinet decision" is published (with just 2 months left until the new tax comes into force).
The best description of the situation I have found so far is from BDO:

BDO Corporate Tax News Issue 65 - Feb 2023

UNITED ARAB EMIRATES - Decree-Law clarifies tax treatment of free zone businesses

www.bdo.global

So, this is not just about the source of income but a FZ company needs also to meet other conditions such as economic substance to qualify for 0%. Whether this is just about having an office, having a director or BO with residency or tax residency in the UAE or even a requirement to hire a local employee remains undetermined.
And then there is point 5 ("Other conditions"): The minister can "prescribe" additional conditions.
To me this looks like it got drafted like this to see the reactions of OECD and EU and being able to amend it quickly with further conditions should UAE be put on blacklists (as has happened).

Well, I entertain the thought UAE could even fix climate change for the eu and it wont help to avoid blacklists as long as it remains the #1 most popular place for people fleeing to from the biggest country in ursulaland.

 

[Martin Everson]

UAE corporate tax and its effect on foreign investment​

https://www.arabianbusiness.com/opinion/uae-corporate-tax-and-its-effect-on-foreign-investment

 

[Fred]

@JackAlabama that's it - you give away so much for free and if you refuse to give EVERYTHING away for free - you get response like the one from @A1988 .

The right people do understand and value our work here and get what they are looking for while others going with there elbows through life.

 

[A1988]

@JackAlabama that's it - you give away so much for free and if you refuse to give EVERYTHING away for free - you get response like the one from @A1988 .

The right people do understand and value our work here and get what they are looking for while others going with there elbows through life.

Look Fred, if I said something that offended you then I apologise, I am not here to waste my time, I am happy to pay you for a consultation if you would have offered me, either ways I have a bigger problem than corporate tax of 9% with UAE. But, its never one size fits all.

P. S Money always talks and bulls**t only walks.

 

[Dandyline]

UAE is perfect if you don't have to use banks and PSPs in EU and so on. 7-10K per year in maintenance is peanutes if you make 500k+ per year tax free.

If you do business in EU, you can add Cyprus to the mix.

 

[iansommersault]

hi all, it has been a while. hope all is doing good.

can someone tell me again how accounting works in FZCO? i know bookkeeping is not required.

1. so can i just simply fund it every time?

my source of income are always from out of uae. mostly usd.

2. do you guys take salary from your own FZCO every month even if you do not neede it and is the only employee (technicallyowner)?

 

[European]

This was issued a couple of days ago and might be relevant for the conversation, although it says the relief is not applicable to FZCs?

Ministry of Finance Issues Decision on Small Business Relief for Corporate Tax Purposes – Ministry of Finance – United Arab Emirates

mof.gov.ae

 

[JustAnotherNomad]

can someone tell me again how accounting works in FZCO? i know bookkeeping is not required.

Nobody knows for sure what will happen starting from June. It seems likely that some form of accounting (or at least annual filings) will be required for all companies, including FZCOs.

@Fred
What is your take on the "permanent establishment" and "foreign company managed from the UAE" stuff?
Previously it seemed like a viable solution to get a Golden visa (if eligible) and then use an offshore company (e.g. US LLC, UK LLP). Now this seems like a huge risk as the offshore company could be subject to corporate tax if it is managed by a UAE resident.
And what's worse, one would probably even risk huge fines for missing filings etc.
What's your opinion about this?

 

[Au999]

Nobody knows for sure what will happen starting from June. It seems likely that some form of accounting (or at least annual filings) will be required for all companies, including FZCOs.

@Fred
What is your take on the "permanent establishment" and "foreign company managed from the UAE" stuff?
Previously it seemed like a viable solution to get a Golden visa (if eligible) and then use an offshore company (e.g. US LLC, UK LLP). Now this seems like a huge risk as the offshore company could be subject to corporate tax if it is managed by a UAE resident.
And what's worse, one would probably even risk huge fines for missing filings etc.
What's your opinion about this?

To avoid risk of the US LLC being treated as a Dubai onshore, have the FZCO be the single member of the LLC which will see the LLC be treated as part of the FZCO

 

[JustAnotherNomad]

To avoid risk of the US LLC being treated as a Dubai onshore, have the FZCO be the single member of the LLC which will see the LLC be treated as part of the FZCO

That's a terrible idea because it would trigger branch office tax in the US.

 

[Au999]

That's a terrible idea because it would trigger branch office tax in the US.

Not for a company with no US trade.

 

[JustAnotherNomad]

Interesting. I just discussed this with a US tax attorney and he confirmed there would be no branch office tax if there is no ECI. But if you have clients in the US, there is always some risk that there could be some. Still could be a good idea. I just guess that getting a bank account for a US LLC with a UAE single member could be difficult.

 

[kekmaw]

In reality though, would the UAE even know that you are the owner of the US LLC's if the LLC is registered in Wyoming or something like that where shareholders don't have to be in public records?

Not ideal, I get that but still.