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

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rowena

Entrepreneur
Substance means real activity in Freezone. Real offices, real employees.
I don't think it is going to happen. You don't have to rent a real office or hire an employee to run the business even if you really live in UAE.

FZs issues freelance(sole-trader) licenses, which means you can't hire an employee. Another example is SHAMS FZ in Sharjah. They only have flexi desk options because they don't have real office spaces, so you can't have real office space.

I expect less strict rules and more importance of individual tax certificates. I also expect all sole businesses like freelance permits or mainland sole proprietorship companies will be exempted from corporate tax because they're not corporate. They should be taxed under income tax which remans 0%.

Update: It looks like mainland sole proprietorship and even Freezone-based freelance licenses are subject to CT. Still waiting for detailed information but this makes freelance licenses useless.
 
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MiddleEuroAsia

opportunist
Entrepreneur
I don't think it is going to happen. You don't have to rent a real office or hire an employee to run the business even if you really live in UAE.

FZs issues freelance(sole-trader) licenses, which means you can't hire an employee. Another example is SHAMS FZ in Sharjah. They only have flexi desk options because they don't have real office spaces, so you can't have real office space.

I expect less strict rules and more importance of individual tax certificates. I also expect all sole businesses like freelance permits or mainland sole proprietorship companies will be exempted from corporate tax because they're not corporate. They should be taxed under income tax which remans 0%.

Update: It looks like mainland sole proprietorship and even Freezone-based freelance licenses are subject to CT. Still waiting for detailed information but this makes freelance licenses useless.
yeaaaaaaah, no, just because the FZs doesn't have strict substance requirement, it will mean that the banks will accept that, remember that it was already very hard to open a bank account for a rak or a Sharjah company before, now it's just impossible. banks only accept Dubai companies and that's even is not sure thing, it's based on a case by case basis.

thank god that I have build my relationships in Dubai before the shitstorm that's about to come. (Also attending Events that's hold by Emirati business men/women and "donating" for their "charities" here and there to get your name out and networking helps too )

But I gotta say it, I just hate these dumb fucks that's ruining the offshore business for all of us, Greedy mfs keep coming to dubai, no substance, hotel bills, fake bs, no business plan, shitty 50$ website, no social media or any social proof at all. Absolutely nothing. and they just keep transferring 500k-700k every month and sometimes more without anything to back these numbers on, and you wander why we hear news like this!
like come on, if you are gonna do something with this money, at least be a little bit smart about it, hire people, have substance and don't be a cheap **** crying about the 0.20 fees that the bank will get from you, like Jesus Christ man.

I have been in this region for so long, I know what's about to come, they will 100% go after the FZ companies, but not like what you imagine, they will look hard for the substance requirement, then they will require you to stay longer or get your visa revoked, and so on and so forth. believe it or not, the UAE doesn't need your money or "experience", they moved past this phase a long time ago. They just want to show the business world how business friendly they are with their "mature laws" and regulations. they want to be the HQs capital of the world.

And as much as I hate regulations and governments interfering with businesses, this is far from "over" regulation that you see in other countries, and this will be a good thing in the long run, because news like this deter the dumb fucks from coming to Dubai and instead, going after other jurisdictions like Seychelles, Belize or whatever crappy jurisdiction they chose to incorporate in.

For the rest of us, as long as you have proper substance, keeping records (Even if you don't need to), building relationships with banks, networking with other business people based in the UAE and the MENA region in general, you are good to go.

But for the other dumb fucks, keep ******* yourself and I hope I see the Interpol ram your house at 3 am, dragging your to the north pole and keep you there right where you belong - "off-shore" and far away enough from the rest of us :)
 

andrew28fl

New member
With the complexity of banking in UAE, and costs associated with Freezone companies/licenses/expensive resources, isn't it best just to live in UAE (through real estate investment) and operate your business out of a Single Member US LLC or a UK LLC? Your business entities are basically tax free, because it's a pass through entity and taxes get passed on to the owner of the LLC. UAE where the owner resides has no personal income tax, so your income (and hence your LLC's income) is all tax free.

Of course, this doesn't apply to people who want to conduct business in the UAE (hire employees, sign leases etc). But for digital business owners, I think this is the best set up. Any experts, please poke holes in this.
 

MiddleEuroAsia

opportunist
Entrepreneur
With the complexity of banking in UAE, and costs associated with Freezone companies/licenses/expensive resources, isn't it best just to live in UAE (through real estate investment) and operate your business out of a Single Member US LLC or a UK LLC? Your business entities are basically tax free, because it's a pass through entity and taxes get passed on to the owner of the LLC. UAE where the owner resides has no personal income tax, so your income (and hence your LLC's income) is all tax free.
That's not true, it all depends on the country you are resident in and how they treat US LLC or a UK LLP.
If they treat them as a corporation, they will tax them like a corporation, but if they treat them Like an opaque entity - like how the UK and Canada treat US LLC - then the company would be taxed at a personal level.

In the UAE, the status is not clear, some says it's opaque, while others say it's not, but it usually didn't matter since both personal and corporate tax were 0%, but would that change? I don't know! the clear thing was that if you have a foreign company that does business in the mainland or a GCC country, you need to register for VAT, and if you don't do business in the mainland or a GCC country, your vat is 0% and you can apply for a vat "exemption", so you don't have to file for VAT every year. But you will find that some people just don't care and don't register for vat, so there's that.

The question is, would the UAE government keep this system? I have no idea, maybe they will only focus on local Companies, and maybe they will start cracking down on foreign companies that satisfy "PE" rules in the UAE, but then again, these companies usually don't do business in the mainland nor the GCC, So what would they tax? and how would they do it if their laws says otherwise?

right now, it's all just theories and predictions, and no one knows wtf is going on in Bin zayed's and bin rashid's minds, only time will tell.
 

rowena

Entrepreneur
remember that it was already very hard to open a bank account for a rak or a Sharjah company before, now it's just impossible. banks only accept Dubai companies and that's even is not sure thing, it's based on a case by case basis.
Impossible? You can easily open a bank account for Sharjah FZ company in Dubai, it is not different than Dubai FZ.
 

MiddleEuroAsia

opportunist
Entrepreneur
Impossible? You can easily open a bank account for Sharjah FZ company in Dubai, it is not different than Dubai FZ.
If you have a good relationship with the bank, then sure, but for newcomers with no minimum deposit nor a bullet proof business plan (majority of wantrepeneurs), then it's very hard if not impossible, the bank has nothing to gain from you, so why bother?
 

kriyazen

New member
IMHO UAE just needs the money. By the way for an FZ company, to my knowledge, at least a hot desk space is always required. Unless it is some sort of "Offshore" FZ company, good luck to open a bank account with that.
 

MiddleEuroAsia

opportunist
Entrepreneur
With the complexity of banking in UAE, and costs associated with Freezone companies/licenses/expensive resources, isn't it best just to live in UAE (through real estate investment) and operate your business out of a Single Member US LLC or a UK LLC? Your business entities are basically tax free, because it's a pass through entity and taxes get passed on to the owner of the LLC. UAE where the owner resides has no personal income tax, so your income (and hence your LLC's income) is all tax free.

Of course, this doesn't apply to people who want to conduct business in the UAE (hire employees, sign leases etc). But for digital business owners, I think this is the best set up. Any experts, please poke holes in this.

From this article: UAE corporate tax: Free zone based businesses with mainland operations to come under tax regime

"Non-residents who conduct a business activity in a GCC country through a permanent establishment are subject to corporate tax."

So, it seems that if your foreign companies do business in the GCC (including mainland), your company will be subject to the new Corporate tax, otherwise, no tax is paid if you only do business outside of the UAE and the GCC.
 

Fred

Dubai Expat
Mentor Group Gold
Elite Member
Commercial Service
Entrepreneur
With the complexity of banking in UAE, and costs associated with Freezone companies/licenses/expensive resources, isn't it best just to live in UAE (through real estate investment) and operate your business out of a Single Member US LLC or a UK LLC? Your business entities are basically tax free, because it's a pass through entity and taxes get passed on to the owner of the LLC. UAE where the owner resides has no personal income tax, so your income (and hence your LLC's income) is all tax free.

Of course, this doesn't apply to people who want to conduct business in the UAE (hire employees, sign leases etc). But for digital business owners, I think this is the best set up. Any experts, please poke holes in this.
Thie issue with all this UK LTD, US LLC or Ireland LTD setups you only get EMI banking without having a Resident Director.

For most serious entrepreneurs that's not a option and what we see in our inquiries is that usually the people want to move away from such setups due to lack of decent reliable retail banking with fully fledged banks.
Impossible? You can easily open a bank account for Sharjah FZ company in Dubai, it is not different than Dubai FZ.
Nop - that's gone.

Mashreqbank that was the only bank still considering them closed the door last year december - was the only major Bank still considering them - now you are looking at bottom of the barrel banks like Bank Alfalah.

UAE in 2015: zero taxes for the next 50 years!
UAE in 2025: just kidding!
Yes - for Freezone Companies and they keep what they promised. We don't understand why this fact was ignored the last years from some Corporate Service Provider telling some bullsh*t to get people for a Mainland Company when it wasn't necessary - well here comes the bill.

Imagine you as CSP do setup last week a Mainland Company for a client - well happy birthday.

Pay attention to who's word you are following otherwise you can get burned easily in the UAE.
 

MiddleEuroAsia

opportunist
Entrepreneur
IMHO UAE just needs the money.
False. The money is the last thing they are looking for, they need Global businesses (including regional ones in the MENA countries) and specially multinationals, to move their HQs to the UAE, so they have the same legitimacy that the legacy brand countries/cities have (e.g. Switzerland, Singapore, Hong Kong, New York, london...etc).
they want people to perceive them as a global, innovative business hub, not another tax heaven, oil-run state.
By the way for an FZ company, to my knowledge, at least a hot desk space is always required. Unless it is some sort of "Offshore" FZ company, good luck to open a bank account with that.
hot desk (or flexi desk), virtual offices and all of that, will only get you far, you need either of these three things to start a relationship with most banks:
1- real substance
2- higher deposits
3- investing some money into some BS investment product that the bank offers you.

If you have none of that and you were able to open a bank account in Dubai, then all props to you, but for most people in this forum, they will need either of these 3 things to get things going.

Thie issue with all this UK LTD, US LLC or Ireland LTD setups you only get EMI banking without having a Resident Director.
Not necessarily true, for example, with a US LLC - and if you have US customers/suppliers, you can get a highly transactional bank account with a credit line and everything, For example, I had no problem opening a corporate account with Citibank in Miami for my US LLC, it was easier than the boogeyman news that you hear online, and if you don't like travelling, go with neo banks like Brex, their FDIC insurance is very good, they say and I quote "with brex, you can choose how your money is stored. You can elect to keep your deposits at a Brex partner bank, and if you do, you’ll be eligible for FDIC insurance up to $1,750,000 in total. The other option is to invest your deposits into a government money market mutual fund. You can also use any combination of these two options."
For me, there are no issues with them so far, ACH transfers from brex to mercury and vice versa works like a charm.

So, it's not really that black and white, and majority of the time, you will find good options if you do your homework on the ground.

Yes - for Freezone Companies and they keep what they promised. We don't understand why this fact was ignored the last years from some Corporate Service Provider telling some bullsh*t to get people for a Mainland Company when it wasn't necessary - well here comes the bill.

Imagine you as CSP do setup last week a Mainland Company for a client - well happy birthday.

Pay attention to who's word you are following otherwise you can get burned easily in the UAE.
Can't agree more, MFs at creative zone kept spam mailing calling me about how "easy" it is to open a Dubai mainland company, and How I was missing out, they are pushing for the "mainland" narrative and i don't know why! but whatever, I blocked them, so I don't hear their nonsense again :)
 
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rowena

Entrepreneur
Nop - that's gone.

Mashreqbank that was the only bank still considering them closed the door last year december - was the only major Bank still considering them - now you are looking at bottom of the barrel banks like Bank Alfalah.
I opened a Mashreq bank account for Sharjah FZ 1.5 years ago in 2 weeks. The Sharjaz FZ company has no office and no flexi desk. Maybe they considered my business very safe but it was 1.5 years ago it can be different now as you mentioned.
 

MiddleEuroAsia

opportunist
Entrepreneur
I opened a Mashreq bank account for Sharjah FZ 1.5 years ago in 2 weeks. The Sharjaz FZ company has no office and no flexi desk. Maybe they considered my business very safe but it was 1.5 years ago it can be different now as you mentioned.
I mean, mashreq is trash, and they always accepted whatever, FAB, ENBD, ADCB are a different story.
your circumstances are also different, If my memory serves me right, I think you deal mainly with marketplaces such as amazon, etsy..etc. So, it's different than other E-commerce stores that do lots of third-party transactions.

in addition, 1.5 years ago, is massively different than what happens in the UAE today, and rest assured that it will only get harder from here on.
 

rowena

Entrepreneur
I mean, mashreq is trash, and they always accepted whatever, FAB, ENBD, ADCB are a different story.
your circumstances are also different, If my memory serves me right, I think you deal mainly with marketplaces such as amazon, etsy..etc. So, it's different than other E-commerce stores that do lots of third-party transactions.

in addition, 1.5 years ago, is massively different than what happens in the UAE today, and rest assured that it will only get harder from here on.
Mashreq has the best online banking in UAE. They updated their retail mobile app and website. It is very modern now and better than most of western banks. FAB, ENBD, and ADCB all of them make me crazy because they have 2010 year online banking.

your circumstances are also different, If my memory serves me right, I think you deal mainly with marketplaces such as amazon, etsy..etc. So, it's different than other E-commerce stores that do lots of third-party transactions.

in addition, 1.5 years ago, is massively different than what happens in the UAE today, and rest assured that it will only get harder from here on.
Yes correct and I live in UAE.

in addition, 1.5 years ago, is massively different than what happens in the UAE today, and rest assured that it will only get harder from here on.
I agree things are changing quickly.
 
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lacomaco

Mentor Group Gold
Guys, did you have a look at the “harmful tax regimes” by OECD? Quite a lot of them were free zones and they are now forcing to amend local legislation and to tax them. I am not sure that all UAE FreeZones will remain tax free… And forget what was announced, I do not care about PR only the written law
 

OffMyBack

Mentor Group Gold
Guys, did you have a look at the “harmful tax regimes” by OECD? Quite a lot of them were free zones and they are now forcing to amend local legislation and to tax them. I am not sure that all UAE FreeZones will remain tax free… And forget what was announced, I do not care about PR only the written law
would be helpful to post a link to whatever you refer to?
 

OffMyBack

Mentor Group Gold
we need to write enough letters and words to post something, hence me blablablbalbala characters to make up my post.....(didnt mean blablablabla to you)
 
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