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

[karishi]

That's what I was thinking. A lot of people are in Dubai for economic reasons. Not many people would choose to live under a dictatorship that taxes you right?

But maybe I am wrong and a low tax dictatorship works for some foreigners .

All my italians friends who moved there would never go back. Things work, which is the opposite of what you have in italy with a taxation rate which is close to 60% and run by idiots (now Mario Draghi is good but of course it's not elected ). Life in Dubai is close to life in any european city, if you don't have to commute to work. I would live there 4-5 months a year but my girlfriend has a job in another country. I really don't understand why people go on vacation to Dubai, which is really nonsense to me, but for living it's pretty good, you can go the Zero Gravity or barasti and be in the pool when you want, kite beach is nice, food is good, if you look well there are places which are not f*****g luxury places.

 

[Konstanz]

All my italians friends who moved there would never go back. Things work, which is the opposite of what you have in italy with a taxation rate which is close to 60% and run by idiots (now Mario Draghi is good but of course it's not elected ). Life in Dubai is close to life in any european city, if you don't have to commute to work. I would live there 4-5 months a year but my girlfriend has a job in another country. I really don't understand why people go on vacation to Dubai, which is really nonsense to me, but for living it's pretty good, you can go the Zero Gravity or barasti and be in the pool when you want, kite beach is nice, food is good, if you look well there are places which are not f*****g luxury places.

Many italians consider Monaco as an option. But yes, it's way more expensive option. But it's just near Italy

 

[Verbatim]

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."

Could private crypto trading be considered "running a business" and therefore be subject to 9% tax?

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.

How will you be able to get a tax residency certificate with this setup? The real estate investment is for residence visa, it does not allow you to work (i.e. conduct business via foreign company)

Trading or managing your investments under your name is not a commercial activity or business.

I am sorry but this is not correct. Take Switzerland for example, in the canton of Bern if you do over 200 trades per year it is explicitly a commercial activity-business. Netherlands has also ambiguity. You file and hope its not classified as professional activity. Depends on court judgements as well. It's very complicated.

I really don't think that a 9% tax will get the UAE out from the blacklist, at least not from UE countries. You would need at least 15 or 20 and for sure Freezones too. I think this is a move to get more money from people who are exploiting the system, and get more money from companies which are to radicated in the UAE to move. It's like Netflix raising prices or Google Maps API asking for money after years of giving away the service for free, you start low and then start raising prices when people are used to the ecosystem.
Also this is to counteract the fact that you could abuse freelance permits or remote working visas with LLCs, where you could have a cheap LLC, a remote working visa, and clean a lot of money with 600$ a year, so I guess that, like @Fred said in another topic, they will start to be picky about who gets a tax certificate: I would say that up to 200k with a remote work visa and LLC would be ok, but above that they want your money and you have to open a freezone company. Which is ok if you are making 200k or more of profit, you can take the hit. Remember that the UAE is not a democratic country, they issuing of a tax certificate is discretionary, so playing by the unwritten rules is mandatory.
In any case what makes the UAE broken, in a digital nomad / ecommerce world, is the enter once every 180 days and still be resident with no CRS rule, in a country which is a 5h direct flight from most UE capitals.

have you heard of cases where tax certificate is not issued despite being present 180 days and owning a Freezone company?

Foreign persons​

01
Will a foreign company or individual be subject to UAE CT?
Foreign entities and individuals will be subject to UAE CT only if they conduct a trade or business in the UAE in an ongoing or regular manner
02
Will income earned by a foreign investor be subject to UAE CT?
UAE CT will generally not be levied on a foreign investor’s income from dividends, capital gains, interest, royalties and other investment returns

I am not a lawyer but if I had to compare this to everything I've read about rules on crypto trading this means that if you trade infrequently as a private person (e.g. bought crypto in 2017, sold in 2022 in one or two trades) then gains are not taxable but if you trade frequently as a private person it falls under the definition of "ongoing or regular manner" so it's taxable at a 9% rate.

I hope I am wrong about this.
Also - I did not expect this.

 

[Fred]

Could private crypto trading be considered "running a business" and therefore be subject to 9% tax?


How will you be able to get a tax residency certificate with this setup? The real estate investment is for residence visa, it does not allow you to work (i.e. conduct business via foreign company)


I am sorry but this is not correct. Take Switzerland for example, in the canton of Bern if you do over 200 trades per year it is explicitly a commercial activity-business. Netherlands has also ambiguity. You file and hope its not classified as professional activity. Depends on court judgements as well. It's very complicated.


have you heard of cases where tax certificate is not issued despite being present 180 days and owning a Freezone company?

Foreign persons​

01
Will a foreign company or individual be subject to UAE CT?
Foreign entities and individuals will be subject to UAE CT only if they conduct a trade or business in the UAE in an ongoing or regular manner
02
Will income earned by a foreign investor be subject to UAE CT?
UAE CT will generally not be levied on a foreign investor’s income from dividends, capital gains, interest, royalties and other investment returns

I am not a lawyer but if I had to compare this to everything I've read about rules on crypto trading this means that if you trade infrequently as a private person (e.g. bought crypto in 2017, sold in 2022 in one or two trades) then gains are not taxable but if you trade frequently as a private person it falls under the definition of "ongoing or regular manner" so it's taxable at a 9% rate.

I hope I am wrong about this.
Also - I did not expect this.

It's over!

Starting from next year 1st of June Sheikh Olaf Scholz and Khalfia Christine Lagarde will overtake and rumors are on the 7 Emirates become the new Europe of the middle east

Joke aside.

Move yourself away from the keyboard to the UAE for several months - do a company setup in practice and see how things work - even if you tend to overthink - you will realize that what you write here can't be technically enforced over night.

Expect a soft launch for several years - otherwise it's not possible.

Expect a lot of smart people building schemes to get around it - like everywhere in the world.

There is no written law yet - so let's see - but coming 100% from practice - I'm holding my hand for it in the fire telling you that for sure we won't have CT on the personal level.

Believe it or not.

 

[Verbatim]

It's over!

Starting from next year 1st of June Sheikh Olaf Scholz and Khalfia Christine Lagarde will overtake and rumors are on the 7 Emirates become the new Europe of the middle east

Joke aside.

Move yourself away from the keyboard to the UAE for several months - do a company setup in practice and see how things work - even if you tend to overthink - you will realize that what you write here can't be technically enforced over night.

Expect a soft launch for several years - otherwise it's not possible.

Expect a lot of smart people building schemes to get around it - like everywhere in the world.

There is no written law yet - so let's see - but coming 100% from practice - I'm holding my hand for it in the fire telling you that for sure we won't have CT on the personal level.

Believe it or not.

I do agree that all of this is only theoretical at this stage.

 

[andrew28fl]

How will you be able to get a tax residency certificate with this setup? The real estate investment is for residence visa, it does not allow you to work (i.e. conduct business via foreign company)

My understanding was that if I spend more than 183 days in Dubai, I would qualify for the tax residency certificate. Is it not so?

I am not an expert on this subject, but here is what I have learned so far.

I would own real estate in Dubai valued over 750k AED, and get a 3 year residency visa. I own a Single member US LLC, and operate out of that US entity. Since the US entity does not do business in the UAE or require a UAE bank account, I do not need any licensing/company set up in the UAE. I dislike Dubai/UAE for company formation and banking, I have heard a lot of horror stories. Plus my merchant accounts//banking work well in the US and I'm not looking to reinvent the wheel.

A US LLC is a disregarded entity for taxes, I don't have offices/permanent employees in the US so I meet the requirements for disregarded entity. So the taxation of this LLC falls on the owner (me). Since I live in Dubai, which has 0 personal tax, this US LLC becomes tax free.

Any experts see holes in this set up, please comment.

 

[karishi]

My understanding was that if I spend more than 183 days in Dubai, I would qualify for the tax residency certificate. Is it not so?

I am not an expert on this subject, but here is what I have learned so far.

I would own real estate in Dubai valued over 750k AED, and get a 3 year residency visa. I own a Single member US LLC, and operate out of that US entity. Since the US entity does not do business in the UAE or require a UAE bank account, I do not need any licensing/company set up in the UAE. I dislike Dubai/UAE for company formation and banking, I have heard a lot of horror stories. Plus my merchant accounts//banking work well in the US and I'm not looking to reinvent the wheel.

A US LLC is a disregarded entity for taxes, I don't have offices/permanent employees in the US so I meet the requirements for disregarded entity. So the taxation of this LLC falls on the owner (me). Since I live in Dubai, which has 0 personal tax, this US LLC becomes tax free.

Any experts see holes in this set up, please comment.

your setup looks perfect to me. most people do the Remote Working visa because it's cheaper, but if you want to buy property and stay in dubay long term, then go with that 3 year residency visa.

 

[Bill D]

My understanding was that if I spend more than 183 days in Dubai, I would qualify for the tax residency certificate. Is it not so?

I am not an expert on this subject, but here is what I have learned so far.

I would own real estate in Dubai valued over 750k AED, and get a 3 year residency visa. I own a Single member US LLC, and operate out of that US entity. Since the US entity does not do business in the UAE or require a UAE bank account, I do not need any licensing/company set up in the UAE. I dislike Dubai/UAE for company formation and banking, I have heard a lot of horror stories. Plus my merchant accounts//banking work well in the US and I'm not looking to reinvent the wheel.

A US LLC is a disregarded entity for taxes, I don't have offices/permanent employees in the US so I meet the requirements for disregarded entity. So the taxation of this LLC falls on the owner (me). Since I live in Dubai, which has 0 personal tax, this US LLC becomes tax free.

Any experts see holes in this set up, please comment.

For the tax residence certificate you are required to prove local source of fund in UAE, in theory cannot get it just with the investor visa for simply owning real estate.

Without proving you are tax residence somewhere some country automatically requalify you as tax resident to the country of your nationality, sometimes it is not even written in the law but law cases automatically requalified someone this way.

 

[karishi]

For the tax residence certificate you are required to prove local source of fund in UAE, in theory cannot get it just with the investor visa for simply owning real estate.

Without proving you are tax residence somewhere some country automatically requalify you as tax resident to the country of your nationality, sometimes it is not even written in the law but law cases automatically requalified someone this way.

with the remote working visa you open a bank account and distribute dividends to you. Dividends are not taxed, is passive income, and the Tax Residency certificate mostly mean that you have spent 180 days in the country, which is controlled digitally. At that point you have a house in the UAE, you spend more than 6 months a year in the UAE, your business is online, it's hard to imagine how you could not be tax resident in the UAE or how you could be conisdered tax resident in another country.
Of course if your LLC in the USA has offices in canada, well that would be different, but if it's all online, this should be safe. In general, if you moved correctly outside of your country and stay 183 days in the UAE you should have no issues.
Then of course it all depends how much money we are talking about: if you are making 2 millions a year, maybe it's better if you open a freezone company as the owner of the LLC, give some more money to the UAE and should be even safer, than you transfer money from LLC to freezone and from freezone to you.

 

[Verbatim]

My understanding was that if I spend more than 183 days in Dubai, I would qualify for the tax residency certificate. Is it not so?

I am not an expert on this subject, but here is what I have learned so far.

I would own real estate in Dubai valued over 750k AED, and get a 3 year residency visa. I own a Single member US LLC, and operate out of that US entity. Since the US entity does not do business in the UAE or require a UAE bank account, I do not need any licensing/company set up in the UAE. I dislike Dubai/UAE for company formation and banking, I have heard a lot of horror stories. Plus my merchant accounts//banking work well in the US and I'm not looking to reinvent the wheel.

A US LLC is a disregarded entity for taxes, I don't have offices/permanent employees in the US so I meet the requirements for disregarded entity. So the taxation of this LLC falls on the owner (me). Since I live in Dubai, which has 0 personal tax, this US LLC becomes tax free.

Any experts see holes in this set up, please comment.

Check here for requirements for tax residency certificate: How to Get Tax Residency Certificate (TRC) in UAE? | Federal Tax Authority
In essence you need to show economic activity in the country either as employee, business owner or freelancer - this is my understanding.
There are some countries where simply not being physically present is enough to be considered foreign tax resident but in other countries you need to present TRC because if you don't have a specific domicile (substantiated by TRC) you regain your passport domicile by default.

 

[Fred]

For the tax residence certificate you are required to prove local source of fund in UAE, in theory cannot get it just with the investor visa for simply owning real estate.

That's it.

There is no more straighfroward way then being employed by your own company to get the Residence Certificate - I feel sorry for the guys going cheap and figure out too late that things don't work out in that way.

 

[Martin Everson]

A US LLC is a disregarded entity for taxes, I don't have offices/permanent employees in the US so I meet the requirements for disregarded entity. So the taxation of this LLC falls on the owner (me).

To be clear where would the place of operation and control be for the US LLC?

 

[andrew28fl]

To be clear where would the place of operation and control be for the US LLC?

I think UAE/Dubai. Since I would spend more than 6 months in Dubai. But as far as I understand, UAE's 9% tax will not be applicable because this is not a mainland company doing business in the UAE.

 

[Martin Everson]

I think UAE/Dubai. Since I would spend more than 6 months in Dubai. But as far as I understand, UAE's 9% tax will not be applicable because this is not a mainland company doing business in the UAE.

You may want to seek legal clarification of the below.

-------

Foreign persons​

01
Will a foreign company or individual be subject to UAE CT?

Foreign entities and individuals will be subject to UAE CT only if they conduct a trade or business in the UAE in an ongoing or regular manner

-------

 

[andrew28fl]

You may want to seek legal clarification of the below.

-------

Foreign persons​

01
Will a foreign company or individual be subject to UAE CT?

Foreign entities and individuals will be subject to UAE CT only if they conduct a trade or business in the UAE in an ongoing or regular manner

-------

Thanks, will definitely look into this. My take on this is, if CT applies to US LLCs because I live in Dubai, then remotely from Dubai visa where freelancers work from Dubai should also incur taxes on their activities here, correct? That's not the case as of now, but things might change?

 

[Verbatim]

You may want to seek legal clarification of the below.

-------

Foreign persons​

01
Will a foreign company or individual be subject to UAE CT?

Foreign entities and individuals will be subject to UAE CT only if they conduct a trade or business in the UAE in an ongoing or regular manner

-------

CFC rules - now available in your local tax haven of choice. Limited time offer. Dial 1-800-CFC-UAE for info.

 

[lacomaco]

That's it.

There is no more straighfroward way then being employed by your own company to get the Residence Certificate - I feel sorry for the guys going cheap and figure out too late that things don't work out in that way.

Residence Certificate ( i presume you mean tax residency certificate) will need 186 days in the UAE, no?

 

[andrew28fl]

For the tax residence certificate you are required to prove local source of fund in UAE, in theory cannot get it just with the investor visa for simply owning real estate.

My US LLC would pay me salary/dividends at 0% personal income tax in Dubai. That would be my source of income. I plan on spending more than 7 months in Dubai so I believe I should be able to get a tax residency certificate.

Any way, I have been out of Canada, my citizenship country for the past 6 years and no one has ever asked me for a tax certificate.

 

[karishi]

My US LLC would pay me salary/dividends at 0% personal income tax in Dubai. That would be my source of income. I plan on spending more than 7 months in Dubai so I believe I should be able to get a tax residency certificate.

Any way, I have been out of Canada, my citizenship country for the past 6 years and no one has ever asked me for a tax certificate.

you will need a tax certificate, in my opinion, in two cases:
1) you buy a property somewhere
2) you move your residency back into canada
In case of point 1, any normal country will ask you for the source of funds, and if you haven't inherited something recently, you need a tax certificate from somewhere. So in case you want to buy something, you set up something in Dubaui which gets you a tax certificate for 2-3 years to prove the source of funds. Freezone company would work.
In case of point 2, the tax authority would want to make sure that you were really out of the country and paying taxes somewhere, as otherwise, you would still be considered tax resident in your home country.
I can't think about other cases where you would need a tax certificate, but of course I might be wrong. Bu as long as you keep your money in Dubai and spend your money in Dubai, having or not having a tax certificate makes little difference, especially after 6 years outside of your country.

 

[Martin Everson]

Thanks, will definitely look into this. My take on this is, if CT applies to US LLCs because I live in Dubai, then remotely from Dubai visa where freelancers work from Dubai should also incur taxes on their activities here, correct? That's not the case as of now, but things might change?

I would definitely get professional legal advice on this matter when it comes to an authoritarian state like UAE. Don't try to apply logic here.