could HK company be considered a PE in Dubai under the PE rule?

[troubled soul]

A Dubai resident is considering setting up a single person Hong Kong (HK) company for‌ his web development business. HK company has mandatory Local HK director and fulfill other requirement‍ for HK rules. The company will not hire any employees and one man show with⁠ few customers . All of the work will be done remotely.

The Dubai resident is⁤ concerned that the HK company could be considered a tax resident in Dubai under the⁣ Permanent Establishment (PE) rule. The PE rule is a tax treaty provision that allows a⁢ country to tax the income of a foreign company if that company has a permanent︀ establishment in the country.

Can you please advise the Dubai resident on whether the HK︁ company could be considered a PE in Dubai under the PE rule?

 

[Marzio]

You can think of any setup but in the end if you are the only‌ one that's working any setup will be considered tax resident in Dubai.

There's no way‍ around it.

 

[jafo]

What if he is in the Cayman or‍ Monaco or another NO income tax jurisdiction?

 

[sergeylim88]

@Konstanz could give opinion about Monaco
also interested to hear it (again)

 

[Konstanz]

what is legally and what is in practice‍ will be different story.
However, I would not risk to have problems with law in⁠ UAE

About Monaco - there would be no tax if you are genuine resident in⁤ Monaco. No PE, CFC
I believe the same with Cayman, Bahamas etc - no tax.⁣ But I am not expert on Caribbean

Btw DUBAI IFZA has started free zone in⁢ Seychelles:
https://ifzaoffshore.com/This says much about Dubai freezone future 🙂

The old good days with UAE︀ tax free pass is gone.. It was really good and cheap solution

 

[Onassis]

They haven't exactly started a freezone, they just registered a CSP like any other except this‌ one has IFZA in its name... kind of strange to be honest.

 

[Marzio]

Then no tax.

 

[Konstanz]

Yes it's true - CSP. But I think they believe IFZA in⁠ Dubai will be collapsing

 

[troubled soul]

Property Golden visa will also lose its charm if‍ they harshly impalement PE rule for corporate tax ......Seems they are cut off from reality⁠
They are thinking that Lindsay Lohan , Cristiano Ronaldo etc type celebrities are enough to⁤ run UAE successful ...they do not need us 🙁🙁🙁🙁🙁

 

[Fred]

Behind the scenes:

IFZA Offshore⁠ was in planning since 2021 long before the 9% CT was even announced.

The reason⁤ for IFZA Offshore is to be able to offer Trust/Foundation Structures which they can't actually⁣ with the Freezone in Dubai neither it makes sense as a Dubai Freezone to partner⁢ with ADGM/DIFC/RAKICC.

It ended up to be Seychelles because everything is there, only 4 hours︀ flight from Dubai and the Regulator approved the Buy of the existing CSP License by︁ a foreign Freezone Authority the fastest. This is not as straightforward as it seems.

However it's just another Seychelles CSP, only English speaking. It would be interesting if they would︂ have dedictated, Spanish, Italian, German speaking staff there maybe even a Swiss Lawyer speaking almost︃ all Central European Languages so that someone with 7-8 figueres really feels comfortable having a︄ Trust/Foundation structure there owning his Holding Dubai Freezone.

Since more then 2 years we preach︅ that they should start using the "INTERNATIONAL" in there brand name. They are on it.︆ We are on it. Stay tuned.

 

[Konstanz]

Yes, for most clientele it will not be⁤ interesting. Desert country with taxes