Suitable structure/residency for active trader (Stocks, futures, options)

[daniels27]

The estate tax only applies to assets in the US (stocks of⁣ US companies, assets of a US LLC).

It may be limted due to a DTA,⁢ but this is not the case at least for India.

 

[RAGAV]

Yes, but can't⁠ it be avoided by selling the stocks of US companies by spouse or family before⁤ it becomes common knowledge that the account holder died? Even the funds can be withdrawn⁣ from broker's account to local bank account after liquidating the assets.

Am I missing something?⁢ Will this approach not work to protect ourselves from estate tax?
We are talking about︀ normal individuals with less than a million in assets, not famous rich people.

 

[daniels27]

In theory, it works. At the moment. If the brokers apply face control and iris‌ scan, it will be more difficult. But to be honest, if you are smart, you‍ move the assets to your kids much earlier on.

 

[RAGAV]

Thanks for pointing out the tax rate applicable over 375K AED in⁣ case of natural persons.

Personal investments also includes a definition that states that the activity⁢ cannot be considered as a commercial business. However commercial business includes speculation (in Federal Decree︀ Law No.50 of 2022) done for the purpose of making a profit. So, it looks︁ like any kind of short term trades or speculation will be excluded from personal investments.︂

Crest, as you︅ are familiar in matters of corporate tax and licenses, are you absolutely sure that trading︆ (short term and speculative in nature, ranging from few minutes to few days) does not︇ require any license if conducted in personal name? Even if the profits/losses are large and︈ it is the primary source of income and activity carried out by the natural person︉ using his own funds?

Is there any ruling or decree by FTA or any other︊ authority that no license is required for personal investments/trading?

 

[GuaraniGhost]

Paraguay could also be an option if you are okay with trading in your name””banking remotely and cheaply (XAPO, Dukascopy, some use Georgia SOLO).
Local options: Cooperatives and, if you have some statements from brokers (proving you made some money there), traditional banks will also be okay. One benefit could be banks here are non-CRS compliant. By my information, only Itau is doing more "work" than necessary.

I use IBKR (they open your account under their US entity), and Schwab will also work (minimum deposit of 30K). Swissquote works.
CitiBank is here; they focus more on import/export, but maybe they will consider you a big player enough (by local standards) to help.

 

[NewHorizon]

Paraguay could also be an option if you are okay with trading in your name,banking‌ remotely and cheaply (XAPO, Dukascopy, some use Georgia SOLO).
Local options: Cooperatives and, if you‍ have some statements from brokers (proving you made some money there), traditional banks will also⁠ be okay. One benefit could be banks here are non-CRS compliant. By my information, only⁤ Itau is doing more "work" than necessary.

I use IBKR (they open your account under⁣ their US entity), and Schwab will also work (minimum deposit of 30K). Swissquote works.
CitiBank is here; they focus more on import/export, but maybe they will consider you a big⁢ player enough (by local standards) to help.

 

[daniels27]

Are you asking if you need a licence to buy stocks and shares with your‌ own money and your own mouse?

 

[PhantomOf ThePits]

CHAT GPT says that here

Federal Decree-Law No. 50 of 2022, also known︃ as the Commercial Transactions Law, has indeed introduced some important changes regarding the definition and︄ scope of commercial activities in the UAE.

You are correct in noting that the law︅ now explicitly includes speculation done for profit within the definition of commercial business.

## Commercial︆ Business Definition

The new law expands the definition of commercial business to include:

1. **Speculation︇ for Profit**: Activities conducted with the intention of making a profit through buying and selling︈ or short-term trading are now considered commercial business[1].

2. **Virtual Commercial Business**: The law recognizes︉ business carried out in the technological space or through modern means of technology as commercial︊ activities[2].

## Implications for Personal Investments

This expanded definition has significant implications for what qualifies︋ as personal investment versus commercial activity:

1. **Short-term Trading**: Frequent buying and selling of assets,︌ such as stocks or cryptocurrencies, with the primary aim of profiting from short-term price fluctuations︍ may now be classified as commercial business rather than personal investment[1][2].

2. **Distinction from Personal︎ Investment**: Personal investment is defined as investment activity conducted by a natural person for their️ personal account that:
- Does not require a license
- Is not conducted through a‌ license
- Is not considered a commercial business under Federal Decree-Law No. 50 of 2022[5]‍

## Tax Implications

The classification of an activity as commercial business rather than personal investment⁠ can have significant tax implications:

1. **Corporate Tax Applicability**: If an individual's speculative activities are⁤ classified as commercial business and generate a turnover exceeding AED 1 million within a calendar⁣ year, they may become subject to corporate tax[6].

2. **Personal Investment Exemption**: Income from personal⁢ investments is not subject to corporate tax, regardless of the amount[6][7].

## Considerations for Investors︀

Given these changes, individuals engaged in frequent trading or speculative activities should consider:

1. **Activity︁ Assessment**: Evaluating whether their investment activities might be classified as commercial business under the new︂ law.

2. **Record Keeping**: Maintaining clear records to distinguish between personal investments and potentially commercial︃ activities.

3. **Licensing Requirements**: Determining if their activities now require a license or fall under︄ commercial business regulations.

4. **Tax Implications**: Understanding the potential tax obligations if their activities are︅ classified as commercial business.

It's important to note that the exact interpretation and application of︆ these new provisions may evolve as regulatory bodies provide further guidance. Individuals engaged in significant︇ trading or investment activities should consider seeking professional legal and tax advice to ensure compliance︈ with the new regulations.

Citations:
[1] Federal Decree-Law No. 50 Of 2022 Issuing The Commercial︉ ... https://www.creationbc.com/corporat...2022-issuing-the-commercial-transactions-law/
[2] New UAE Laws Part 3: The Effect of the New Commercial ...︊ https://www.tamimi.com/news/new-uae...ial-transactions-law-on-financial-activities/
[3] [PDF] Federal Decree-Law No. 50/2022 - Commercial Code https://www.moec.gov.ae/documents/2...9-b407-6e73-9acb-3b01522e94e6?t=1673496808487
[4] [PDF] Cabinet Decision︋ No. 49 of 2023 https://tax.gov.ae/DataFolder/Files... Decision No. 49 of 2023 - for publishing.pdf
[5] Examining︌ UAE Tax Regulations: Personal Investment and Real ... https://www.linkedin.com/pulse/exam...personal-investment-real-hemant-mundhra-w7ilf
[6] [PDF] Taxation of Natural Persons︍ under the Corporate Tax Law https://tax.gov.ae/Datafolder/Files/Guides/CT/Taxation of natural persons - 25 11 2023.pdf
[7] Federal︎ Decree Law on Commercial Companies https://uaelegislation.gov.ae/en/legislations/1542
[8] [PDF] Federal Decree by Law No. (50) of️ 2023 Concerning the ... https://uaelegislation.gov.ae/en/legislations/2181/download
[9] Federal Decree-Law No. 50/2022 - Lexis® Middle East https://www.lexismiddleeast.com/law/UnitedArabEmirates/DecreeLaw_50_2022

 

[JustAnotherNomad]

US estate tax applies to all US assets. If you own it under your own‌ name, that mostly means US stocks like Tesla and USD balances. If you own e.g.‍ Japanese stocks, then those wouldn't fall under US estate tax.
But if you own them⁠ through a US LLC, then everything owned by the US LLC will fall under US⁤ estate tax, including your Japanese stocks.

If the US LLC was owned by a foreign⁣ corporation (e.g. Hong Kong or BVI or Cyprus company etc.), then US estate tax wouldn't⁢ apply since the owner of the US LLC did not die (as the foreign company︀ did not die, only people can die).
But then again, you could also own US︁ stocks directly through an offshore company and avoid the US estate tax, why bother with︂ the US LLC in between?

And if you use e.g. a Cyprus company, you may︃ even be able to lower the withholding tax on US-source dividends (as a UAE tax︄ resident it will otherwise be 30% since there is no tax treaty).
Edit: But probably︅ this won't work because the tax treaty probably will have Limitation on Benefits clauses that︆ won't allow this.

 

[RAGAV]

My trading will involve‍ lot of transactions and turnover in contracts on a daily basis, especially in futures and⁠ options. Not sure how speculation, leverage and heavy use of derivatives is treated in UAE⁤ and middle east region.

 

[daniels27]

It is like in China. It replaces gambling in casinos and smoky play halls.

 

[bizman]

you can't trust chatgpt with all this, you need to check︃ with doing your own research. It can show you where you have to look but︄ most often it is very wrong what it spit out even it looks legit and︅ correct!

 

[RAGAV]

Had a look︁ at Paraguay immigration requirements. It is very welcoming with less capital requirements.
Have a feeling︂ Spanish language is needed to lead a comfortable life.
Not familiar with non-CRS compliant banks.︃ Would there be challenges in transferring funds from non-CRS compliant banks to banks that are︄ CRS compliant in other countries?

 

[GuaraniGhost]

RAGAV said:
Had a look at Paraguay immigration requirements. It is very welcoming with less capital requirements.
Have a feeling Spanish language is needed to lead a comfortable life.
Not familiar with non-CRS compliant banks. Would there be challenges in transferring funds from non-CRS compliant banks to banks that are CRS compliant in other countries?
Click to expand...

Speaking of capital, there are no requirements.

Some people live here with zero Spanish, but their lives are limited. If you want to live here full-time, you need to learn.

There won't be specific challenges related to this. Dealing with banks nowadays is challenging everywhere, but your business is straightforward, so it should be fine.

Have you been to LATAM before?

 

[NewHorizon]

Speaking of⁠ capital, there are no requirements.

Some people live here with zero Spanish, but their lives⁤ are limited. If you want to live here full-time, you need to learn.

There won't⁣ be specific challenges related to this. Dealing with banks nowadays is challenging everywhere, but your⁢ business is straightforward, so it should be fine.

Have you been to LATAM before?

 

[RAGAV]

No. I have not been to LATAM, Europe or⁣ US before.

 

[GuaraniGhost]

RAGAV said:
No. I have not been to LATAM, Europe or US before.
Click to expand...

Understand. Well, if you will be interested in this option, hit me up and we can talk.
LATAM has its benefits, but also obvious downsides, especially compared to to places like Dubai.
It boils down to what kind of lifestyle you want to have.

 

[NewHorizon]

Understand. Well, if you will be interested in this option, hit me up and‍ we can talk.
LATAM has its benefits, but also obvious downsides, especially compared to to⁠ places like Dubai.
It boils down to what kind of lifestyle you want to have.⁤

 

[brianK]

you have a hell of a lot of options with an UAE company‌ if the above list is correct.

 

[RAGAV]

Copying your post from︀ the other thread. If there is a risk of doing business in UAE, where can︁ I open an offshore entity? Can I control the offshore entity from UAE to avoid︂ regulatory/license risk?

Would there be increased tax liability? If yes, are there any other good︃ options for residence?