Would being a UAE resident pull my tax-free companies into tax / regulatory framework of the UAE?

[OKboomer]

This is a two-point question.

If I were to live in the UAE and I own and/or manage companies in zero-tax jurisdictions, would my companies, on the grounds of my residency in the UAE be considered as Controlled Foreign Companies and:

1) I would be obliged to pay the 9% tax on income of those companies ?

2) those companies might be subject to UAE rules/regulations ? (For instance if these companies do stuff related to crypto which has more and more restrictions and regulations in the UAE)

And are arrangements on paper (appointing a director / ceo) sufficient, or would any effective / de facto control be deemed as effective management with the same consequences?

Maybe some folks have already experienced this? Curios to hear more. Thanks

 

[Martin Everson]

Yes

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Under the Corporate Tax regime, Foreign Companies‍ which have in the UAE

1. Their Permanent Establishment (‘PE’) ; or
   
2. Their Place of Effective⁠ Management ; or
   
3. Their source of income
   

will be subject to UAE Corporate Tax at⁤ the rate of 9% on annual taxable income exceeding AED 375,000 attributable to UAE business⁣ operations and activities.

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No

Full arms length setup with economic substance PE, management etc etc. We are talking UAE here︃ not EU. They don't slap people on the wrist for violation of their laws rather︄ cut of wrists proverbially speaking.....lol.

 

[GF150]

Yes, that's the first step. I believe that has something to do with the⁣ deal for removing the UAE from some black/gray list.
But what comes next ? Probably⁢ they will tax the off-shore, then they will lower the threshold over time. The other︀ important issue is this one: how can they know your taxable income ? You have︁ to state it. And how can they know you will tell the truth ? Some︂ kind of control, of course. Hence, as things "logically" call for one another in most︃ of the countries, accounting will become mandatory..... So, we start to part with: "The UAE︄ is for makers, not for paper shufflers" - an official punchline less than a decade︅ ago.

 

[Martin Everson]

Good question...perhaps they can ask for an audit report⁠ for foreign company . But would you be happy in any case committing tax fraud⁤ in UAE by lying to the UAE government while stood on their soil? In UAE⁣ laws are applied withut mercy sadly i.e

https://newsone.com/409392/brit-jailed-in-dubai-for-4-years-for-speck-of-marijuana-on-shoe/

 

[GF150]

No, of course, I wouldn't !⁠ I believe you are an experienced and knowledgeable person and can easily get my point⁤ of view which is slightly different: moving from the EU to the UAE isn't only⁣ for tax purposes. It's more general. The UAE was strongly promoted in the past as⁢ "business-friendly". To put things otherwise: "Do your legal business. Make your money. Invest here if︀ you so wish and I won't be staying in your way and charge you with︁ BS". When there are no taxes, accounting is Company's own business and the Government will︂ not put their hands in it - none of their business. Even with a small︃ tax, things change radically, by necessity. You have to state your income and it is︄ to be calculated following a specific pattern (Accounting plan), that must be laid out by︅ the Government. No need to say where all that leads, let alone the fact that︆ there can (and will) be many forms of discrepancy, leading, in their turn, to conflicts︇ to be (hopefully) solved by accountants and lawyers. In other words, that's when the s**t︈ hits the fan!!😡

 

[CrazyPanda]

In the UAE, the first $100,000 of income is exempt from corporate tax also they‌ allow a salary of $20,000 per month to be earned completely tax-free. This results in‍ an effective tax-free threshold of $340,000. Beyond this, only a 9% corporate tax applies, with⁠ no personal income tax.

The UAE’s tax policy invites with the promise of paying zero⁤ tax on the first $340,000, followed by a modest 9% tax rate thereafter. In my⁣ opinion, this makes dealing with problematic zero-tax offshore jurisdictions unnecessary.

 

[GF150]

Yes, I agree with you. For modest businesses, the main burden seems to be not‌ the tax itself but what the taxation process will call for,
one thing leading to‍ the next, as pointed out in #5. We can only hope that this corporate tax⁠ is just for the show-room and that the UAE
Government will not be willing to⁤ really enforce it in a strict EU/USA-style manner.

 

[Martin Everson]

Ok we strayed a little from OP's questions. Lets keep to answering his questions 😛.

 

[OKboomer]

Do you really believe that? The level of technological⁠ advancement of the public sector in the UAE is light-years ahead of most of the⁤ EU. Why would they not enforce that?

 

[GF150]

Because I believe that they don't need this tax.⁠ They did very well without it so far. Why kill the goose that lays golden⁤ eggs ?
I believe, as previously stated, that they introduced some measures in order to⁣ be removed form the black & grey list, as per some undisclosed agreement. As for⁢ tax enforcement, it's another ball game. You have to build from scratch a whole Tax︀ Administration with thousands of trained agents, etc., etc. In the present situation, they cannot check︁ Company's profit, as for many of these the accounting isn't mandatory and they just don't︂ maintain any. Either the Administration will just accept Company's statements as they are or︃ they'll have to put things right by first enforcing a proper accounting. That was my︄ primary concern, BTW. Accounting is a real pain in the neck (and elsewhere) when︅ you have other fish to fry, believe me.