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

[yngmind]

Bill D said:
I mean as an individual (physical person) trading your own assets, not as a company
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Make sense, that means you will be taxed by personal income tax, which 0%
So no tax applies in that case.

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[Bill D]

yngmind said:
Make sense, that means you will be taxed by personal income tax, which 0%
So no tax applies in that case.
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are you sure that actively managing your own asset is exempt from ct? because it doesn't sound like the wording authorities used.
It is said in the Decree that Physical persons should pay CT if they conduct a business in the UAE.
They define business as « any activity conducted regularly on an ongoing and independant basis by any Person and in any location, such as industrial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible assets » and business activity as : « any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of Business »

 

[yngmind]

Bill D said:
are you sure that actively managing your own asset is exempt from ct? because it doesn't sound like the wording authorities used.
It is said in the Decree that Physical persons should pay CT if they conduct a business in the UAE.
They define business as « any activity conducted regularly on an ongoing and independant basis by any Person and in any location, such as industrial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible assets » and business activity as : « any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of Business »
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No, physical persons or individuals cannot be taxed by corporate tax. Corporate tax is a tax imposed on companies or legal entities, such as corporations, partnerships, and limited liability companies, on their taxable income or profits.

Individuals, on the other hand, are typically taxed on their personal income through personal income tax. The tax rates, exemptions, and deductions for individuals can vary depending on the jurisdiction, but the basic principle is that individuals are taxed on their earnings from employment, business activities, investments, and other sources.

It's important to note that there are some cases where individuals may be required to pay tax on the income they earn from a business they own, such as self-employment tax, but this is distinct from corporate tax and is based on the individual's personal income rather than the company's profits.

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[Bill D]

yngmind said:
No, physical persons or individuals cannot be taxed by corporate tax. Corporate tax is a tax imposed on companies or legal entities, such as corporations, partnerships, and limited liability companies, on their taxable income or profits.

Individuals, on the other hand, are typically taxed on their personal income through personal income tax. The tax rates, exemptions, and deductions for individuals can vary depending on the jurisdiction, but the basic principle is that individuals are taxed on their earnings from employment, business activities, investments, and other sources.

It's important to note that there are some cases where individuals may be required to pay tax on the income they earn from a business they own, such as self-employment tax, but this is distinct from corporate tax and is based on the individual's personal income rather than the company's profits.
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"Natural persons will be subject to Corporate Tax as a “Resident Person” on income from both domestic and foreign sources, but only insofar as such income is derived from a Business or Business Activity conducted by the natural person in the UAE."
source : https://mof.gov.ae/corporate-tax/

I would be interested how you can be sure already day trading your own asset is not within that scope

 

[turtle]

yngmind said:
No, physical persons or individuals cannot be taxed by corporate tax.
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They can if they conduct business activities including foreign countries.

 

[yngmind]

Bill D said:
"Natural persons will be subject to Corporate Tax as a “Resident Person” on income from both domestic and foreign sources, but only insofar as such income is derived from a Business or Business Activity conducted by the natural person in the UAE."
source : https://mof.gov.ae/corporate-tax/

I would be interested how you can be sure already day trading your own asset is not within that scope
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turtle said:
They can if they conduct business activities including foreign countries.
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Who said investing in the stock market or trading is considered a business activity?

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[Bill D]

yngmind said:
Who said investing in the stock market or trading is considered a business activity?
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awaiting for the cabinet decision, but with the current wording that I quote in my last post day trading is fitting in that definition of business activity ?

 

[yngmind]

Bill D said:
awaiting for the cabinet decision, but with the current wording that I quote in my last post day trading is fitting in that definition of business activity ?
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No, it's not.

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[Bill D]

yngmind said:
No, it's not.
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« any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of Business » where business include "any activity conducted regularly on an ongoing and independant basis by any Person... or any other activity related to the use of tangible or intangible assets", wording like that include assets/stocks/crypto day trading or I miss something ?
Probably the cabinet decision clarify that, hopefully, but worded as that, am I the only one to understand it this way ?

 

[yngmind]

Bill D said:
« any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of Business » where business include "any activity conducted regularly on an ongoing and independant basis by any Person... or any other activity related to the use of tangible or intangible assets", wording like that include assets/stocks/crypto day trading or I miss something ?
Probably the cabinet decision clarify that, hopefully, but worded as that, am I the only one to understand it this way ?
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You don't conduct any operations.

Your broker does.

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[turtle]

yngmind said:
Who said investing in the stock market or trading is considered a business activity?
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Personal investing is a different thing. He is talking about active trading and it is considered a business activity and taxed in many countries. It can be like that in UAE as well, waiting for law clarification from FTA. Also if you engage in any business in UAE or any foreign country as an individual(like freelancing) then you will be subject to corporate tax as an individual.

 

[algotrader]

turtle said:
Personal investing is a different thing. He is talking about active trading and it is considered a business activity and taxed in many countries. It can be like that in UAE as well, waiting for law clarification from FTA.
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Looks like they are planning to exempt capital gains and dividends in most cases although I'm not sure what the conditions of the participation exemption are:

"UAE businesses will be subject to CT on their worldwide income. However, dividend income and capital gains will be exempt, subject to meeting the conditions of the participation exemption. "
https://www.ey.com/en_gl/tax-alerts/uae-ministry-of-finance-releases-corporate-tax-law--detailed-rev

 

[Bill D]

algotrader said:
Looks like they are planning to exempt capital gains and dividends in most cases although I'm not sure what the conditions of the participation exemption are:

"UAE businesses will be subject to CT on their worldwide income. However, dividend income and capital gains will be exempt, subject to meeting the conditions of the participation exemption. "
https://www.ey.com/en_gl/tax-alerts/uae-ministry-of-finance-releases-corporate-tax-law--detailed-rev
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I think these participation exemption requirement are only for legal entities, from what I could understand in the decree

 

[algotrader]

ok, seems to apply only to shareholders with significant stakes >= 5% of (not applicable to traders) :
"The regime of corporate tax in the UAE will exempt dividends paid by foreign companies, and capital gains from the sale of shares in both UAE and foreign companies subject to certain conditions. The chief condition for this participation exemption is that the UAE shareholder company should own at least 5% of the shares of the subsidiary company. Moreover, the participation exemption can be availed only if the foreign subsidiary is subject to corporate tax (or an equivalent tax) at a rate of at least 9%. This condition is to prevent income from being shifted to a subsidiary in a no- or low-tax country."
https://jcauaeaudit.com/exempt-income-under-the-uae-corporate-tax/

 

[Bill D]

algotrader said:
ok, seems to apply only to shareholders with significant stakes >= 5% of (not applicable to traders) :
"The regime of corporate tax in the UAE will exempt dividends paid by foreign companies, and capital gains from the sale of shares in both UAE and foreign companies subject to certain conditions. The chief condition for this participation exemption is that the UAE shareholder company should own at least 5% of the shares of the subsidiary company. Moreover, the participation exemption can be availed only if the foreign subsidiary is subject to corporate tax (or an equivalent tax) at a rate of at least 9%. This condition is to prevent income from being shifted to a subsidiary in a no- or low-tax country."
https://jcauaeaudit.com/exempt-income-under-the-uae-corporate-tax/
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yes and for natural persons it was clearly mentionned any dividends or profit from the sale of shares is exempted from CT (no need to hold more than 5%), if I get it right

Last edited: Feb 11, 2023

 

[Fred]

turtle said:
It can be like that in UAE as well, waiting for law clarification from FTA.
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If we even get a clarification - wouldn't be surprised when FTA doesn't care about some Europeans trying to interpret more in to what's actually there.

Looking again from pratice point of view on such a matter - I'm asking myself - where is the infrastructure and manpower to enforce a control when some Guy on the Palm Jumeirah doing daytrading on IBKR US.

Sorry but dealing daily with licensing Authorities and Immigration of the UAE - I don't believe in this conversation here - when the Immigration of a Country does issue all the time for Taiwan and Hong Kong Passport Holder a Mainland China Visa in the first stage and then needs to be pressured and pushed back on issuing it on the correct Passport Country - last year some Licensing Authority Servers where down for Months and endless of other things whoch actually shouldn't be a big deal or at least not happen again and again - I'm asking myself how they want to enforce what's discussed here - are they even interested in - do they even need to Tax you because the Government needs the money? I don't think so. They do more money from Tourism and Real Estate Transactions then ever before.

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[Mercury]

Fred said:
If we even get a clarification - wouldn't be surprised when FTA doesn't care about some Europeans trying to interpret more in to what's actually there.

Looking again from pratice point of view on such a matter - I'm asking myself - where is the infrastructure and manpower to enforce a control when some Guy on the Palm Jumeirah doing daytrading on IBKR US.

Sorry but dealing daily with licensing Authorities and Immigration of the UAE - I don't believe in this conversation here - when the Immigration of a Country does issue all the time for Taiwan and Hong Kong Passport Holder a Mainland China Visa in the first stage and then needs to be pressured and pushed back on issuing it on the correct Passport Country - last year some Licensing Authority Servers where down for Months and endless of other things whoch actually shouldn't be a big deal or at least not happen again and again - I'm asking myself how they want to enforce what's discussed here - are they even interested in - do they even need to Tax you because the Government needs the money? I don't think so. They do more money from Tourism and Real Estate Transactions then ever before.
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Same for Thailand and similar countries. The only relevant point is not the law itself but how/if the law is really enforced.

We keep reading here and there scaremongers quoting the law of such particular country. However, in order to understand how it truly works one should live there or take sound advice from people having spent enough time in the field.

 

[khinkali]

Mercury said:
The only relevant point is not the law itself but how/if the law is really enforced.
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There is normally some notice before a new law takes effect, while enforcement practices are more likely to change without warning. In many jurisdictions, a change of enforcement practice is much more likely to be backdated than a new law.

So if we know both the legal perspective and enforcement history as of yesterday, we have more likelihood of judging the risks of tomorrow.

I'm not saying not to take risks, but I would prefer to have some understanding of what they are.

 

[RealDude]

Mercury said:
Same for Thailand and similar countries. The only relevant point is not the law itself but how/if the law is really enforced.

We keep reading here and there scaremongers quoting the law of such particular country. However, in order to understand how it truly works one should live there or take sound advice from people having spent enough time in the field.
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😉

https://sherrings.com/tax-evasion-in-thailand.html

 

[yngmind]

I was wondering if I will be a perpetual traveler and tax resident of the UAE.

Are there any risks to creating a PE in the UAE?

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