UAE freezone company audit

[lifeisfun]

Is there any exact date set when there will be new rules set for UAE freezone companies based on CIT laws?
I have UAE freezone company and still considering between having this UAE freezone company or incorporate in some other countries. I have ecommerce business.
Will be audit required for freezone companies as proof of non CIT obligation?
Costs of audit make a huge difference for me. I have huge amount of transactions. Audit for 20k transactions / year are too high for me.
I have aututomated almost all accounting processes. So accounting costs are not so high. But if I shall pay additional 100K AED just for audit, I will consider moving to some other jurisdictions.

 

[Martin Everson]

lifeisfun said:
Is there any exact date set when there will be new rules set for UAE freezone companies based on CIT laws?
Click to expand...

https://mof.gov.ae/corporate-tax-faq/
See point 4 in above link

lifeisfun said:
Will be audit required for freezone companies as proof of non CIT obligation?
Costs of audit make a huge difference for me. I have huge amount of transactions. Audit for 20k transactions / year are too high for me.
Click to expand...

See below thread.

https://www.offshorecorptalk.com/th...ar-audit-for-free-zone-entity-in-dubai.37572/
Otherwise @Fred Is the expert on everything Dubai.

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[JackAlabama]

Martin Everson said:
https://mof.gov.ae/corporate-tax-faq/
See point 4 in above link




See below thread.

https://www.offshorecorptalk.com/th...ar-audit-for-free-zone-entity-in-dubai.37572/
Otherwise @Fred Is the expert on everything Dubai.
Click to expand...

Section P. is also relevant for freezones.

 

[lifeisfun]

Law sets one of conditions:
adequate substance. What everything does it?
Physical office? Flexi desk? Staff?

I have not found information if Audit will be mandatory to show having all conditions fulfilled.

 

[RealDude]

Let's imagine hypothetically that the UAE introduces a CIT in all freezones. What do you do then, move away?

At what tax rate is your pain threshold?

 

[lifeisfun]

It is not about pain treshold. It is all about math. If I shall pay high fees for accounting, audit and pay tax afterwords, there are more jurisdictions where numbers will look better.

What is diffence between UAE and Hong Kong for ecommerce biz?
Cost of accounting and audit.
If I shall pay as much in UAE as in Hong Kong, there is no reason to hold business in UAE.
Hong kong has lower fees for Stripe payment processing (-2 %).
Hong Kong offers (still) tax exemption regime.
If there will be audit required for UAE Freezone companies, business conditions will be more expensive than in Hong Kong, Malaysia, ...

 

[JohnnyDoe]

SoNewToAllShit said:
As of my knowledge cutoff of September 2021
Click to expand...

Where “my” means ChatGPT's

Toggle signature

@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[JackAlabama]

lifeisfun said:
It is not about pain treshold. It is all about math. If I shall pay high fees for accounting, audit and pay tax afterwords, there are more jurisdictions where numbers will look better.

What is diffence between UAE and Hong Kong for ecommerce biz?
Cost of accounting and audit.
If I shall pay as much in UAE as in Hong Kong, there is no reason to hold business in UAE.
Hong kong has lower fees for Stripe payment processing (-2 %).
Hong Kong offers (still) tax exemption regime.
If there will be audit required for UAE Freezone companies, business conditions will be more expensive than in Hong Kong, Malaysia, ...
Click to expand...

There is nothing written about any audit requirement so far.

 

[Fred]

lifeisfun said:
It is not about pain treshold. It is all about math. If I shall pay high fees for accounting, audit and pay tax afterwords, there are more jurisdictions where numbers will look better.

What is diffence between UAE and Hong Kong for ecommerce biz?
Cost of accounting and audit.
If I shall pay as much in UAE as in Hong Kong, there is no reason to hold business in UAE.
Hong kong has lower fees for Stripe payment processing (-2 %).
Hong Kong offers (still) tax exemption regime.
If there will be audit required for UAE Freezone companies, business conditions will be more expensive than in Hong Kong, Malaysia, ...
Click to expand...

Wrong.

You compare apples with bananas.

While a HK Ltd with Offshore Status can be compared with a single member US LLC as disregarded pass through LLC - a Dubai Freezone Company grants you a tax free Permanent Residence.

HK Ltd. with Offshore Status can't get any local HK banking done as the Banks want to see substance which automatically triggers the Tax Authority charging you 16.5% in CT.

While we are bottom line looking at filling a sheet of paper to confirm to have no local UAE Mainland income with Freezones.

No matter what - if you make decent numbers - for this pricetag - it's Dubai Freezone Company with the Tax Free Residence it comes along with - all the time.

SG is 17% CT and can get with a lot of struggle and again paying down but not to 0% CT - audit and proper bookkeeping of course and a resident director.

Labuan in Malaysia is going back and forth with regulations and rules - local employees required and a proper office. You get then maybe fully fledged retail banking done with a proper bank like OCBC but you look for this at 30000-40000 USD yearly running costs.

What else? US LLC and HK Ltd as discussed above.

For rich Banana Island lovers you have Bahamas and Cayman Islands which requires 750000-2000000$ to get a Permanent Residence.

Monaco for the super rich but then again only Residence is Tax Free.

Everything beyond this you are looking again at Tax - no matter what.

Toggle signature

 

[GeneralGogol]

Fred said:
Everything beyond this you are looking again at Tax - no matter what.
Click to expand...

You can also live in Cyprus and operate offshore companies the same way half the people there do and pay 0% tax.
No substance, audit or anything required. And if you got 6 fig you can even get some solid banking in reputable jurisdiction (and use EMIs for transactional banking).

 

[Fred]

GeneralGogol said:
You can also live in Cyprus and operate offshore companies the same way half the people there do and pay 0% tax.
No substance, audit or anything required. And if you got 6 fig you can even get some solid banking in reputable jurisdiction (and use EMIs for transactional banking).
Click to expand...

Again no Tax Free Residence and EU - banking is a pain.

Yes you can calculate you poor on the personal income side but why all this headache and paperwork again - of course let other guys dealing with it but then look at what you are paying - does only make sense if you are willing to spend and if you are wiling to spend - go the Dubai Company route and you have it all just with less headache.

Toggle signature

 

[lifeisfun]

Fred said:
Wrong.

You compare apples with bananas.

While a HK Ltd with Offshore Status can be compared with a single member US LLC as disregarded pass through LLC - a Dubai Freezone Company grants you a tax free Permanent Residence.

HK Ltd. with Offshore Status can't get any local HK banking done as the Banks want to see substance which automatically triggers the Tax Authority charging you 16.5% in CT.

While we are bottom line looking at filling a sheet of paper to confirm to have no local UAE Mainland income with Freezones.

No matter what - if you make decent numbers - for this pricetag - it's Dubai Freezone Company with the Tax Free Residence it comes along with - all the time.

SG is 17% CT and can get with a lot of struggle and again paying down but not to 0% CT - audit and proper bookkeeping of course and a resident director.

Labuan in Malaysia is going back and forth with regulations and rules - local employees required and a proper office. You get then maybe fully fledged retail banking done with a proper bank like OCBC but you look for this at 30000-40000 USD yearly running costs.

What else? US LLC and HK Ltd as discussed above.

For rich Banana Island lovers you have Bahamas and Cayman Islands which requires 750000-2000000$ to get a Permanent Residence.

Monaco for the super rich but then again only Residence is Tax Free.

Everything beyond this you are looking again at Tax - no matter what.
Click to expand...

I understand that you as person selling UAE will argue just dor that.
HK banks has no problem with companies without substance. They have this problem just with newbies and ralsk about substance requirement is just about having a good looking reason how to say no. In reality, if you are able to show at least 7-8 figures in your foreign business turmover which you want to move to HK entity, they will welcome you.
Your argument works just for newbies, small startups.. etc..

Let calculate together:

Ecommerce company widh turnover 2 mil USD in approx 40k transactions.

UAE:
License: 5K
Substance (as required for maintaining a 0 CT): 12K
Accounting: 40K
Audit: 20K
Tax: 0
Loss in card processing fees: 40K

Total for UAE: 107K USD

Honf Kong:
License: 0
Substance: Not required
Accounting: 40K
Audit: 40 K
Tax: 0

Total for HK: 80K

Fred, I understand that selling IFZA in UAE is your business. But UAE are loosing their position. At least for a medium sized business.

 

[turtle]

VAT was introduced several years ago and now corporate tax is coming, making Dubai less attractive certainly. Yes you can comply with VAT or try to avoid CT but all of them will consume your time and money. I can also verify that banking and accounting services are much better in Hong Kong.

 

[Fred]

lifeisfun said:
I understand that you as person selling UAE will argue just dor that.
HK banks has no problem with companies without substance. They have this problem just with newbies and ralsk about substance requirement is just about having a good looking reason how to say no. In reality, if you are able to show at least 7-8 figures in your foreign business turmover which you want to move to HK entity, they will welcome you.
Your argument works just for newbies, small startups.. etc..

Let calculate together:

Ecommerce company widh turnover 2 mil USD in approx 40k transactions.

UAE:
License: 5K
Substance (as required for maintaining a 0 CT): 12K
Accounting: 40K
Audit: 20K
Tax: 0
Loss in card processing fees: 40K

Total for UAE: 107K USD

Honf Kong:
License: 0
Substance: Not required
Accounting: 40K
Audit: 40 K
Tax: 0

Total for HK: 80K

Fred, I understand that selling IFZA in UAE is your business. But UAE are loosing their position. At least for a medium sized business.
Click to expand...

Again wrong.

I never met a person - no matter ho much he got ripped of - who is actually paying 180000 USD for Dubai same I never met a client who formerly or still is using HK and pays 80000 USD per year - even not with 40k transactions.

@JackAlabama what is your renew fee actually with 2 Residence Visa - 5000-6000 USD if even?

This has nothing to do with what we sell - I mentioned above other options as well and why they are more cost intensive and general speaking require more paperwork compared to Dubai. Better make yourself familiar with our proposal before claiming such bulls**t and framing me as the subjective Dubai Company seller while I mentioned one post earlier several other jurisdictions and why they are not so attractive.

Yes - everyone not making 7-8 figures is actually a newbie and startup and has no possibilities to setup a tax free structure - this Forum is sometimes really sad with the amount of nonsense published by some users.

Everyone who actually reads this - you can setup an effektive working tax free structure without making 7-8 figures especially if you don't make this number yet you can utilise a Tax Free Setup to get at to this point.

Beside of that - to give each post some real value for everyone - we have recently more then every clients from China and even Hong Kong itself looking to pull there money out due to the recently geopolitical risks associated with the war in ukraine and general things not going exactly well in china - but yes Hong Kong is Hong Kong and has nothing to do with China 😀

Toggle signature

 

[JackAlabama]

Fred said:
Again wrong.

I never met a person - no matter ho much he got ripped of - who is actually paying 180000 USD for Dubai same I never met a client who formerly or still is using HK and pays 80000 USD per year - even not with 40k transactions.

@JackAlabama what is your renew fee actually with 2 Residence Visa - 5000-6000 USD if even?

This has nothing to do with what we sell - I mentioned above other options as well and why they are more cost intensive and general speaking require more paperwork compared to Dubai. Better make yourself familiar with our proposal before claiming such bulls**t and framing me as the subjective Dubai Company seller while I mentioned one post earlier several other jurisdictions and why they are not so attractive.

Yes - everyone not making 7-8 figures is actually a newbie and startup and has no possibilities to setup a tax free structure - this Forum is sometimes really sad with the amount of nonsense published by some users.

Everyone who actually reads this - you can setup an effektive working tax free structure without making 7-8 figures especially if you don't make this number yet you can utilise a Tax Free Setup to get at to this point.

Beside of that - to give each post some real value for everyone - we have recently more then every clients from China and even Hong Kong itself looking to pull there money out due to the recently geopolitical risks associated with the war in ukraine and general things not going exactly well in china - but yes Hong Kong is Hong Kong and has nothing to do with China 😀
Click to expand...

my renewal for the company license with 2 visa was about 22k AED.

Is there now an audit requirement? It does not look like it.
https://mof.gov.ae/corporate-tax-faq/ Section P.
On official website, I read self-assessment principle and 0% being automaticly applied.

 

[lifeisfun]

JackAlabama said:
my renewal for the company license with 2 visa was about 22k AED.

Is there now an audit requirement? It does not look like it.
https://mof.gov.ae/corporate-tax-faq/ Section P.
On official website, I read self-assessment principle and 0% being automaticly applied.
Click to expand...

Have you red carefully?
First condition - substance.requirement Do you have physical office and staff? I expect you do not (based on 22K AED fee). If you do not have, forget to 0 % CIT.
Self assesment is not mentioned anywhere. "Automatic" means that you do not have to apply for 0 % CIT. But it does not mean that you do not have to have accounting + audit.

 

[Fred]

lifeisfun said:
Have you red carefully?
First condition - substance.requirement Do you have physical office and staff? I expect you do not (based on 22K AED fee). If you do not have, forget to 0 % CIT.
Self assesment is not mentioned anywhere. "Automatic" means that you do not have to apply for 0 % CIT. But it does not mean that you do not have to have accounting + audit.
Click to expand...

He has a fully fledged office otherwise we wouldn't have got @JackAlabama ENBD Business done.

@lifeisfun better get a free initial consultation from us if not already happened - seems you have absolutely wrong informations on your end available and you are loosing in opportunity with this wrong assumptions from your side.

Toggle signature

 

[JackAlabama]

lifeisfun said:
Have you red carefully?
First condition - substance.requirement Do you have physical office and staff? I expect you do not (based on 22K AED fee). If you do not have, forget to 0 % CIT.
Click to expand...

It is the license renewal fee only, other costs have not been mentioned. But this is written in my post and indicated as such.
Of course there is some other cost involved and I also eat sometimes, which adds to cost of doing business as well. 😉

lifeisfun said:
Self assesment is not mentioned anywhere.
Click to expand...

"A self-assessment regime is one where taxpayers are responsible for calculating, reporting and paying their taxes." -- look at point 142.
Free alpha: Ctrl+F enables search function and you can type: self
Again, you cannot deduct an audit requirement from this one either.
Since you know it so well, where is your audit requirement clearly written in section P. for example?

lifeisfun said:
"Automatic" means that you do not have to apply for 0 % CIT. But it does not mean that you do not have to have accounting + audit.
Click to expand...

There may or may not be one, but as things look like now its far from being clear.
You seem to interpret stuff, which is fine. But at the end of the day, it is just guessing.

 

[uplana]

GeneralGogol said:
You can also live in Cyprus and operate offshore companies the same way half the people there do and pay 0% tax.
No substance, audit or anything required. And if you got 6 fig you can even get some solid banking in reputable jurisdiction (and use EMIs for transactional banking).
Click to expand...

Is that legal or does people just do it?

Toggle signature
Find help to the ultimate anonymous setup on OffshoreCorpTalk - Tried, Tested & Works
Need help to get things done, ping me inside the Mentor Group Gold forums.

 

[Don]

uplana said:
Is that legal or does people just do it?
Click to expand...

it is just not enforced (legal until you get busted)

• A company is a tax resident of Cyprus if it is managed and controlled in Cyprus.
• Cyprus domestic income tax legislation explicitly provides for the determination of a taxable Cyprus PE of a non-Cyprus tax resident company (based on the OECD model).
  + you have ATAD, CFC rules, etc.

GeneralGogol said:
You can also live in Cyprus and operate offshore companies the same way half the people there do and pay 0% tax.
No substance, audit or anything required. And if you got 6 fig you can even get some solid banking in reputable jurisdiction (and use EMIs for transactional banking).
Click to expand...

Why not go to Kosovo for this where you have:

• Banking in EUR with free access to the European Union market and neighbouring markets
• No CRS
• 10% CIT, 10% PIT
• Dividends received are exempt from tax
• The tax system is kept extremely simple
• NO EU directives like ATAD, BEPS, DAC6, DAC7, AML

Last edited: Mar 6, 2023