UAE 50 year no corporate tax promise

[ecool]

Like many others, I was promised by my UAE freezone when registering the company that there would be no corporate income tax for at least 50 years from the registration date.

After the latest news, I contacted them to ask about what happened to their promise. Here is their answer:

We cannot comment on promises that were made to you when registering the company but there are new laws applied by the UAE government that we cannot overcome
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I'm curious to know what your freezones told you when asking about their broken promises.

 

[scooterguy]

It's pretty naive to take government promises seriously.

But FZs are still 0% tax, so use them. If they add tax in the future (unlikely), just move on to a new country.

 

[Martin Everson]

ecool said:
Like many others, I was promised by my UAE freezone when registering the company that there would be no corporate income tax for at least 50 years from the registration date.

After the latest news, I contacted them to ask about what happened to their promise. Here is their answer:



I'm curious to know what your freezones told you when asking about their broken promises.
Click to expand...

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

 

[AnonymousCryptoOTC]

scooterguy said:
It's pretty naive to take government promises seriously.

But FZs are still 0% tax, so use them. If they add tax in the future (unlikely), just move on to a new country.
Click to expand...

Starting 2024 most FZ will be taxed.

 

[Rexstone]

ecool said:
Like many others, I was promised by my UAE freezone when registering the company that there would be no corporate income tax for at least 50 years from the registration date.

After the latest news, I contacted them to ask about what happened to their promise. Here is their answer:



I'm curious to know what your freezones told you when asking about their broken promises.
Click to expand...

Hey Ecool, i've gone through a few of your posts about the UAE CT, then I want to share with you my experience and I would be more than happy to hear out your opinion about what I'm gonna say.
I have a FZCO incorporated in IFZA and got in touch with IFZA itself about CT:

Me: will the CT apply also to IFZA FZCOs?
IFZA: yes, however it will apply to the first full financial year after 1st June 2023
Me: then if my current financial year (2023/2024) started on 1st May 2023, will this financial year be taxed?
IFZA: no, the first taxed financial year will be the one that will start on 1st May 2024
Me: what are the rules for changing the start and the end of the financial year?
IFZA: by default, according to IFZA AoA, the first financial year of a FZCO starts on incorporation date and shall be not less than 6 months and not more than 18 months, afterwards by default it will be 1st Jan/31st Dec; if a FZCO wants to move these dates can do it by means of a board resolution
Me: shall that board resolution be signed/approved/registered by you or anyone else? Is there a register for FZCO financial years?
IFZA: no, just keep that board resolution signed and stamped by the company's legal representative in company's records

I have all this written in emails
Now, until 1st May 2024 we're safe, but afterwards? What will the place to be next?
I am currenlty investigating about caribbeans and/or channel islands, any other suggestions?

Thanks

 

[Checkmelater]

Guys I will pay myself and my wife huge salary, bonuses, dividends and commissions, i think i will pay 0-3% tax with approximately 5M AED profits

 

[ecool]

Rexstone said:
Hey Ecool, i've gone through a few of your posts about the UAE CT, then I want to share with you my experience and I would be more than happy to hear out your opinion about what I'm gonna say.
I have a FZCO incorporated in IFZA and got in touch with IFZA itself about CT:

Me: will the CT apply also to IFZA FZCOs?
IFZA: yes, however it will apply to the first full financial year after 1st June 2023
Me: then if my current financial year (2023/2024) started on 1st May 2023, will this financial year be taxed?
IFZA: no, the first taxed financial year will be the one that will start on 1st May 2024
Me: what are the rules for changing the start and the end of the financial year?
IFZA: by default, according to IFZA AoA, the first financial year of a FZCO starts on incorporation date and shall be not less than 6 months and not more than 18 months, afterwards by default it will be 1st Jan/31st Dec; if a FZCO wants to move these dates can do it by means of a board resolution
Me: shall that board resolution be signed/approved/registered by you or anyone else? Is there a register for FZCO financial years?
IFZA: no, just keep that board resolution signed and stamped by the company's legal representative in company's records

I have all this written in emails
Now, until 1st May 2024 we're safe, but afterwards? What will the place to be next?
I am currenlty investigating about caribbeans and/or channel islands, any other suggestions?

Thanks
Click to expand...

You won some months but that doesn't really make a difference. Also if you registered in the past for VAT, check the financial year you wrote there as if it doesn't match maybe when you register for corporate tax you have some problems (I have no idea really, just thinking)

About other places, you can search the forum for other threads but usually the conclusion ends up being that currently UAE keeps being the best place. Reduce your profits as much as you can, and pay 9% on those. That is still better than other places in the world, and UAE is better than the known islands and other s**t holes. But check other threads. This thread is not about such discussion

Checkmelater said:
Guys I will pay myself and my wife huge salary, bonuses, dividends and commissions, i think i will pay 0-3% tax with approximately 5M AED profits
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Remember there are these rules to keep everything at arms length. If you ever get inspected and they see giant salaries that don't match UAE similar roles, they will see you are doing that to evade taxes.

Regarding dividends, they are paid from profits, so unless I'm wrong, you first pay taxes from profits, then you pay dividends from the remaining profits

 

[Rexstone]

ecool thanks for your reply, I will check other threads anyways thank you very much for your answer, much appreciated

I didn't register for VAT (I know there's a 10k aed penalty for late registration, whatever, i'll pay it)

I agree with you about the dividends

ecool said:
Regarding dividends, they are paid from profits, so unless I'm wrong, you first pay taxes from profits, then you pay dividends from the remaining profits
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However I don't see how/who would inspect about paying high salaries and bonuses (potentially up to 60-70% of the profits), offtopic again, i'll check other threads about salaries and bonuses

 

[Checkmelater]

But I don't understand something, I don't need cash in my company, 98% of revenue = Profits = salary for myself, so they will tell me : bro you don't have the right to give you 1M salary ?

Checkmelater said:
But I don't understand something, I don't need cash in my company, 98% of revenue = Profits = salary for myself, so they will tell me : bro you don't have the right to give you 1M salary ?
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The guy who have bank loan and needs to pay 2M AED / month it can be enough to justify he needs huge salary ? lol

 

[ecool]

Checkmelater said:
But I don't understand something, I don't need cash in my company, 98% of revenue = Profits = salary for myself, so they will tell me : bro you don't have the right to give you 1M salary ?


The guy who have bank loan and needs to pay 2M AED / month it can be enough to justify he needs huge salary ? lol
Click to expand...

If 1M salary is a reasonable salary for your position and industry then is no problem. Otherwise they will tell you that you are paying yourself a big salary to avoid paying taxes, so you should have a lower salary, pay taxes on profits and then distribute dividends to yourself