Does UAE classify foreign companies as local Taxable residents?

[Cloudbanck]

A UAE company pays UAE corporate tax‌ by default. If additionally Qatar deems the company as being tax resident in Qatar then‍ there could be tax in both countries. In this case a double tax treaty between⁠ Qatar and the UAE (or some GCC treaty) could determine that tax is only payable⁤ in one of the two countries.

And if Qatar doesnt deem the company in question⁣ to be tax resident in Qatar, then it only pays tax in the UAE.

But in no case will there be no corporate tax.

A more interesting case is a⁢ Dutch citizen with an Emirates id living in the UAE at least 9 months per︀ year, and owning a single member US LLC. This US LLC has a three person︁ board with two board members who are residents in Bahrain, and the dutch guy. All︂ board meetings take place in Bahrain and board meeting minutes are duly taken.
The US︃ LLC has no office in the UAE, is managed from a laptop and sells services︄ online to a small number of clients all over the world with very long contracts.︅

Will the US LLC have effective management and control in the UAE and pay UAE︆ corp tax?

 

[Don]

Certain activities are exempt from tax in the UAE.︀ Qatar has territorial tax, so foreign-source income should not be taxed.
If the board oversees global operations︉ and makes strategic decisions in the UAE, it could be liable for taxes there.
If you keep, e.g., a local warehouse in UAE, it will most often be just a︊ PE (provided management is elsewhere).

 

[Chroft]

What if one is‌ thinking hard on a decision in UAE, but then goes to Bahrain and makes it‍ finally there? From the perspective of tax authorities, what is considered the trigger for "committing⁠ to a strategic decision" and how could they investigate it?

 

[Cloudbanck]

I think they will just look at the paperwork of where⁤ the decisions took place (e.g. minutes of board meetings) and where the decision makers are⁣ residents.

 

[Chroft]

Let us go further and consider a scenario where the minutes were signed‍ in Bahrain. The formal decision maker is a resident of Singapore and has the position⁠ of general manager, as appointed by the director. The director is a UAE resident, but⁤ at the same time he has limited the scope of his responsibility by an internal⁣ corporate resolution and excluded for himself the right to make strategic decisions and participate in⁢ the control of the company's activities - transferring these functions to the general manager. What︀ assessment can the UAE tax authorities make in this case?

 

[jafo]

You ask every employee in the UAE 👎 this separately, and you will get‍ (n²) answers. Why? They do NOT face any punishment for their mistakes.

 

[Chroft]

It is even worse. I have asked much more simple questions to local people⁠ in the UAE who consider themselves lawyers and received different answers, sometimes even contradictory ones.⁤

 

[jafo]

smi(&% rof/%
I'm sorry I laughed. This was very funny (and true!) smi(&%

 

[JackAlabama]

its true. I had that many times.

 

[dany]

You mean it⁤ is not worth it to use your UAE company for doing business online diretcly? to⁣ much work and hassle?

 

[JackAlabama]

No, i dont‍ mean that.
it can still be totally worthwhile if you want to stay in uae⁠ for long. Work on your business expenses and you depending on your overall income profile⁤ it may still be worth it.

 

[dany]

okay, what I mean if you don't live in the UAE and don't have plans‌ to live there but you only want the company to be there say for privacy‍ reasons.

 

[OffshorePhantom]

If you do not plan to live in UAE⁠ nor make any business with locals there is no reason to have a company there⁤ nowadays, since you will pay the 9% CIT and on top have to keep accounting⁣ and also be subject to audits.

If you want privacy you can opt in for⁢ a US LLC in Wyoming (or New Mexico) for example and nominate a manager resident︀ in a tax free or territorial tax country to manage it, privacy and tax wise︁ it would be better.

 

[Nw1]

If possible best would be︈ to get same company that sponsors your wife visa to sponsor you too for which︉ you could possibly pay them a fee or find a different company that can do︊ same. And then don't take salary from company u have 0 tax just when you︋ need money take a loan from your company also called as Drawings. So u run︌ other company as it is and live in UAE using the visa.

So tell me︍ what way did u manage to get the 0% tax entity? Which country and do︎ they have no reporting requirements like annual return, audits etc?

 

[EliasIT]

Can you‌ elaborate on this please?

 

[TheCryptoAnt]

In paper yes, foreign‌ corps will be taxed at 9% because of CFC.
In practice (so far), nobody is‍ asking questions.

 

[daniels27]

I think only PE‍ rules as there are no CFC rules in UAE.

But for the PE, we recently discussed that⁤ there isn't really a PE concept in the GCC as it was widely tax-free and⁣ the law is fairly new:

 

[TheCryptoAnt]

word

Overall what Im trying to say is that 'this is Dubai‍ habibi, no taxes here, no questions neither (at least for now)

 

[Redhue]

Any updates on this topic?

 

[sergeylim88]

if you stay less then 90 days there should be no issue