New Corp Tax In Dubai. Please Help

[Johnwills]

hi there, some really useful info on this forum. Perhaps somebody can help

i have a freezone company in dubai that owns property in europe. this uae compay receives rental income from these european properties.

will the new 9% corp tax apply to this rental income?

I cannot find this answer anywhere and the tax advisors dont seem to know either.

Anybody that can answre it would be amazing. many thanks

 

[Clank]

Corp tax does not apply to FZ

 

[KDX]

Are you sure that the company does not have a Permanent Establishment (PE) in⁢ Europe? If you are primarily just receiving income, you could say that the majority of︀ the business interest and operations are in Europe therefore you need to pay tax there?︁ I would ask your tax advisors that. Better be safe than sorry.

 

[tolstoy]

For Freezone Company it is zero tax mate.

 

[CyprusLawyer101]

No tax should be payable in Freezone Dubai, but certainly some tax should be payable‌ in the country of source where the RE is located

 

[KDX]

Yeah, this setup doesn't seem very solid. All it takes is one audit and poof!⁠

 

[Hmmm]

Companies which registered in Freezone Dubai, could get UAE Taxation Residence Certificate?
How I understood‌ without this certificate you cannot apply for double treaties?
ref: UAE Taxes 2022: a Taxation‍ System in the United Arab Emirates

 

[Mr Gus]

What European country?

It depends if the country has a tax treaty with the⁢ UAE but most of the time profits from real estate are taxed in the country︀ where the RE is located, but some tax treaties offer exclusions.

 

[CyprusLawyer101]

Are there still any such Treaties out there?

 

[Anonymous1234]

UAE Freezone company is tax exempt in UAE unless it generates business in the mainland‌ (inside uae). But, real estate income in all of europe is taxed at source country‍ meaning the country where the real estate is located.

 

[Johnwills]

hi thanks for your replies.

There is a flat rate of 25% on foreign companies‌ owning real estate in this country. The foreign company registers with the tax authorities in‍ this european country and pays this special reduced rate on any rental income. I have⁠ done this. It does not owe further tax in the european country other than the⁤ 25%

My question is to do with Dubai. I have read the new corporation tax⁣ law in the UAE and it is not very clear. It states the following for⁢ freezones.

Free zones: Qualifying free zone persons will be subject to 0% CT on qualifying︀ income and 9% CT on non-qualifying income.

It does not clearly state what is qualifying︁ income. Yes you have an office and substance in the UAE as well as resident︂ directors but it is not clear on the activity, and whether rental income will be︃ exempt. Hence my question

 

[KDX]

As long as it is not︄ doing business in the mainland e.g. rental income from Dubai properties. Of course, this is︅ talking about the FZ companies.

 

[Anonymous1234]

if your company is paying taxes︄ where they are due then just declare the income received and you dont have to︅ pay any tax in UAE for freezone. Freezone company is technically outside UAE as per︆ their tax law but physically inside UAE. Like the non dom taxation in UK and︇ ireland. Unless and until any income is received or generated inside UAE mainland, you pay︈ zero taxes for freezone company. More like territorial taxation system is applicable for freezone company.︉ Hope it helps.