Possible workaround for new UAE Corporate Tax?
- Thread starter imtaku
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Exactly, that's why I really don't understand why anyone would want to use a UAE entity for anything. There is also no limited liability.
The intention of my post was to highlight that when your business has inherently high risk, then UAE might not be the best place to run it.
Evading tax is generally not a good idea.
Perhaps you are more up-to-date then myself (and many others) regarding penalties:
https://www.ebs.ae/tax-evasion-pena...es consist of,tax experts for tax compliance.https://habibalmulla.com/criminal-liability-for-tax-evasion-in-uae/https://www.thenationalnews.com/uae...ails-13-for-money-laundering-and-tax-evasion/https://www.lexology.com/library/detail.aspx?g=a6643f41-b334-4823-871b-3cbbeb265585https://jcauaeaudit.com/tax-evasion-penalties.html
Article (26)
Tax Evasion Penalties
1. Without prejudice to any more severe penalty applicable under any other law, a prison sentence and monetary penalty not exceeding five times the︀ amount of evaded Tax or either of the two, shall be imposed on:
a. a︁ Taxable Person who deliberately fails to settle any Payable Tax or Administrative Penalties.
b. a︂ Taxable Person who deliberately understates the actual value of his Business or fails to consolidate︃ his related Businesses with the intent of remaining below the required registration threshold.
c. a︄ Person who charges and collects amounts from his clients claiming them to be Tax without︅ being registered.
d. a Person who deliberately provides false information and data and incorrect documents︆ to the Authority.
e. a Person who deliberately conceals or destroys documents or other material︇ that he is required to keep and provide to the Authority.
f. a Person who︈ deliberately steals, mis-uses or causes the destruction of documents or other materials that are in︉ the possession of the Authority.
g. a Person who prevents or hinders the Authority’s employees︊ from performing their duties.
h. a Person who deliberately decreases the Payable Tax through Tax︋ Evasion or conspiring to evade Tax.
2. The imposition of a penalty under the provisions︌ of this Law or any other Law shall not exempt any Person from the liability︍ to pay any Payable Tax or Administrative Penalties under the provisions of this Law or︎ any Tax Law.
3. The competent court shall impose Tax Evasion penalties against any Person️ who is proven to have been directly involved or instrumental in Tax Evasion pursuant to said Federal Law No. (3) of 1987.
4. Without prejudice to Clause (2) of this Article, any Person who is proven to have been directly involved or instrumental in Tax Evasion pursuant to Clause (3) of this Article shall be jointly and severally liable with the Person whom he has assisted, to pay the Payable Tax and Administrative Penalties pursuant to this Law or any other Tax Law.
Evading tax is generally not a good idea.
Perhaps you are more up-to-date then myself (and many others) regarding penalties:
https://www.ebs.ae/tax-evasion-pena...es consist of,tax experts for tax compliance.https://habibalmulla.com/criminal-liability-for-tax-evasion-in-uae/https://www.thenationalnews.com/uae...ails-13-for-money-laundering-and-tax-evasion/https://www.lexology.com/library/detail.aspx?g=a6643f41-b334-4823-871b-3cbbeb265585https://jcauaeaudit.com/tax-evasion-penalties.html
Article (26)
Tax Evasion Penalties
1. Without prejudice to any more severe penalty applicable under any other law, a prison sentence and monetary penalty not exceeding five times the︀ amount of evaded Tax or either of the two, shall be imposed on:
a. a︁ Taxable Person who deliberately fails to settle any Payable Tax or Administrative Penalties.
b. a︂ Taxable Person who deliberately understates the actual value of his Business or fails to consolidate︃ his related Businesses with the intent of remaining below the required registration threshold.
c. a︄ Person who charges and collects amounts from his clients claiming them to be Tax without︅ being registered.
d. a Person who deliberately provides false information and data and incorrect documents︆ to the Authority.
e. a Person who deliberately conceals or destroys documents or other material︇ that he is required to keep and provide to the Authority.
f. a Person who︈ deliberately steals, mis-uses or causes the destruction of documents or other materials that are in︉ the possession of the Authority.
g. a Person who prevents or hinders the Authority’s employees︊ from performing their duties.
h. a Person who deliberately decreases the Payable Tax through Tax︋ Evasion or conspiring to evade Tax.
2. The imposition of a penalty under the provisions︌ of this Law or any other Law shall not exempt any Person from the liability︍ to pay any Payable Tax or Administrative Penalties under the provisions of this Law or︎ any Tax Law.
3. The competent court shall impose Tax Evasion penalties against any Person️ who is proven to have been directly involved or instrumental in Tax Evasion pursuant to said Federal Law No. (3) of 1987.
4. Without prejudice to Clause (2) of this Article, any Person who is proven to have been directly involved or instrumental in Tax Evasion pursuant to Clause (3) of this Article shall be jointly and severally liable with the Person whom he has assisted, to pay the Payable Tax and Administrative Penalties pursuant to this Law or any other Tax Law.
Personal Business Income is taxed (so professional services you provide should be declared and taxed). Like Instagram influencer making over 375k per your - it's a business activity.
Personal Non-Business Income is still tax-free (so any dividends, capital gains, inheritance, gifts, forex gains etc are exempt from any taxes). So if you parked 1mil in SPY and another 1mil in some startups - you will not pay any taxes on dividends, exits or capital gains.
Some folks here are trying to be overzealous when it comes to taxation when in reality the tax code is generally reasonable as long as you don't try to bend︀ it very much.
P.S. Seek a professional advice.
Personal Non-Business Income is still tax-free (so any dividends, capital gains, inheritance, gifts, forex gains etc are exempt from any taxes). So if you parked 1mil in SPY and another 1mil in some startups - you will not pay any taxes on dividends, exits or capital gains.
Some folks here are trying to be overzealous when it comes to taxation when in reality the tax code is generally reasonable as long as you don't try to bend︀ it very much.
P.S. Seek a professional advice.
Maybe I have︍ a different idea, I don't see any prison sentence in the violation penalties - https://mof.gov.ae/wp-content/uploa...-the-Application-of-the-Corporate-Tax-Law.pdf
Can you please point me to a sentence in the above pdf, where it says︎ prison time for violation? Remember Corporate Taxation is being dealt with amendments, taking into account️ all previous Tax laws in place, please go through the document objectively.
I stand amended on my︀ previous statement regarding personal income from services. There is a nuance to the CIT legislation︁ -
"Businesses or Business Activities, conducted by a resident or non-resident natural person, shall be︂
subject to Corporate Tax only where the total Turnover derived from such Businesses or Business︃ Activities exceeds AED 1,000,000 (one million United Arab Emirates dirhams) within a Gregorian calendar year."︄
So, I think, if someone is a freelancer, working as a natural person and not︅ as a legal entity, then in that case, if the turnover doesn't exceed 1 million︆ AED, then that person doesn't have to register for CT as CT doesn't come into︇ the picture. My apologies to @imtaku
Source: https://mof.gov.ae/wp-content/uploads/2023/05/Cabinet-Decision-No.-49-of-2023.pdf
Can you please point me to a sentence in the above pdf, where it says︎ prison time for violation? Remember Corporate Taxation is being dealt with amendments, taking into account️ all previous Tax laws in place, please go through the document objectively.
I stand amended on my︀ previous statement regarding personal income from services. There is a nuance to the CIT legislation︁ -
"Businesses or Business Activities, conducted by a resident or non-resident natural person, shall be︂
subject to Corporate Tax only where the total Turnover derived from such Businesses or Business︃ Activities exceeds AED 1,000,000 (one million United Arab Emirates dirhams) within a Gregorian calendar year."︄
So, I think, if someone is a freelancer, working as a natural person and not︅ as a legal entity, then in that case, if the turnover doesn't exceed 1 million︆ AED, then that person doesn't have to register for CT as CT doesn't come into︇ the picture. My apologies to @imtaku
Source: https://mof.gov.ae/wp-content/uploads/2023/05/Cabinet-Decision-No.-49-of-2023.pdf
Sinos, this is because you are referring to administrative penalties and simply︅ disregarding the penal code, which exists in parallel.
It would be a paradise for criminals︆ if you could do whatever and just pay a small fine 🙂
Administrative Penalties:
These are︇ essentially fines imposed for failures to comply with VAT/CIT requirements. Examples include failure to register︈ for tax when required, failure to submit a tax return or make a payment within︉ the required period, and errors leading to incorrect refund claims.
The penalties are detailed in︊ the UAE laws and are often financial in nature, with fixed amounts or percentages of︋ unreported tax depending on the violation.
Criminal Penalties:
These are applied in more serious cases︌ of tax evasion, such as deliberate falsification of records to reduce payable tax or fraud.︍
Penalties might include imprisonment as well as hefty fines - usually both. The nature and︎ extent of the penalty are often determined by the severity of the offense, and cases️ are typically referred to the judiciary by the Federal Tax Authority (FTA).
In severe cases, other repercussions like deportation (for non-citizens) could also apply.
It's crucial to differentiate between unintentional mistakes (which might still incur administrative penalties) and willful tax evasion (which could lead to criminal penalties). In either case, the FTA is the primary body overseeing tax compliance in the UAE, and they have the power to conduct audits, impose penalties, and refer cases for criminal prosecution.
It would be a paradise for criminals︆ if you could do whatever and just pay a small fine 🙂
Administrative Penalties:
These are︇ essentially fines imposed for failures to comply with VAT/CIT requirements. Examples include failure to register︈ for tax when required, failure to submit a tax return or make a payment within︉ the required period, and errors leading to incorrect refund claims.
The penalties are detailed in︊ the UAE laws and are often financial in nature, with fixed amounts or percentages of︋ unreported tax depending on the violation.
Criminal Penalties:
These are applied in more serious cases︌ of tax evasion, such as deliberate falsification of records to reduce payable tax or fraud.︍
Penalties might include imprisonment as well as hefty fines - usually both. The nature and︎ extent of the penalty are often determined by the severity of the offense, and cases️ are typically referred to the judiciary by the Federal Tax Authority (FTA).
In severe cases, other repercussions like deportation (for non-citizens) could also apply.
It's crucial to differentiate between unintentional mistakes (which might still incur administrative penalties) and willful tax evasion (which could lead to criminal penalties). In either case, the FTA is the primary body overseeing tax compliance in the UAE, and they have the power to conduct audits, impose penalties, and refer cases for criminal prosecution.
Hello
Here its written that personal income is still taxed unless it doesnt have a business profile -> Everything You Need to Know About the Corporate Tax in the UAE – What to Do & What to Avoid
Here and on some other pages it says that you can increase that 100 thousands threshold with paying yourself a legit salary 99% of Freezone Companies formed by DLS Dubai remain 0% Corporate Tax – Why?
& on some other pages i read that if you only sell to non-uae personens and businesses you can be fully excluded from the tax as a freezone company.
Here its written that personal income is still taxed unless it doesnt have a business profile -> Everything You Need to Know About the Corporate Tax in the UAE – What to Do & What to Avoid
Here and on some other pages it says that you can increase that 100 thousands threshold with paying yourself a legit salary 99% of Freezone Companies formed by DLS Dubai remain 0% Corporate Tax – Why?
& on some other pages i read that if you only sell to non-uae personens and businesses you can be fully excluded from the tax as a freezone company.
Yes, the relevant part is "legit". It has to be a realistic amount. You can't make 10M in profits and pay out a 10M salary.
That's a lie.
That's a lie.
Yes, if you do manufacturing, there isn't any tax either. But the statement as it is written above is a lie.
I believe you meant 10M sales revenue and paying all that out as salary, otherwise in your case it would not look too bad, e.g.:
30M revenue
10M profits (33.3% of revenue) @ 9% tax
10M salary expense (33.3%) 0% tax
10M outsourced services (33.3%) to Estonian company that does not distribute profits (0% tax)
In such way out of 30M revenue, only 810k tax is paid effectively (2.7%)
30M revenue
10M profits (33.3% of revenue) @ 9% tax
10M salary expense (33.3%) 0% tax
10M outsourced services (33.3%) to Estonian company that does not distribute profits (0% tax)
In such way out of 30M revenue, only 810k tax is paid effectively (2.7%)
I'm not sure how strict they will be about transfer pricing/GAAR. I guess it could work like that - but then 10M are stuck in Estonia and potentially subject to 24% tax later. Unless you find some other way to get the money out (well, maybe with your capital contribution trick).
Yes, well it could be whatever else that makes a better sense. For example a typical Cyprus holding with nominees - Georgia subsidiary structure with IT license which could be effectively 0% tax structure.
For IT licence you must be an IT company and have some economic substance in︀ Georgia (e.g. a local office with Georgian employees, Georgian bank account and phone number).
UAE and Cyprus both have 0% wht, so they are solid options for holding
For IT licence you must be an IT company and have some economic substance in︀ Georgia (e.g. a local office with Georgian employees, Georgian bank account and phone number).
UAE and Cyprus both have 0% wht, so they are solid options for holding
I’m thinking about going for a Small Business Relief. Can redirect payments and get revenue for FZCO under 3M AED in 2024.
However, the previous period revenue was higher. But since the first tax period will be in 2024, maybe it’s not a problem.
What do you think? Is this a valid approach?
However, the previous period revenue was higher. But since the first tax period will be in 2024, maybe it’s not a problem.
What do you think? Is this a valid approach?
If you didn't have to submti accounts for previous years, how would they even know? I would probably still ask them to be sure though.
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