No, the UAE charges CIT even if you don't have a company, such as freelancing under your own name. Where other countries would be charging PIT.
Setting Up an Anonymous, Low-Cost Tax-Free Company Globally in 2024 with Minimal Compliance Requirements?
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That's possible, as salary income isn't taxed. In theory, however, they could charge CIT on the PE, or even deem the whole company tax resident in the UAE.
Just like if you were living in e.g. Denmark and you were running a UAE company from there, which just pays you a "salary".
In practice, however, so far this isn't happening.
So you could absolutely live in Dubai and live off a salary︀ from a Swiss company - the salary would not be taxed in Dubai and it︁ would be a deductible expense for the company.
Provided that the salary is "reasonable". You︂ can't pay a $20m salary - then the Swiss would say it's a hidden distribution.︃
You would of course need a visa to live in Dubai, but there are lots︄ of options now.
You could try a digital nomad visa (but I believe it has︅ to be renewed every year), or a golden visa based on a real estate investment,︆ or even a fixed term deposit in a UAE bank.
Or you could also get︇ a freelance visa or set up a local company - I don't think they care︈ if you have any revenue.
Just like if you were living in e.g. Denmark and you were running a UAE company from there, which just pays you a "salary".
In practice, however, so far this isn't happening.
So you could absolutely live in Dubai and live off a salary︀ from a Swiss company - the salary would not be taxed in Dubai and it︁ would be a deductible expense for the company.
Provided that the salary is "reasonable". You︂ can't pay a $20m salary - then the Swiss would say it's a hidden distribution.︃
You would of course need a visa to live in Dubai, but there are lots︄ of options now.
You could try a digital nomad visa (but I believe it has︅ to be renewed every year), or a golden visa based on a real estate investment,︆ or even a fixed term deposit in a UAE bank.
Or you could also get︇ a freelance visa or set up a local company - I don't think they care︈ if you have any revenue.
Heres one example.
Under the United Arab Emirates (UAE) Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and international tax principles, a foreign company may have a Permanent Establishment (PE) in the UAE without being liable for Corporate Income Tax (CIT) if its activities are considered auxiliary or preparatory in nature. Here’s how this could apply:
1. Definition of Permanent Establishment (PE) in the UAE
A foreign company is deemed to have a PE in the UAE if it has a fixed place of business through which it conducts business, either wholly or partially. This includes a branch, office, or factory, a place︀ of management, or a dependent agent acting on behalf of the foreign company.
However, certain︁ exemptions apply under Article 14 of the UAE Corporate Tax Law, which aligns with the︂ OECD Model Tax Convention.
2. Exemption for Auxiliary or Preparatory Activities
A PE may not︃ trigger UAE corporate tax liability if its activities are merely auxiliary or preparatory in nature.︄ This means the activities must not form an essential part of the foreign company’s core︅ business operations.
Examples of auxiliary activities that may not create a taxable PE include administrative︆ support (e.g., HR, accounting, IT services), storage or display of goods (if not for sales),︇ procurement of information (market research, data collection), and internal coordination or liaison functions (if not︈ involving contract signing or revenue generation).
3. Conditions for Tax Exemption
For the PE to︉ avoid UAE corporate tax, the activities must not generate revenue directly in the UAE, the︊ employees must only perform support functions (not core business activities like sales, contract execution,︋ or service delivery), and the PE must not have authority to conclude contracts on︌ behalf of the foreign company.
4. UAE Corporate Tax Law & OECD Alignment
The UAE︍ follows the OECD PE principles, meaning that if the PE’s role is purely supportive, it︎ would not be subject to CIT (Article 14(2) of UAE CT Law).
5. Tax-Free Salaries️ in the UAE
The UAE does not impose income tax on salaries, meaning employees (even those hired by a foreign PE) receive tax-free remuneration. This is a major advantage for cost efficiency, as the foreign company can pay salaries without UAE payroll taxes or personal income tax deductions.
6. Estonia’s Corporate Tax System (0% on Retained/Repatriated Profits)
Estonia operates a unique corporate tax model with 0% tax on retained profits (tax applies only upon profit distribution at 22%). The participation exemption means dividends from foreign subsidiaries (including UAE PEs) are tax-exempt if the subsidiary/PE is taxed at a reasonable rate (UAE CIT at 9% qualifies).︀
7. Optimal Structure: Estonian Company + UAE Auxiliary PE
An Estonian company with a UAE︁ auxiliary PE achieves no UAE CIT (if activities are auxiliary), tax-free salaries for UAE employees,︂ 0% tax in Estonia until dividends are paid, and no additional tax on repatriated UAE︃ profits (if CIT applicable)
8. Potential Risks & Compliance Considerations
Potential risks include the PE︄ becoming taxable in UAE (9%) if activities go beyond auxiliary, substance requirements where the UAE︅ PE must have real employees and functions, transfer pricing where salaries and intra-group service fees︆ must be at arm’s length, and Estonian CFC rules where if the UAE PE is︇ deemed a Controlled Foreign Company (CFC), Estonia could tax undistributed profits,but this is unlikely if︈ the PE is low-risk and auxiliary. The core income generating activities could be established for︉ example in Estonia (0% CIT until distribution) or in an Estonian PE in Malta (in︊ case the effective tax rate could be as low as 5%).
9. Estonias benefit for︋ individuals: Combined with UAE residence its possible to remain non-tax resident in Estonia, yet have︌ EU legal residence, which simplifies access to EU banking, and for some also to Schengen.︍ Even as Estonia tax resident, the dividends from Estonia company are tax free, which could︎ mean total effective tax rates from distributed profits to be as low as 0%-9%.
10. Conclusion:
An Estonian company with a UAE auxiliary PE is a highly efficient structure for️ auxiliary support functions, but must be carefully monitored to ensure compliance with PE and transfer pricing rules.
Under the United Arab Emirates (UAE) Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and international tax principles, a foreign company may have a Permanent Establishment (PE) in the UAE without being liable for Corporate Income Tax (CIT) if its activities are considered auxiliary or preparatory in nature. Here’s how this could apply:
1. Definition of Permanent Establishment (PE) in the UAE
A foreign company is deemed to have a PE in the UAE if it has a fixed place of business through which it conducts business, either wholly or partially. This includes a branch, office, or factory, a place︀ of management, or a dependent agent acting on behalf of the foreign company.
However, certain︁ exemptions apply under Article 14 of the UAE Corporate Tax Law, which aligns with the︂ OECD Model Tax Convention.
2. Exemption for Auxiliary or Preparatory Activities
A PE may not︃ trigger UAE corporate tax liability if its activities are merely auxiliary or preparatory in nature.︄ This means the activities must not form an essential part of the foreign company’s core︅ business operations.
Examples of auxiliary activities that may not create a taxable PE include administrative︆ support (e.g., HR, accounting, IT services), storage or display of goods (if not for sales),︇ procurement of information (market research, data collection), and internal coordination or liaison functions (if not︈ involving contract signing or revenue generation).
3. Conditions for Tax Exemption
For the PE to︉ avoid UAE corporate tax, the activities must not generate revenue directly in the UAE, the︊ employees must only perform support functions (not core business activities like sales, contract execution,︋ or service delivery), and the PE must not have authority to conclude contracts on︌ behalf of the foreign company.
4. UAE Corporate Tax Law & OECD Alignment
The UAE︍ follows the OECD PE principles, meaning that if the PE’s role is purely supportive, it︎ would not be subject to CIT (Article 14(2) of UAE CT Law).
5. Tax-Free Salaries️ in the UAE
The UAE does not impose income tax on salaries, meaning employees (even those hired by a foreign PE) receive tax-free remuneration. This is a major advantage for cost efficiency, as the foreign company can pay salaries without UAE payroll taxes or personal income tax deductions.
6. Estonia’s Corporate Tax System (0% on Retained/Repatriated Profits)
Estonia operates a unique corporate tax model with 0% tax on retained profits (tax applies only upon profit distribution at 22%). The participation exemption means dividends from foreign subsidiaries (including UAE PEs) are tax-exempt if the subsidiary/PE is taxed at a reasonable rate (UAE CIT at 9% qualifies).︀
7. Optimal Structure: Estonian Company + UAE Auxiliary PE
An Estonian company with a UAE︁ auxiliary PE achieves no UAE CIT (if activities are auxiliary), tax-free salaries for UAE employees,︂ 0% tax in Estonia until dividends are paid, and no additional tax on repatriated UAE︃ profits (if CIT applicable)
8. Potential Risks & Compliance Considerations
Potential risks include the PE︄ becoming taxable in UAE (9%) if activities go beyond auxiliary, substance requirements where the UAE︅ PE must have real employees and functions, transfer pricing where salaries and intra-group service fees︆ must be at arm’s length, and Estonian CFC rules where if the UAE PE is︇ deemed a Controlled Foreign Company (CFC), Estonia could tax undistributed profits,but this is unlikely if︈ the PE is low-risk and auxiliary. The core income generating activities could be established for︉ example in Estonia (0% CIT until distribution) or in an Estonian PE in Malta (in︊ case the effective tax rate could be as low as 5%).
9. Estonias benefit for︋ individuals: Combined with UAE residence its possible to remain non-tax resident in Estonia, yet have︌ EU legal residence, which simplifies access to EU banking, and for some also to Schengen.︍ Even as Estonia tax resident, the dividends from Estonia company are tax free, which could︎ mean total effective tax rates from distributed profits to be as low as 0%-9%.
10. Conclusion:
An Estonian company with a UAE auxiliary PE is a highly efficient structure for️ auxiliary support functions, but must be carefully monitored to ensure compliance with PE and transfer pricing rules.
If you run an offshore business from the UAE, in theory, the UAE can tax that company just like any other high-tax country does.
But at least for now, I don't think this has happened in practice. It's quite unlikely to happen anytime soon.
If you receive a salary from a non-UAE business and you don't have any UAE-based customers, there's a high chance you won't have to pay tax in practice.
But at least for now, I don't think this has happened in practice. It's quite unlikely to happen anytime soon.
If you receive a salary from a non-UAE business and you don't have any UAE-based customers, there's a high chance you won't have to pay tax in practice.
Ultimately, if you are receiving money in Dubai, or any country, from somewhere else, you might need to explain where its been generated, because otherwise the assumption they'll be allowed to make is that it's being generated wherever you are.
I suspect the UAE is less easily curious than most though.
I suspect the UAE is less easily curious than most though.
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