UAE announces list of entities exempted from corporate tax
- Thread starter troubled soul
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Thanks for sharing.
"Any company that is non-resident and does not have a permanent establishment in the UAE will not be required to register or pay UAE corporate tax."
If I live in Dubai for over 183 days, and operate a US LLC, do I have to register? I won't have any offices or employees in the UAE. Maybe @Fred can comment.
"Any company that is non-resident and does not have a permanent establishment in the UAE will not be required to register or pay UAE corporate tax."
If I live in Dubai for over 183 days, and operate a US LLC, do I have to register? I won't have any offices or employees in the UAE. Maybe @Fred can comment.
Here is the official statement with all minor details ...
https://mof.gov.ae/ministry-of-fina...from-registration-for-corporate-tax-purposes/
https://mof.gov.ae/wp-content/uploads/2022/12/Federal-Decree-Law-No.-47-of-2022-EN.pdf
Some expert can simplify this ....I read all things twice but....My English and Financial understanding is not so good .......
Is it right to say that "Freezone company with no local income Exception from Registration" ?
Is it correct ?
Thanks
https://mof.gov.ae/ministry-of-fina...from-registration-for-corporate-tax-purposes/
https://mof.gov.ae/wp-content/uploads/2022/12/Federal-Decree-Law-No.-47-of-2022-EN.pdf
Some expert can simplify this ....I read all things twice but....My English and Financial understanding is not so good .......
Is it right to say that "Freezone company with no local income Exception from Registration" ?
Is it correct ?
Thanks
It doesn't give details as to which income qualifies for a freezone exemption:
We have to wait for the "cabinet decision"
We have to wait for the "cabinet decision"
Based on what I've been able to gather, US LLC that have not applied for S/C corp status will be considered tax transparent so you good.
So they clarified now that Offshore Companies remain Corporate Tax exempt and not like guys speculated here months ago to have EU high tax country like CFC rules etc.
I'm surprised about everyone who is actually surprised about such an outcome.
Next Freezone Companies without local UAE Mainland income remain Corporate Tax Exempt - wait for it.
I'm surprised about everyone who is actually surprised about such an outcome.
Next Freezone Companies without local UAE Mainland income remain Corporate Tax Exempt - wait for it.
So far its a regular LLC and hasnt filled for S/C corp status, yes. They will consider it as the tax transparent LLC that it is.
So personal taxes will apply and those remain at 0
So personal taxes will apply and those remain at 0
I had the same thought. The news article says:
They explicitly mention that the offshore company shouldn't have a PE in UAE. The devil is in the details.
They explicitly mention that the offshore company shouldn't have a PE in UAE. The devil is in the details.
Chapter 4 - Article 11 of the federal decree actually provides a definition of taxable person:
Article 14 provides︁ more detail about PE:
My interpretation of the law is that natural persons conducting business from UAE or effectively︇ controlling a foreign legal entity from UAE are considered as taxable persons as well (i︈ don't see any exemption for US LLC).
Now what matters in the end is the︉ taxable base which is specified in article 12:
My interpretation of this article is that even foreign sourced income will be considered taxable︁ if it relates to business activity conducted in UAE and further defined by another decree,︂
Article 14 provides︁ more detail about PE:
My interpretation of the law is that natural persons conducting business from UAE or effectively︇ controlling a foreign legal entity from UAE are considered as taxable persons as well (i︈ don't see any exemption for US LLC).
Now what matters in the end is the︉ taxable base which is specified in article 12:
My interpretation of this article is that even foreign sourced income will be considered taxable︁ if it relates to business activity conducted in UAE and further defined by another decree,︂
Not ignoring it per se. They recognize the LLC as tax transparent and as a result they apply personal taxes to you.
Different story is if the LLC is a real corp, and as a result not tax transparent.
UAE government can lack in a bunch of things, but they are not retarded. They understand why most people live there, and based on that they create rules to keep all parties happy; all parties being residents and OECD.
Tons of countries consider US LLCs as tax transparent too, Spain for example does and its nowhere near a low︀ tax jurisdiction.
EDIT to add: A US LLC is basically just you with a front︁ name. It's not a real corporation unless you apply for S/C corp status. It only︂ serves the purpose of reducing liability, but for tax purposes it's just you.
Different story is if the LLC is a real corp, and as a result not tax transparent.
UAE government can lack in a bunch of things, but they are not retarded. They understand why most people live there, and based on that they create rules to keep all parties happy; all parties being residents and OECD.
Tons of countries consider US LLCs as tax transparent too, Spain for example does and its nowhere near a low︀ tax jurisdiction.
EDIT to add: A US LLC is basically just you with a front︁ name. It's not a real corporation unless you apply for S/C corp status. It only︂ serves the purpose of reducing liability, but for tax purposes it's just you.
You are right, with︃ PE rule in place and individual and corporation considered as taxable person it is risky,︄ plus 3 mil revenue is peanuts, I as an individual will pay tax on personal︅ income of 3mil aed or above, there are anti abuse rules too.
If the government︆ of uae or fta opens an investigation against you then goodluck, i would not take︇ any advise where someone says the authorities will turn a blind eye but the law︈ says something else. As in my personal situation since there are 6 figures plus involved︉ / expected, I am moving to a jurisdiction which has reasonable taxation for personal and︊ corporate. Now that doesnt mean dubai is bad, im sure it suits a lot of︋ people and their current situation.
If the government︆ of uae or fta opens an investigation against you then goodluck, i would not take︇ any advise where someone says the authorities will turn a blind eye but the law︈ says something else. As in my personal situation since there are 6 figures plus involved︉ / expected, I am moving to a jurisdiction which has reasonable taxation for personal and︊ corporate. Now that doesnt mean dubai is bad, im sure it suits a lot of︋ people and their current situation.
Ok, I think I did not get it, so ''Freezone Companies without local UAE Mainland income'' does have to register corporate TAX?
I had some bad experiences with UAE VAT and don't want to reproduce this as someone deciding no you are not eligible and now we fine you 100K. Wouldnt it be best to register and then wait for the outcome, like this its safe?
I had some bad experiences with UAE VAT and don't want to reproduce this as someone deciding no you are not eligible and now we fine you 100K. Wouldnt it be best to register and then wait for the outcome, like this its safe?
Number of people are running business from UAE and some are very complex structure businesses ....I do not think that UAE Government have so much resource to going after everyone....Resident company is different topics...but Non resident company are many and very hard to going after each of them......IMHO taxation of Non residence LLC will be out of the question....Most people are over thing about this
I am UAE resident but in and out of the country with a Freezone company and no official employees in UAE with all income coming from outside of UAE, any direction or idea in that︀ case. Trust me I have been talking with quite a few accountants and even with︁ the freezone authorities themselves and seems that everyone is saying something else.
I would be very confident that such a setup will remain tax free. But I could imagine that an audit or annual report will be required in the future. That's just my guess though, I have no secret information and hope to be proven wrong.
Some countries take a different approach︂ to that (hybrid mismatch). That can be good or bad.
What I find a bit︃ troubling is that the UAE rules explicitly state that you may be subject to corporate︄ (!) tax as "c) A natural person who conducts a Business or Business Activity in︅ the State".
So even if they do consider the US LLC as transparent (personal income),︆ it could still be subject to corporate tax.
What's worse, even if you're exempt or︇ you stay below the thresholds (they just announced very high exemptions for small businesses, like︈ $800k in revenu per year) - you may still have to register.
So how do︉ you know if you should register or not? How would you even register your US︊ LLC? Would you have to register a branch in a freezone? Is it enough to︋ just tell them "Hey, I work from home for my tax-transparent US LLC"?
I guess︌ nobody knows until it might be too late - and then they could change the︍ rules again a day later, meaning you still wouldn't know how they are interpreted in︎ practice.
I trust that they won't start taxing the Russian billionaire living in Dubai off️ the dividends from his factory in Russia.
I'm also quite confident that they won't start coming after free zone companies doing only business with clients abroad - otherwise they might as well just close all the free zones.
But foreign companies like US LLCs, managed by UAE residents? I feel there's a lot of uncertainty here. I guess it will also depend on how much time you spend in the UAE, if you have UAE clients (and if so, what about free zone vs. mainland?) etc.
Most likely nothing will happen for at least the next couple years in any case though, they will be︀ busy enough implementing it for large companies, stores, restaurants etc.
Some countries take a different approach︂ to that (hybrid mismatch). That can be good or bad.
What I find a bit︃ troubling is that the UAE rules explicitly state that you may be subject to corporate︄ (!) tax as "c) A natural person who conducts a Business or Business Activity in︅ the State".
So even if they do consider the US LLC as transparent (personal income),︆ it could still be subject to corporate tax.
What's worse, even if you're exempt or︇ you stay below the thresholds (they just announced very high exemptions for small businesses, like︈ $800k in revenu per year) - you may still have to register.
So how do︉ you know if you should register or not? How would you even register your US︊ LLC? Would you have to register a branch in a freezone? Is it enough to︋ just tell them "Hey, I work from home for my tax-transparent US LLC"?
I guess︌ nobody knows until it might be too late - and then they could change the︍ rules again a day later, meaning you still wouldn't know how they are interpreted in︎ practice.
I trust that they won't start taxing the Russian billionaire living in Dubai off️ the dividends from his factory in Russia.
I'm also quite confident that they won't start coming after free zone companies doing only business with clients abroad - otherwise they might as well just close all the free zones.
But foreign companies like US LLCs, managed by UAE residents? I feel there's a lot of uncertainty here. I guess it will also depend on how much time you spend in the UAE, if you have UAE clients (and if so, what about free zone vs. mainland?) etc.
Most likely nothing will happen for at least the next couple years in any case though, they will be︀ busy enough implementing it for large companies, stores, restaurants etc.
Has anyone actually sort local legal opinion on their setup? Or is everyone making an educated guess based on the various publications? It might be worthwhile doing so to have the legal opinion on paper in case a challenge to ones assumption is made by the tax man.
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