UAE clarification of Freezone Qualifying Income

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I understand that you are emphasizing the positive aspects of Dubai's development and suggesting that‌ focusing on the negative side of taxation overlooks the international relations and progress the city‍ has made.
You are now definitely in 9 of June in your mind and try⁠ to analyze situation focusing on the potentially bad side of bringing taxation while such places⁤ are visionary in their moves which lead to a successful & fast economic development 🙂

Not one world about real international relation, financial flow improvement and global improvement of making Dubai⁣ a real player in the "current" world.

Dubai's owner made their place what it is⁢ within a dozen of years only and you should be really over confident coming in︀ a forum and by your own perspective of life thinking you can get better analyze︁ of the best advisor around Dubai's rulers regarding their financial development.

"Almost all companies in︂ these free zones will be affected by the tax. This includes small businesses, startups, and︃ multinational corporations. The tax will make it more expensive for these companies to operate in︄ Dubai, and it could lead to job losses and a decline in investment."

-> If you want to play big as a International business Hub, you can't stay on︅ your side not even asking people to do proper accounting 🙂)) As a reminder -︆ we are here for most of us entrepreneur - You are speaking about companies which︇ are starting from 0 and should create proper history records. Leveraging in banking can offer︈ the opportunity to accelerate capital creation.

Dubai's taxation enjoys of SBR (Small Business Relief) -︉ exempted up to 750K USD revenu - or 100K USD threshold tax means Small Companies︊ / Sole entrepreneur will not be really impacted.

"The UAE government is gambling that the︋ tech and e-commerce sector will still be able to thrive in Dubai despite the tax.︌ However, this is a risky gamble. There are many other attractive places for tech companies︍ to set up shop, and the UAE government could easily lose out on business to︎ its competitors."

Which one ?


"The recent influx of Russian population to Dubai may have️ given the government some confidence. However, this influx is not sustainable in the long term.‌ The UAE government needs to focus on creating a business-friendly environment for all companies, not‍ just those owned by Russians. "

Russians got any exemption of corporate tax ?
 
Well, this sucks.

But as long as there are no laws in place regarding how‌ much a sole owner can take out as a salary, it shouldn't be an issue‍ to stay below the 375k AED bracket.

Whether that is a $200k salary or a⁠ $5M salary.

At least a temporary solution for most of us that are "stuck" until⁤ we figure out something else.

Am I right?
 
Right....wait and⁣ watch.....May Government issue new notification for Tax Free status....Hope for the best....It is monarchy....Decision can⁢ be change in seconds.......Finger crossed
 
Sounds like the de minimus is irrelevant if your activities don't︋ qualify you as a QFZP - then you fall under the normal tax regime @9%︌ above 375k.
 
The limits we are talking about is 375k NET PROFIT per fiscal year, correct? There‌ are no limits on gross revenue?

Can someone confirm this? I am finding conflicting‍ information.
 
At arm's⁣ length -

Of course you can't cash out your net income this way - but⁢ reduce your % absolutely

Correct. We are talking about︂ net profit
 
UAE government is smarter than the majority in‍ this forum thinks.

They created a giant mousetrap like Microsoft did way back when they⁠ deliberately let people install on their PC illegal copies of Win XP.

The result?

95% of world's computers were running Microsoft software.

What happened when they released software updates?

You had to pay for the update.

At the time there wasn't another option because the⁤ majority of software where built for PC.

UAE is doing the same: they welcomed all⁣ sort of businesses with the 0% CIT promise but i'm 99% sure they knew that⁢ this was a temporary promotion like phone companies do.

And now they are waking up︀ everybody to the reality: pay 9% CIT

Do you think people will move from Dubai︁ to not pay CIT?

To go where?

To some 10 square foot island in the︂ middle of nowhere?

There are zero better options.

The only potential one is Malta at︃ 5% but i don't see millionaires moving there to save 4% on taxes and live︄ a miserable life because, let's be real, Malta is not everybody's cup of tea.

If you take everyhting in consideration the force of inertia will win and people will stay︅ in UAE because it's still the best option for those who want to minimize taxes.︆
 
Hi there,
I've gone through the entire post, but I feel like there's still something‌ I'm not quite grasping. I'm in the consulting business, providing IT services internationally, not in‍ the UAE.

If my Free Zone (FZ) company, doesn't engage in any trading activities during⁠ the year, and also create a Limited Liability Company (LLC) in Delaware, which I use⁤ for my professional dealings isn't that the best solution? Becuase If I distribute profits from⁣ the Delaware LLC directly to my personal bank account as dividends, I'd be able to⁢ bypass the 9% tax, given the distinct nature of these two entities.

Is there something︀ I'm not accounting for in this scenario?
 
It is called your personal income....and It will not subjected to New CIT......Yes...Dubai⁤ is still personal tax Free country......only plus point left in Dubai.....
 
Single member us︀ LLC is passthrough, so UAE would consider the earnings of the LLC to be either︁ yours if you were the single member, or earnings of the FZCO if it was︂ the single member.

It's my understanding that the new rules would catch you in either︃ case as the LLC income is not tax free salary but becomes by magic onshore︄ income. I may be wrong 🙂
 
So to keep the setup tax-free need to maintain all the trading activities from the LLC‍ and not make any connection with the free zone company, jus that?

This can be but it's︀ a very strange stuff... If I don't work in UAE how it can be..
 
Yes....Even IF you open USA LLC as a branch of Dubai freezone.......USA⁠ LLC income is still tax free as per New CIT
 
Is there any specialist to approach the sense of manage & controlled in the State‌ ?

Means the US LLC owned by sole entrepreneur in FZ will be also taxed‍ on the potential dividends ?
 
Sorry I should've said that's if‍ you're personally tax resident in UAE
 
Which you become if present over 90 days per calendar year. So it‌ could lead to the consequence of people reducing their time inside the uae?
 
If it's⁠ a single member LLC as most folks use then there are not dividends - the⁤ whole profits are considered pass through to the single member wherever they may be tax⁣ resident
 
There are︇ other options... how about Panama or Thailand?

UAE doesn't recognize US LLC's as tax transparent. So it sees‌ it as a corporation for tax purposes. Since they're introducing management and control rules, it'll‍ be taxed as if a local UAE company if it's managed here.
 
The US considers anything passed from the⁠ single member LLC to the owner as "distributions" which are neither salary nor dividends.

The country of tax residence of the owner however, may very well treat such flows differently.⁤ Totally depends from country to country, but for the UAE this is has not been⁣ clarified.

Well, beside︀ the 375k profit exemption, there seems to also be an exemption for turnover below 1M︁ AED . At least it's mentioned in the following articles:

https://gulfnews.com/business/corpo...n-to-pay-corporate-tax-in-uae-1.1684318157806
https://www.trenchlaw.com/the-minis...r-annual-turnover-exceeds-dh1-million-272294/
https://www.thenationalnews.com/bus...rate-tax-only-if-their-turnover-exceeds-dh1m/
https://www.gulf-insider.com/uae-to-introduce-corporation-tax/
 
Yes those could be options for a solopreneur but are also dangerous options because:

1. Panama is a territorial taxation country and if you manage your offshore LLC from there‍ technically you are generating local sourced income but up to this point Panama is closing⁠ eyes.

2. In Thai you are not allowed to work but up to this point⁤ Thailand is closing eyes too and let farangs do their thing because they spend money⁣ in the country but things could change very quickly.

https://thethaiger.com/news/busines...cial-data-to-combat-transnational-tax-evasion
If you need to hire⁢ people then the only available option to this day to pay 0% tax is Georgia︀ virtual zone with a UAE holding.
 
I think you can︁ manage from Thailand right? Since there are no management and control rules. What's the difference︂ managing and working?
 
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