UAE clarification of Freezone Qualifying Income

[troubled soul]

For corporate tax query....this service will be starting from tomorrow...(1 August )
Tax Clarifications Request :

• Through this service, the FTA issues a Clarification which is an official, signed, and stamped document in response to a query by the applicant regarding the tax treatment of specific transactions

https://tax.gov.ae/en/services/tax.clarifications.request.aspx
UAE corporate tax: FTA to allow clarification requests on registration
https://www.khaleejtimes.com/uae/ua...-allow-clarification-requests-on-registration

Attachments​

• 
  Clarifications User Guide EN05122022.pdf
  278.3 KB · Views: 198

Last edited: Jul 31, 2023

 

[uranium]

troubled soul said:
For corporate tax query....this service will be starting from tomorrow...(1 August )
Tax Clarifications Request :

• Through this service, the FTA issues a Clarification which is an official, signed, and stamped document in response to a query by the applicant regarding the tax treatment of specific transactions

https://tax.gov.ae/en/services/tax.clarifications.request.aspx
UAE corporate tax: FTA to allow clarification requests on registration
https://www.khaleejtimes.com/uae/ua...-allow-clarification-requests-on-registration
Click to expand...

From what I understood; I submit to them my company details and they would tell me if I need to pay taxes or not ?

 

[Cloudbanck]

uraniumze said:
From what I understood; I submit to them my company details and they would tell me if I need to pay taxes or not ?
Click to expand...

Well, I m guessing it's more likely they give some stock answer text about corp tax that doesn't answer your question.
Or something that s obviously wrong or doesn't make sense.

 

[ecool]

Cloudbanck said:
Well, I m guessing it's more likely they give some stock answer text about corp tax that doesn't answer your question.
Or something that s obviously wrong or doesn't make sense.
Click to expand...

You forgot about the stamp! They say they will stamp the paper. UAE loves stamps smi(&%

 

[uranium]

I would not do it on my own
Better ask Fred's help first

 

[JustAnotherNomad]

Guys, read the FAQ:
https://mof.gov.ae/corporate-tax-faq/https://tax.gov.ae/en/faq.aspxhttps://tax.gov.ae/en/taxes/corporate.tax/faqs.aspx
Most of it is explained there. What we don't know is how it will be handled in practice. And I certainly don't want to be the one to find out.
I cannot imagine that income from a A US LLC would be treated as personal income. They explicitly write that they basically treat partnerships as opaque.

Also note the difference between managed&controlled in the UAE and a PE. Similar concepts, but not the same.

 

[Konstanz]

JustAnotherNomad said:
Guys, read the FAQ:
https://mof.gov.ae/corporate-tax-faq/https://tax.gov.ae/en/faq.aspxhttps://tax.gov.ae/en/taxes/corporate.tax/faqs.aspx
Most of it is explained there. What we don't know is how it will be handled in practice. And I certainly don't want to be the one to find out.
I cannot imagine that income from a A US LLC would be treated as personal income. They explicitly write that they basically treat partnerships as opaque.

Also note the difference between managed&controlled in the UAE and a PE. Similar concepts, but not the same.
Click to expand...

It sounds scary:

I don't think they would write such exact phrase if they would not be willing to charge tax.
I think it they will look into it sooner or later

I would not be willing to test that

 

[troubled soul]

Konstanz said:
It sounds scary:
View attachment 5113

I don't think they would write such exact phrase if they would not be willing to charge tax.
I think it they will look into it sooner or later

I would not be willing to test that
Click to expand...

seems they are digging their own grave by making Strict rule likes this....,,, Nobody is going take a chance or try to test law in Dubai ..
It is far more safer to take change in Thailand or Bali than Dubai.....For PE

 

[Cloudbanck]

Konstanz said:
It sounds scary:
View attachment 5113

I don't think they would write such exact phrase if they would not be willing to charge tax.
I think it they will look into it sooner or later

I would not be willing to test that
Click to expand...

A single member US LLC isnt a partnership though, since it's not "two or more members". And from a US perspective it is unincorporated unless you choose to turn it into a C or S corp or something in the US. Seems from the above that UAE follows the US way of seeing incorporated vs unincorporated.

And a US LLC is more similar to a sole proprietorship from a tax perspective (but not from a legal perspective in the US). Point 49 talks about sole proprietorships:

49. What is the UAE CT treatment of a sole proprietorship or civil company?
For certain types of business activities, natural persons can form a sole proprietorship or civil company. For CT purposes, these entities will be treated as the natural person or persons owning them.

From all of this, I cannot exclude that a single member US LLC is a natural person from the UAE perspective. But yeah wouldnt be willing to test it.

 

[Checkmelater]

Guys, for Free Zone company, do you know when we will need to register for Corporate Tax ?

 

[Konstanz]

Cloudbanck said:
A single member US LLC isnt a partnership though, since it's not "two or more members". And from a US perspective it is unincorporated unless you choose to turn it into a C or S corp or something in the US. Seems from the above that UAE follows the US way of seeing incorporated vs unincorporated.

And a US LLC is more similar to a sole proprietorship from a tax perspective (but not from a legal perspective in the US). Point 49 talks about sole proprietorships:

49. What is the UAE CT treatment of a sole proprietorship or civil company?
For certain types of business activities, natural persons can form a sole proprietorship or civil company. For CT purposes, these entities will be treated as the natural person or persons owning them.

From all of this, I cannot exclude that a single member US LLC is a natural person from the UAE perspective. But yeah wouldnt be willing to test it.
Click to expand...

Yes it's crazy.
I think they rely on Russians, Ukrainians , Africans and Indians. They have no better choice.. and think they would make enough economy for UAE
For Europeans Dubai is dead end

 

[ecool]

Checkmelater said:
Guys, for Free Zone company, do you know when we will need to register for Corporate Tax ?
Click to expand...

Now. All companies in UAE have to register now. If your company pays taxes or not it's a different topic. But you have to register regardless

 

[uranium]

ecool said:
Now. All companies in UAE have to register now. If your company pays taxes or not it's a different topic. But you have to register regardless
Click to expand...

So why Fred didn't mention this ?

 

[Cloudbanck]

Konstanz said:
Yes it's crazy.
I think they rely on Russians, Ukrainians , Africans and Indians. They have no better choice.. and think they would make enough economy for UAE
For Europeans Dubai is dead end
Click to expand...

If a US LLC / its owner is a natural person, it's good though. It means you are not subject to UAE corp tax if you have below 1M AED in turnover - which I guess is a typical situation for most consultants and contractors, including European ones.

See UAE CT - Cabinet Decision No.49 of 2023

ecool said:
Now. All companies in UAE have to register now. If your company pays taxes or not it's a different topic. But you have to register regardless
Click to expand...

The FAQ doesnt say now though, just (I guess anytime) before they file the first corp tax return:

56. When do I register for UAE CT?
Taxpayers are required to register before they file their first CT return.

Last edited: Jul 31, 2023

 

[Konstanz]

Cloudbanck said:
If a US LLC / its owner is a natural person, it's good though. It means you are not subject to UAE corp tax if you have below 1M AED in turnover - which I guess is a typical situation for most consultants and contractors, including European ones.

See UAE CT - Cabinet Decision No.49 of 2023


The FAQ doesnt say now though, just (I guess anytime) before they file the first corp tax return:

56. When do I register for UAE CT?
Taxpayers are required to register before they file their first CT return.
Click to expand...

Better I would live free in Caribbean than think in desert about CIT

 

[uranium]

Konstanz said:
Better I would live free in Caribbean than think in desert about CIT
Click to expand...

I agree 100%
But at same time I don't want to live in high crime country in Caribbean or a country where banking is dead
Don't forget that UAE offers full package with visa and banking
We just need a bit of time to confirm if fzco are eligible for taxes or not

 

[Konstanz]

uraniumze said:
I agree 100%
But at same time I don't want to live in high crime country in Caribbean or a country where banking is dead
Don't forget that UAE offers full package with visa and banking
We just need a bit of time to confirm if fzco are eligible for taxes or not
Click to expand...

If you have EU passport you can live in St Barts. It's French territory so you have access to French/EU banking system
It's very safe and luxury.

 

[uranium]

Konstanz said:
If you have EU passport you can live in St Barts. It's French territory so you have access to French/EU banking system
It's very safe and luxury.
Click to expand...

Seems like Monaco of the Caribbean

 

[Cloudbanck]

Konstanz said:
If you have EU passport you can live in St Barts. It's French territory so you have access to French/EU banking system
It's very safe and luxury.
Click to expand...

Yeah, but it seems on St Barth, for the first 5 years you are a - horrifying prospect - French tax subject, possibly with some reductions for living in a Collectivité d'outre-mer. You can buy a 5 year old business for 20k EUR, and then the business wouldnt be subject to French tax, but you personally would still be for the first 5 years.

 

[Konstanz]

Cloudbanck said:
Yeah, but it seems on St Barth, for the first 5 years you are a - horrifying prospect - French tax subject, possibly with some reductions for living in a Collectivité d'outre-mer. You can buy a 5 year old business for 20k EUR, and then the business wouldnt be subject to French tax, but you personally would still be for the first 5 years.
Click to expand...

If you have enough savings from past. You can live part from savings, part on this St Barts company and through it.
You can put expense on this company etc. I don't say it's perfect, but not bad.

Better for business if you cannot be on blacklisted countries etc

But this is offtopic

Last edited: Jul 31, 2023