UAE to introduce 9% corporate tax on business profits from June 1, 2023 (FZCO REMAINS 0%)
- Thread starter calnana
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5 words is that too much? You must have a very sparse vocabulary!
Back to topic 9% corporate tax may not be something bad, now they just need to implement double tax treaties and people will be happy again.
Back to topic 9% corporate tax may not be something bad, now they just need to implement double tax treaties and people will be happy again.
@Fred You are the expert when it comes to UAE. So I have to ask you this. When UAE implements this, what would the Source Income rules be like? Any Idea? And how about Foreign Dividends or profits? Any CFC rules?
I tend not to pay attention to the advertised tax rate, the devil is always in the details.
I tend not to pay attention to the advertised tax rate, the devil is always in the details.
there are no details for this. they should be published in due course. Indeed devil is in the details.......
Depends on the Country - while Germany has no longer a Double Tax Treaty with the UAE they had previously only a "one-way" treaty for UAE citizens.
Austria and Switzerland have a fully functional Double Tax Treaty for both UAE and there own Citizens - that's the reason why we have a lot of Swiss and Austrian Clients with a Dubai Company and just a local Director in Dubai - works without any issues.
It's plane︃ PR and considering my conversation with several CEO's and Chairmans of Business Authorities it literally︄ smells like a deal with the FATF to not getting grey listed. Everyone of this︅ high position leaders wasn't aware of this announcement - it was discussed and expected already︆ during last year it was clear however the date of announcement surprised everyone - but︇ of course makes sense to avoid FATF grey listing.
Nobody knows yet about the written︈ law but everything remains the same the next 18 months and even then we will︉ see some kind of "soft" launch for many years - considering the VAT implemented in︊ 2018 is still till today in some kind of soft launch and not really enforced.︋
Considering everything we see all togehter daily in practice - we are far far away︌ from bureaucracy stuff like CFC rules anytime soon.
Personally I would now of course avoid︍ everything in the mainland if I don't intend to run a Supermarket or Restaurant in︎ Dubai.
I'm glad we did avoid the Mainland as much as possible and for none️ of our existing or new clients does change anything.
A big question tag will be the UAE Banking - I can imagine the missing Residence Visa for RAK ICC's can be then the missing Tax for Freezone Companies and the bank account opening will continue to be more lengthy.
Long story short - get your setup done within the next 18 months as we as a honest service provider need to see then if we can hold the line in terms of getting everyone business banking done.
I think on the personal level nothing will change in terms of tax and regulation otherwise expat after︀ expat would leave.
As for now this all seems to me much more being PR︁ to avoid FATF Grey Listing then everything else and it shows the UAE want to︂ become more then just another Cayman Islands.
Austria and Switzerland have a fully functional Double Tax Treaty for both UAE and there own Citizens - that's the reason why we have a lot of Swiss and Austrian Clients with a Dubai Company and just a local Director in Dubai - works without any issues.
It's plane︃ PR and considering my conversation with several CEO's and Chairmans of Business Authorities it literally︄ smells like a deal with the FATF to not getting grey listed. Everyone of this︅ high position leaders wasn't aware of this announcement - it was discussed and expected already︆ during last year it was clear however the date of announcement surprised everyone - but︇ of course makes sense to avoid FATF grey listing.
Nobody knows yet about the written︈ law but everything remains the same the next 18 months and even then we will︉ see some kind of "soft" launch for many years - considering the VAT implemented in︊ 2018 is still till today in some kind of soft launch and not really enforced.︋
Considering everything we see all togehter daily in practice - we are far far away︌ from bureaucracy stuff like CFC rules anytime soon.
Personally I would now of course avoid︍ everything in the mainland if I don't intend to run a Supermarket or Restaurant in︎ Dubai.
I'm glad we did avoid the Mainland as much as possible and for none️ of our existing or new clients does change anything.
A big question tag will be the UAE Banking - I can imagine the missing Residence Visa for RAK ICC's can be then the missing Tax for Freezone Companies and the bank account opening will continue to be more lengthy.
Long story short - get your setup done within the next 18 months as we as a honest service provider need to see then if we can hold the line in terms of getting everyone business banking done.
I think on the personal level nothing will change in terms of tax and regulation otherwise expat after︀ expat would leave.
As for now this all seems to me much more being PR︁ to avoid FATF Grey Listing then everything else and it shows the UAE want to︂ become more then just another Cayman Islands.
Free zones
Below FAQs are from this link under freezone section https://www.mof.gov.ae/en/resourcesAndBudget/Pages/faq.aspx
01
Will a free zone business be subject to UAE CT?
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE
02
Will a free zone business be required to register and file a CT return?
A business established in a free zone will be required to register and file a CT return
Further details on the compliance obligations of︀ free zone businesses will be provided in due course
03
Will the UAE CT treatment︁ be different for a free zone business established in a financial free zone?
The UAE︂ CT treatment that will apply to businesses in free zones will be the same across︃ all free zones
Does this mean Freezones need to file and claim returns?
In theory yes - however it's the same with the VAT already.︄
Nobody enforces anything - the VAT is in a soft launch since the very beginning.︅
I would say 10% file a VAT return as 0 and the other 90% don't︆ do anything - this are at least the numbers I can see.
This plane dumb︇ theory is very hardly working here in the UAE - because no one bothers with︈ enforcing to file a anyway 0 everywhere return.
FZCO remains 0% tax and if we︉ are forced to file once a year a 0 across all fields - so let︊ it be.
It's the same with a UK LLP, US LLC etc. - that's the︋ whole point of this announcement - going into a Western direction and handling things smart.︌
I can make here only a transfer from the existing VAT and how things are︍ enforced - next 18 months remain the same anyway - it does not really make︎ sense to announce this CT and having not even a legal framework for - so️ like the guys before me said - it's PR - we guess PR for the FATF.
Nobody enforces anything - the VAT is in a soft launch since the very beginning.︅
I would say 10% file a VAT return as 0 and the other 90% don't︆ do anything - this are at least the numbers I can see.
This plane dumb︇ theory is very hardly working here in the UAE - because no one bothers with︈ enforcing to file a anyway 0 everywhere return.
FZCO remains 0% tax and if we︉ are forced to file once a year a 0 across all fields - so let︊ it be.
It's the same with a UK LLP, US LLC etc. - that's the︋ whole point of this announcement - going into a Western direction and handling things smart.︌
I can make here only a transfer from the existing VAT and how things are︍ enforced - next 18 months remain the same anyway - it does not really make︎ sense to announce this CT and having not even a legal framework for - so️ like the guys before me said - it's PR - we guess PR for the FATF.
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05
Are there any consequences for non-compliance under the CT regime?︄
Similar to other taxes in the UAE (e.g. VAT), businesses will be subject to penalties︅ for non-compliance with the CT regime. Further information on the UAE CT compliance obligations and︆ applicable penalties will be released in due course.
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Humm I wonder ns2.
05
Are there any consequences for non-compliance under the CT regime?︄
Similar to other taxes in the UAE (e.g. VAT), businesses will be subject to penalties︅ for non-compliance with the CT regime. Further information on the UAE CT compliance obligations and︆ applicable penalties will be released in due course.
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Humm I wonder ns2.
In case you are resident in UAE, and actively managing your investments (online from UAE thus) , or even trading/day trading, could it requalify you as a professional commercial activity (above a certain number of yearly transactions) and thus put you under the scope of this new taxation ?
The FAQ says:
Will a free zone business be subject to UAE CT?
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE
DMCC requires the renewal of the licence every year. According to this, DMCC will be taxable next year? I tried to search the website for infomabout the length ofmthe tax-free status but found nothing…
But probably many︀ clients are asking this question, so answers will be forthcoming soon
Will a free zone business be subject to UAE CT?
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE
DMCC requires the renewal of the licence every year. According to this, DMCC will be taxable next year? I tried to search the website for infomabout the length ofmthe tax-free status but found nothing…
But probably many︀ clients are asking this question, so answers will be forthcoming soon
Am i missing something here? But notwithstanding the potential 9% CT , personal tax remains at 0%
Therefore there is still the option of paying yourself 100% of the profits and no tax paid?
Therefore there is still the option of paying yourself 100% of the profits and no tax paid?
if the salary for managers will still be deductible in the︁ fiscal P&L of the entity and the individual tax will be 0% then theoretically one︂ could pay a big salary basically reducing the CIT. Pls correct me if i am︃ wrong.
from the faq "
Will an individual’s salary income be subject to UAE CT?︄
UAE CT will not apply on an individual’s salary and other employment income (whether received︅ from the public or private sector)".
last but not least, what does this mean?
"Will intra-group transactions be exempt from UAE CT?
Qualifying intra-group transactions and reorganizations will not be︆ subject to UAE CT provided the necessary conditions are met"
it suggests the presence of︇ space for profit shifting unless transfer pricing controls are in place.
from the faq "
Will an individual’s salary income be subject to UAE CT?︄
UAE CT will not apply on an individual’s salary and other employment income (whether received︅ from the public or private sector)".
last but not least, what does this mean?
"Will intra-group transactions be exempt from UAE CT?
Qualifying intra-group transactions and reorganizations will not be︆ subject to UAE CT provided the necessary conditions are met"
it suggests the presence of︇ space for profit shifting unless transfer pricing controls are in place.
No - you as an individual remain tax free for sure - same with investments, dividends and foreign income. Even when you perform it under the FZCO - CT rules will either apply but they are 0 (nobody knows) or it remains the same like actually and you don't have︀ to do anything similar like with VAT (nobody knows)
The fact is that 90% of︁ the Dubai Companies are FZCO's - it's a core business and everyone I talked to︂ so far can hardly imagine the UAE destroys one of there core business.
Nobody knows and we can only interpret the wording because there is no︊ written rule.
However when you call or email any Freezone they will either don't respond︋ at all or tell you that everything remains 0 - which makes sense - the︌ CT incentives will be honoured -CT across all Freezones is 0.
Thats it.
And this is only one of many️ loopholes - I mean guys come on - imagine the 3000 AED salary Taxi Driver needs to pay 9% tax.
You can lower the company profits left and right - I'm sure at the end of the day even mainland companies will figure ways out to remain either completely tax free or close to.
Imagine in practice every UAE company files a tax return end of 2023 - files a tax return to an department that exists a few months - happy birthday.
We have actually since August last year a backlog due to a new issued Emirates ID version and this is only a︀ change in production - now imagine the backlog when humans have to cross check your︁ CT filing with your paperwork.
Yes at least the salary part is correct - intra-group - nobody knows.︊
All in all it's a big announcement that has to fulfill a purpose otherwise it︋ doesn't make sense to do such an announcement so early without having any written law︌ so everyone is guessing the announcement was made so early to shield the FATF grey︍ listing.
From what's available now - if you think a bit around the corner everything︎ can remain the same - but per definition it's not tax free - makes sense️ to relief international pressure especially from the local banks.
The fact is that 90% of︁ the Dubai Companies are FZCO's - it's a core business and everyone I talked to︂ so far can hardly imagine the UAE destroys one of there core business.
Nobody knows and we can only interpret the wording because there is no︊ written rule.
However when you call or email any Freezone they will either don't respond︋ at all or tell you that everything remains 0 - which makes sense - the︌ CT incentives will be honoured -CT across all Freezones is 0.
Thats it.
And this is only one of many️ loopholes - I mean guys come on - imagine the 3000 AED salary Taxi Driver needs to pay 9% tax.
You can lower the company profits left and right - I'm sure at the end of the day even mainland companies will figure ways out to remain either completely tax free or close to.
Imagine in practice every UAE company files a tax return end of 2023 - files a tax return to an department that exists a few months - happy birthday.
We have actually since August last year a backlog due to a new issued Emirates ID version and this is only a︀ change in production - now imagine the backlog when humans have to cross check your︁ CT filing with your paperwork.
Yes at least the salary part is correct - intra-group - nobody knows.︊
All in all it's a big announcement that has to fulfill a purpose otherwise it︋ doesn't make sense to do such an announcement so early without having any written law︌ so everyone is guessing the announcement was made so early to shield the FATF grey︍ listing.
From what's available now - if you think a bit around the corner everything︎ can remain the same - but per definition it's not tax free - makes sense️ to relief international pressure especially from the local banks.
If you read well what you says︀ is true only for "other income earned by individuals that does not arise from a︁ business or other form of commercial activity licensed or otherwise permitted to be undertaken in︂ the UAE.""
But if you are actively managing your investments from UAE online/trading as most︃ people do and think they are safe by doing so, professional tools and a frequency︄ above some yearly threshold, coudln't this in theory be seen as a professional commercial activity︅ ?...
But if you are actively managing your investments from UAE online/trading as most︃ people do and think they are safe by doing so, professional tools and a frequency︄ above some yearly threshold, coudln't this in theory be seen as a professional commercial activity︅ ?...
Expect the UAE to enact tax anti avoidance legislation at some point maybe even adopt GAAR. This behaviour you describe will fall under GAAR as an abusive practice to reduce your tax base by using an excessive salary. I wouldn't do this in a place like UAE until they publish there CT compliance obligations and penalties.
Maybe the below is true but who knows. But knowing UAE you will have to wait and see if any FZ tax breaks given to investors are honored.
https://www.natlawreview.com/article/update-uae-introduces-corporate-tax
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Companies incorporated in UAE’s free zones or financial free zones will also be subject to the︀ federal corporate tax. However, it appears that such companies will continue to enjoy applicable tax︁ breaks and incentives in the manner and for the duration set out under the legal︂ framework of the relevant free zone authority.
For instance, Dubai International Finance Centre (DIFC) law︃ and the Abu Dhabi Global Market (ADGM) law provide that a DIFC- or ADGM-incorporated company︄ is subject to a zero tax rate for a period of 50 years from the︅ time the law in question enters into effect. Accordingly, DIFC- and ADGM-incorporated companies could expect︆ to remain subject to zero tax rate until 2071 and 2063, respectively.
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Maybe the below is true but who knows. But knowing UAE you will have to wait and see if any FZ tax breaks given to investors are honored.
https://www.natlawreview.com/article/update-uae-introduces-corporate-tax
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Companies incorporated in UAE’s free zones or financial free zones will also be subject to the︀ federal corporate tax. However, it appears that such companies will continue to enjoy applicable tax︁ breaks and incentives in the manner and for the duration set out under the legal︂ framework of the relevant free zone authority.
For instance, Dubai International Finance Centre (DIFC) law︃ and the Abu Dhabi Global Market (ADGM) law provide that a DIFC- or ADGM-incorporated company︄ is subject to a zero tax rate for a period of 50 years from the︅ time the law in question enters into effect. Accordingly, DIFC- and ADGM-incorporated companies could expect︆ to remain subject to zero tax rate until 2071 and 2063, respectively.
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