Many owners of small and medium enterprises (SMEs) often have multiple revenue streams with different legal structures.
These entrepreneurs may understand their investments well. However, the introduction of corporate tax in the UAE means that these should be revisited.
There are nine types of persons defined in the corporate tax decree law and it is possible to be many at once.
Like the children’s game Guess Who, as you systematically examine the particulars of a revenue stream, you understand the beneficiary’s identity from a corporate tax perspective.
I liaised with Peter Wilson, an international tax expert from PB First, to write this column.
We can put two persons at the heart of our understanding: natural persons and juridical persons. The former includes myself and the latter includes the legal entity I work for.
Since Emiratis solely can trade as natural persons, theoretically only they should be affected by corporate tax. Everyone else must operate through a trading entity.
With the Ministry of Finance recently gazetting a ministerial decision on the Determination of Tax Residency and coupled with the corporate tax decree law, some things might not be clear to some.
Take this example. Albert, a UAE visa holder living onshore, owns a business in a qualifying free zone that only trades with similar businesses, supplemented with an occasional offshore deal.
His business is a juridical and free zone person, whereas Albert is a natural and resident person.
Albert can elect that his business is not subject to corporate tax. However, it must conduct an annual external audit.
Albert provides non-executive support to businesses in three non-UAE countries. For this, he receives Dh600,000 ($163,376) per annum.
As his services are imported into those nations, he is not subject to their taxes and, for the purposes of this example, no local withholding tax applies.
Will Albert be liable for UAE corporate tax for these activities?
In the UK, there is something called badges of trade. In simple terms, think of it as the duck test. If it walks, sounds and looks like a duck, it’s a duck.
The corporate tax decree law defines what constitutes a business and, in particular, what a business activity is. But it does not specify the categories of business or business activity that will attract the tax.
Considering the above information, is Albert trading?
Unless the government clarification says otherwise, it is not unreasonable to suggest that what he is doing is business.
The new tax residency rules confirm that Albert is a tax resident in the UAE. As he is also a natural person, he should have a suitable trade licence to conduct his overseas business activities.
Say Albert has a long-stay visa: green or gold. Using this, he can apply to get a work permit. This should ensure his non-executive work can be conducted legally from the UAE.
If such a permit is unincorporated, it does not limit liability.
Not unlike a sole trader, Albert is inherently wrapped up in his permit. A natural/juridical person chimera.
Is his permit onshore or offshore? If it’s onshore, then Albert will have to pay corporate tax on his non-executive income. If it’s offshore, like his entity, it can be avoided.
How is it possible that it could be one or the other? One answer is that it depends where Albert lives.
Some areas contain both onshore and offshore elements. Building A is legally onshore, the one across the road may not be.
I said earlier that non-Emiratis cannot trade in their own name as natural persons.
What happens if Albert receives income from abroad that is not interest, not dividends and not from a qualifying fund?
UAE to introduce federal corporate tax from June 2023 — in pictures
The latter might have been an exempt person, and if it was, then its beneficiary would wear the same guise.
But it is not. Therefore, their beneficiary is in receipt of monies that appear to constitute taxable business revenue.
Hence, here we have an example of where a non-Emirati could be a natural person and still subject to corporate tax.
This article is not exhaustive. There are a number of other persons detailed in the decree law that I have not discussed.
With regard to those that I have, this column only touches on elements of what is possible.
It is only the beginning of the conversations many of you need to start having.
David Daly is partner at Gulf Tax Accounting Group in the UAE
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
FULL%20FIGHT%20CARD
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Summer special
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
More from Neighbourhood Watch:
UAE currency: the story behind the money in your pockets
List of officials:
Referees: Chris Broad, David Boon, Jeff Crowe, Andy Pycroft, Ranjan Madugalle and Richie Richardson.
Umpires: Aleem Dar, Kumara Dharmasena, Marais Erasmus, Chris Gaffaney, Ian Gould, Richard Illingworth, Richard Kettleborough, Nigel Llong, Bruce Oxenford, Ruchira Palliyaguruge, Sundaram Ravi, Paul Reiffel, Rod Tucker, Michael Gough, Joel Wilson and Paul Wilson.
The winners
Fiction
- ‘Amreekiya’ by Lena Mahmoud
- ‘As Good As True’ by Cheryl Reid
The Evelyn Shakir Non-Fiction Award
- ‘Syrian and Lebanese Patricios in Sao Paulo’ by Oswaldo Truzzi; translated by Ramon J Stern
- ‘The Sound of Listening’ by Philip Metres
The George Ellenbogen Poetry Award
- ‘Footnotes in the Order of Disappearance’ by Fady Joudah
Children/Young Adult
- ‘I’ve Loved You Since Forever’ by Hoda Kotb
RACE SCHEDULE
All times UAE ( 4 GMT)
Friday, September 29
First practice: 7am - 8.30am
Second practice: 11am - 12.30pm
Saturday, September 30
Qualifying: 1pm - 2pm
Sunday, October 1
Race: 11am - 1pm
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
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UAE currency: the story behind the money in your pockets
Global state-owned investor ranking by size
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United States
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2.
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China
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3.
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UAE
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4.
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Japan
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5
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Norway
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6.
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Canada
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Singapore
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Australia
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Saudi Arabia
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South Korea
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ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
Schedule:
Sept 15: Bangladesh v Sri Lanka (Dubai)
Sept 16: Pakistan v Qualifier (Dubai)
Sept 17: Sri Lanka v Afghanistan (Abu Dhabi)
Sept 18: India v Qualifier (Dubai)
Sept 19: India v Pakistan (Dubai)
Sept 20: Bangladesh v Afghanistan (Abu Dhabi) Super Four
Sept 21: Group A Winner v Group B Runner-up (Dubai)
Sept 21: Group B Winner v Group A Runner-up (Abu Dhabi)
Sept 23: Group A Winner v Group A Runner-up (Dubai)
Sept 23: Group B Winner v Group B Runner-up (Abu Dhabi)
Sept 25: Group A Winner v Group B Winner (Dubai)
Sept 26: Group A Runner-up v Group B Runner-up (Abu Dhabi)
Sept 28: Final (Dubai)
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%3A%3C%2Fstrong%3E%20Astra%20Tech%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3EMarch%202022%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3EAbdallah%20Abu%20Sheikh%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20technology%20investment%20and%20development%3Cbr%3E%3Cstrong%3EFunding%20size%3A%3C%2Fstrong%3E%20%24500m%3C%2Fp%3E%0A
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
The Bio
Name: Lynn Davison
Profession: History teacher at Al Yasmina Academy, Abu Dhabi
Children: She has one son, Casey, 28
Hometown: Pontefract, West Yorkshire in the UK
Favourite book: The Alchemist by Paulo Coelho
Favourite Author: CJ Sansom
Favourite holiday destination: Bali
Favourite food: A Sunday roast
Frida%20
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