Dubai... is there a catch?
Discussion
A little background.
I run a company in the UK doing roughly £1.5m in revenue. I have recently moved our paid ads to a new agency running out of dubai which then sent me down the rabbit hole of opening a company in dubai due to the 0% corp tax and no income tax.
What is stopping me opening a company in Dubai that owns our UK company and the UK company passes all profits to the Dubai company?
There might be a moral issue but at the moment i am quite happy to not give the government more money to waste.
Anyone have any experience with this sort of thing?
I run a company in the UK doing roughly £1.5m in revenue. I have recently moved our paid ads to a new agency running out of dubai which then sent me down the rabbit hole of opening a company in dubai due to the 0% corp tax and no income tax.
What is stopping me opening a company in Dubai that owns our UK company and the UK company passes all profits to the Dubai company?
There might be a moral issue but at the moment i am quite happy to not give the government more money to waste.
Anyone have any experience with this sort of thing?
Where are you living and where do you want to spend the money the U.K. Co makes?
BTW Dubai is into riding CT in 2023 for taxable income above ~USD100k. I was speaking to a local banker out there last month who thought it was just a matter of time before income tax came in. Not at U.K. levels but it will come.
BTW Dubai is into riding CT in 2023 for taxable income above ~USD100k. I was speaking to a local banker out there last month who thought it was just a matter of time before income tax came in. Not at U.K. levels but it will come.
BlackWidow13 said:
Where are you living and where do you want to spend the money the U.K. Co makes?
BTW Dubai is into riding CT in 2023 for taxable income above ~USD100k. I was speaking to a local banker out there last month who thought it was just a matter of time before income tax came in. Not at U.K. levels but it will come.
Currently living in the UK but i am tempted to leave if i can. BTW Dubai is into riding CT in 2023 for taxable income above ~USD100k. I was speaking to a local banker out there last month who thought it was just a matter of time before income tax came in. Not at U.K. levels but it will come.
But even if i stayed in the UK and paid income/dividend tax. Surely the Corporation tax saving would be worth it it alone to be 26% better off to grow the business.
I’m in a similar position. If I buy another buy to let in the uk, I pay tax on rental income. If I ever sell it i pay capital gains tax. Not relevant in Dubai at the moment. Also, I don’t think there are restrictions on bringing money back to the uk. Yields are good and regulations are not that relevant as properties are modern and don’t have damp / needs gas Certs etc . .
I too am wondering, ‘where’s the catch ?’
Not only that but I could have some great holidays out there in the sun !
I too am wondering, ‘where’s the catch ?’
Not only that but I could have some great holidays out there in the sun !
mickytruelove said:
A little background.
I run a company in the UK doing roughly £1.5m in revenue. I have recently moved our paid ads to a new agency running out of dubai which then sent me down the rabbit hole of opening a company in dubai due to the 0% corp tax and no income tax.
What is stopping me opening a company in Dubai that owns our UK company and the UK company passes all profits to the Dubai company?
There might be a moral issue but at the moment i am quite happy to not give the government more money to waste.
Anyone have any experience with this sort of thing?
Withholding tax will apply, think at 20%. Won't stop you, but likely make the extra costs of running another company not worth it. I run a company in the UK doing roughly £1.5m in revenue. I have recently moved our paid ads to a new agency running out of dubai which then sent me down the rabbit hole of opening a company in dubai due to the 0% corp tax and no income tax.
What is stopping me opening a company in Dubai that owns our UK company and the UK company passes all profits to the Dubai company?
There might be a moral issue but at the moment i am quite happy to not give the government more money to waste.
Anyone have any experience with this sort of thing?
swanseaboydan said:
I’m in a similar position. If I buy another buy to let in the uk, I pay tax on rental income. If I ever sell it i pay capital gains tax. Not relevant in Dubai at the moment. Also, I don’t think there are restrictions on bringing money back to the uk. Yields are good and regulations are not that relevant as properties are modern and don’t have damp / needs gas Certs etc . .
I too am wondering, ‘where’s the catch ?’
Not only that but I could have some great holidays out there in the sun !
If you are resident in the UK, and assuming you are UK citizen, UK tax applies on both the rental income and capital gains tax if you sell it (tax is on worldwide income, not just the UK) Fairly big catch! (double taxation treaty though, so you can offset any tax paid in Dubai against the UK tax)I too am wondering, ‘where’s the catch ?’
Not only that but I could have some great holidays out there in the sun !
The way to do it is to have a foreign spouse, as they can opt for being taxed on UK income only. They then own all the stuff abroad, and only pay UK tax on the money they bring in
Edited by wisbech on Tuesday 13th December 03:45
I know several people here who have businesses in UK that are forever sending money to prop up their loss making Dubai office.
I do wonder what the legal POV is if HMRC were to audit this.
Btw corporation tax will only apply outside of free zone areas. Given you don’t need to operate on the mainland, and the cost of free zone company set up are minimal, this would be your easiest route.
If you did actually want to establish a working business entity other than a tax dodge, your company structure and license becomes much more important. However the reforms of this year mean you no longer require a local partner for any of it, so don’t fall for people saying you do.
I do wonder what the legal POV is if HMRC were to audit this.
Btw corporation tax will only apply outside of free zone areas. Given you don’t need to operate on the mainland, and the cost of free zone company set up are minimal, this would be your easiest route.
If you did actually want to establish a working business entity other than a tax dodge, your company structure and license becomes much more important. However the reforms of this year mean you no longer require a local partner for any of it, so don’t fall for people saying you do.
mickytruelove said:
Currently living in the UK but i am tempted to leave if i can.
But even if i stayed in the UK and paid income/dividend tax. Surely the Corporation tax saving would be worth it it alone to be 26% better off to grow the business.
Also, corp tax will be levied on profits not income. Depending on your level of investment you’d also be eligible for a 10yr visa which helps cut out a lot of red tape if you were to expand your interests beyond the initial trade license. But even if i stayed in the UK and paid income/dividend tax. Surely the Corporation tax saving would be worth it it alone to be 26% better off to grow the business.
Steve H said:
wisbech said:
The way to do it is to have a foreign spouse, as they can opt for being taxed on UK income only. They then own all the stuff abroad, and only pay UK tax on the money they bring in
Hands up if anyone can see how that one can go wrong
how do you run the dubai company without it becoming UK tax resident? if its managed and controlled from the UK it is UK tax resident and liable to UK corporation tax.
how do you get the uk company underneath the dubai company without triggering some tax? use a S.135 share for share swap maybe? you might trigger some transaction in securities charges potentially from a personal perspective.
The uk company would still be paying UK corporate tax so im not sure what you are solving by doing this?
how do you get the uk company underneath the dubai company without triggering some tax? use a S.135 share for share swap maybe? you might trigger some transaction in securities charges potentially from a personal perspective.
The uk company would still be paying UK corporate tax so im not sure what you are solving by doing this?
Edited by db10 on Tuesday 13th December 10:03
db10 said:
how do you run the dubai company without it becoming UK tax resident? if its managed and controlled from the UK it is UK tax resident and liable to UK corporation tax.
how do you get the uk company underneath the dubai company without triggering some tax? use a S.135 share for share swap maybe? you might trigger some transaction in securities charges potentially from a personal perspective.
The uk company would still be paying UK corporate tax so im not sure what you are solving by doing this?
IIUC he's proposing, in effect, to pay management charges from the UK company to the Dubai company, reducing the UK company profits to zero, in the hope of then being able to take money out of the Dubai company and repatriate it to the UK as income without income tax (on the belief that income earned in Dubai is somehow tax-free back in the UK).how do you get the uk company underneath the dubai company without triggering some tax? use a S.135 share for share swap maybe? you might trigger some transaction in securities charges potentially from a personal perspective.
The uk company would still be paying UK corporate tax so im not sure what you are solving by doing this?
Edited by db10 on Tuesday 13th December 10:03
The issues are:
(1) the Dubai company will become UK tax-resident unless very careful (see the case of Mark Higgins Rallying v HMRC to learn a bit more about this) - in which case the Dubai company will pay UK corporation tax;
(2) the OP will still be liable for income tax on income from the Dubai company - the zero income tax in Dubai is irrelevant unless the OP becomes tax resident in Dubai;
(3) there are potential withholding tax issues;
(4) the management charges will be subject to potential transfer pricing issues and challenges;
etc.
It really isn't that simple. If you have to fly out to Dubai every month for board meetings, have to hire staff in Dubai to run things, and so on then any potential tax benefits will quickly evaporate. And that's before considering any potential regulatory issues in Dubai.
Saweep said:
I'm reasonably sure that if the OP moves to Dubai and becomes resident there, he can just pay himself all the profits from his UK company as salary to Dubai. Tax free.
No need to move things inter-company or get involved in transfer pricing etc (new rules on this in 2023 in the UK)
The OP didn’t mention physically moving to Dubai. If that’s on the cards then it will change the equations.No need to move things inter-company or get involved in transfer pricing etc (new rules on this in 2023 in the UK)
mike74 said:
Steve H said:
wisbech said:
The way to do it is to have a foreign spouse, as they can opt for being taxed on UK income only. They then own all the stuff abroad, and only pay UK tax on the money they bring in
Hands up if anyone can see how that one can go wrong
swanseaboydan said:
I’m in a similar position. If I buy another buy to let in the uk, I pay tax on rental income. If I ever sell it i pay capital gains tax. Not relevant in Dubai at the moment. Also, I don’t think there are restrictions on bringing money back to the uk. Yields are good and regulations are not that relevant as properties are modern and don’t have damp / needs gas Certs etc . .
I too am wondering, ‘where’s the catch ?’
Not only that but I could have some great holidays out there in the sun !
From what I gather, and working in Dubai myself, tax must be paid on income from all rental property in the UK, i.e. regardless of whether it's just the one or several more.I too am wondering, ‘where’s the catch ?’
Not only that but I could have some great holidays out there in the sun !
Obviously not using PH as a tax advice place, but as I already have a BTL from before I moved out, and in any event (with plans to maybe buy more), it was my understanding from the gov.uk webpages that even with the one that I do currently have, I'll need to pay tax on any net income from that.
It'll be my first self-assessed tax return, but luckily I've got a reliable contact to hand to tend to it as chances are I'll probably get it wrong doing it myself and accidentally do myself over.
As for the post above, I'm not sure where the banker got his information from but it is one of those old Chinese whisper urban myths: on the contrary there are still no plans for income tax, otherwise we'd all have learned about it my now.
If there was one then that would be one of the many draws to the UAE (which helps boost tax revenue in other areas) gone so a bit of an obvious own goal.
And even then and if there were a nominal income tax, it's still remarkably not as expensive as people say it is, and worth moving to for work even if only temporarily, especially amidst the cost of living shambles back in Europe.
skwdenyer said:
Saweep said:
I'm reasonably sure that if the OP moves to Dubai and becomes resident there, he can just pay himself all the profits from his UK company as salary to Dubai. Tax free.
No need to move things inter-company or get involved in transfer pricing etc (new rules on this in 2023 in the UK)
The OP didn’t mention physically moving to Dubai. If that’s on the cards then it will change the equations.No need to move things inter-company or get involved in transfer pricing etc (new rules on this in 2023 in the UK)
There's no way to legally just move the profits to Dubai then back to yourself in the UK, without leaving.
Otherwise everyone would just have a business out there!
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