Dubai Tax Guide For Artists:
An Executive Summary
This is an introductory guide for Artists, linking in to
our full Dubai Fact-File. If you'd rather dive right in to
the Fact-File, you can use the navigation on the right of
this page, or start from the Dubai home
page.
Business Formation: The major distinction
is between the various Free
Zones, where 100% foreign ownership is permitted and regulations
are light, and the rest of the country, where there are restrictions
on ownership and permission is required to start a business.
If you want to sell internationally, then you will be able
to use one of the special Free Zone business formats, and
the bureaucracy is fairly light. But if you want to work in
the general economy, then you will have to have a local 'sleeping
partner', and you can use a regular
business format such as a
limited company or a sole proprietorship; the bureaucracy
is quite dense, though. Many creators operate very successfully
as individuals. In the regular economy all types of business
have to be registered
and to have a business
licence. Whether you are in a Free
Zone or not, the good news (unless you are a bank or an
oil or gas company) is that no tax returns are necessary,
since there is no
income tax in Dubai, and no VAT either.
Basis of Domestic Taxation: Theoretically,
there is income taxation in the regular economy, and there
isn't in the Free
Zones. But in practice the income tax law is not enforced,
except for oil and gas companies and banks. So as regards
tax, for most people and certainly for most types of artist,
there isn't any. It's necessary to be resident,
however, or your home country may say that you have never
left. If you're an individual, that means cutting off ties
at home; and whether you're an individual or a company, you
need to try to have a Permanent
Establishment in Dubai.
Basis of International Taxation: If an artistic
creator has a static location, she'll trade from there, but
one of the advantages of this rather special way of life is
that you're not necessarily tied to one spot, and you have
the opportunity to base yourself in a
low-tax location. Dubai certainly qualifies in that respect.
Getting royalty returns without tax may be straightforward
if you have a corporate set-up, although some countries discriminate
against low-tax locations, but it can be more complicated
because the foreign country may take a bite out of your returns,
called withholding
tax. Then you have to turn to double
tax treaties to try to get the money back, and Dubai's
Double
Tax Treaties aren't much help, because they are mostly
aimed at getting good tax treatment for income flows leaving
Dubai. It's all a bit of a jungle. If you set up a studio
in a foreign country, you need to try to avoid the 'permanent
establishment' trap, and you may get bogged down in local
VAT. If you send staff - or yourself - to work in foreign
countries you need to think hard about their tax situation
in advance, both in respect of local
income taxation and perhaps because of withholding
tax.
Tax-Efficient Structures: As long as you
stay in Dubai, there is no need to worry about tax efficiency,
since there isn't
any tax. The problem comes if you are going to leave one
day and return to your high-tax home country, or perhaps move
to another high-tax jurisdiction. Obviously there is a case
to be made for locating the business focus of your investments
in a low-tax, 'offshore'
jurisdiction, and Dubai certainly qualifies on that score;
but you need to consider that Dubai doesn't have many Double
Tax Treaties, and those that it does have tend to be concerned
mostly with getting good treatment for income flows leaving
Dubai. One way or another, you should probably set up in one
of the Free
Zones rather than (or as well as) in the regular economy:
Dubai's recent economic problems have yet to play out in terms
of the ongoing taxation structure; but the Free Zones are
well insulated from the regular economy.
Incentive Programmes: The main incentive
programme in Dubai is of course the
Free Zones, but in the regular economy the government
has made an effort lately to assist
entrepreneurial activity, although this is mostly by way
of advice and assistance rather than in monetary terms. The
banks are under pressure to help SMEs, though, with government
guarantees for lending. Although not many of these schemes
will be relevant to artistic creators, it is well worth investigating
what's on offer. However, the saying: 'He who sups with the
devil needs a long spoon' comes to mind. The schemes are well-intentioned,
no doubt, but they can be intensely bureaucratic, with very
intrusive qualification procedures, and a long 'tail' of reporting
requirements. The UAE offers support for training
programmes, initially aimed at locals, but now available
more widely.
Employing People: Many businesspeople will
just tell you: 'Don't do it'. 'Marry in haste; repent at leisure',
they say, and it was never so true than when it comes to employment.
Don't kid yourself that employees will feel that they owe
you anything. Today's workers, encouraged by a slew of anti-business
legislation from Brussels, and the general nannying attitude
of government, often feel that the world owes them a living.
Many employers of course bring problems on themselves by treating
employees as little better than slaves. Of course, there are
plenty of exceptions to these rather sweeping generalizations.
Lucky you if you find some! Most artists run quite skinny
operations, but if you do need staff try as hard as you can
to use contractors (ie self-employed
people) rather than employees. Employment
law in Dubai is not anywhere near as nasty as it is in
the EU, but can be quite prescriptive as regards local
staff.
Pensions, Social Security, Health Care and Insurance:
Meaning, for the creator herself. Obviously, state
social welfare schemes apply to artists as much as to
anyone else, although there may be problems if you operate
across national borders. Many artists will want to have improved
(meaning private) health
benefits, and almost all will want to find tax-efficient
ways of making provision for their pensions.
It's important to separate these from your business itself,
in case of failure. If you have it in mind to retire to somewhere
warm and not too highly taxed, then the time to start is now,
in terms of building
up a pension away from the grasp of the tax authorities,
and Dubai is evidently a good place to begin. Social provision
is good
for locals, and free; but expats have to look after themselves
to a large extent.
Living Internationally: Perhaps you plan
to live out your life as a respected and contented member
of your local community. The salt of the earth, one might
say, if that's not patronising. But some artists will find
themselves drawn intentionally or otherwise to an international
existence, doing business and/or living in other countries.
There are many challenges: apart from the difficulty of arranging
your tax affairs satisfactorily, there are the problems that
go along with property
ownership, education
of your children, international removals, health
care and pension
provision, just to take some of the more obvious issues.
Of course no one can predict the future with any certainty,
but there are all too many stories of people who have trapped
themselves in the wrong investment in the wrong currency in
the wrong place, with multiple taxmen on their backs. Most
such problems are avoidable, with forethought.
|
Cyprus
Full Guide
Back to main Dubai page
