Companies of all legal forms regularly pay only 9% corporate taxes in Dubai – in addition to various exceptions and benefits. German entrepreneurs could therefore come up with the idea of taxing profits via a company based in the UAE significantly lower than in Germany. However, this arrangement only works if there is no fact of the so-called additional taxation. Dubai is basically a city that falls within the scope of §§ 7 to 14 AStG due to its low tax rates. We show what additional taxation means in Dubai, what consequences it has and how entrepreneurs can avoid taxation!
1st principle of additional taxation in Dubai
Additional taxation refers to a special form of taxation of foreign profits. It is regulated in §§ 7 to 13 AStG and leads to the fact that profits of a foreign company can also be taxable in Germany. The prerequisite is that the company resident abroad has an indirect or direct connection to the country. This connection usually arises because the shareholder is resident in Germany.
There is no such thing as an “adjustment taxation for Dubai”. However, the regulations of the AStG apply to Dubai or the Arab Emirates (UAE) because only a very low corporate tax is due there. The German legislator therefore tries in principle to counteract corresponding arrangements with the facts of foreign tax law.
So let’s now look at what additional taxation means for Dubai and what specific facts are relevant here.
1.1 Participation in foreign intermediaries
Additional taxation only applies in Dubai if the basic requirements of § 7 AStG are met. This in turn is the case for participation in a foreign intermediary company. The following applies:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.