Dubai tax system

The UAE Federation was formed in 1971 and now it consists of seven Emirates. All the Emirates were vested with the right to pursue autonomous internal policies. Each Emirate has elaborated its own income tax and corporate tax act. However, these decrees apply only to oil, gas and petrochemical companies and branch offices of foreign banking institutions. All the types of business and personal income received in UAE are exempted from taxation. This applies to all the forms income, interests, dividends and other types of capital gains of any nature and it is it passive or active investment.

The companies registered and operating on the territory of Dubai and other Emirates have no worries with taxation. According to the annual Tax Analysis Report, the average time spent in UAE for financial reporting is about 4 hours per year. That is due to the simplicity and transparency of the Dubai tax system.

The UAE offers a unique system of taxation as the state imposes almost no taxes. Such taxes as VAT and sales tax are not collected at all. At current there is a plan to introduce a minimum rate of VAT which is planned to be 5%. Its introduction is planned in a couple of years only.

Dubai local income tax (proposed in 1969) has never been levied, and the UAE Government has no plans to implement it. The foreign trade is virtually free of tax, and there is no currency exchange regulation on the remittance of profits and capital repatriation. Moreover, the companies and legal entities registered on the territory of the specialized FTZs can take the full advantage of guaranteed tax incentives.

An account audit is a mandatory requirement for the most of onshore businesses in the UAE, whereas financial reporting to government is not required. An exception is foreign banks and those involved in the oil, gas and petrochemical sector. However, this applies only to the entities in this business that carry out their activities directly on the territory of the UAE. In the other cases, there is no taxation at all.

The economy of the UAE, according to the Cooperation Council for the Arab States of the Persian Gulf, is considered as the region’s most liberal and most diversified economy. The results of the comparative analysis of the 15 European and Middle Eastern countries and ist tax systems proves that the UAE is the only country with no taxation on majority of types of income. Only major oil and gas companies and branches of international banks are liable to taxation.

In order to prove the advantages of the UAE tax system, let us compare the most beneficial jurisdictions in terms of taxation. This table gives a clear vision of the reasonability of starting business on the territory of the UAE.

Jurisdictions Criteria

Dubai

Belize

Switzerland

Corporate tax

0%

0%

- companies under Holding Company regime — 7.83%
- other companies — 11.5%-24.2% (combined Federal, Cantonal and Municipal taxes)

Withholding tax on dividend payments to foreign shareholders

0%

0%

35%

VAT standard rate

0%

12,5%

8%

VAT registration threshold

0

BZD 75,000

CHF 100,000

If you need any other info on the Dubai tax system – please feel free to get in touch with us. Use the contact us form and learn all the features of taxation in the UAE and its practical aspects and advantages of taxation system of United Arab Emirates for your business.


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