UAE Tax Rates: An Overview of Dubai Taxation
UAE Tax Rates: An Overview of Dubai Taxation
In the United Arab Emirates, businesses are exempt from corporate tax until June 2023, after which they are subject to a 9% tax. Individuals are not required to pay income tax.
enterprises that deal in goods deemed dangerous by the UAE government are subject to hefty taxes: enterprises that sell soda, energy drinks, tobacco, and sugar-containing products are subject to a 50¬–100% levy.
Individual Taxes in the UAE
Taxes on income
No income tax is paid at all by individuals, whether they are citizens or residents. Additionally, they are not subject to taxes on capital gains, inheritance, gifts, interest, dividends, riches, or luxury.
In the UAE, foreign nationals with residency visas are exempt from paying pension tax; in Portugal, however, pensions earned abroad are subject to a tax rate ranging from 10 to 48%.
Taxes on Tourists
In the United Arab Emirates, taxes are paid by foreigners in restaurants, hotels, and resorts.
Various emirates may have various tax rates. For instance, municipal taxes are 10% in Ajman or Sharjah, 7% in Dubai, and none imposed in Ras Al Khaimah.
How can a person become a Tax Resident of UAE?
Tax residents are automatically granted UAE residence visas to foreign nationals. For that, they don’t have to have their tax identification number.
One must, however, seek a Taxation Residence Certificate if they wish to avoid double taxation and their home country has a double taxation treaty treaty with the United Arab Emirates.
Here’s what you must do to verify your tax status:
1. Obtain a resident visa and spend a minimum of 180 days in the United Arab Emirates.
2. Invest in or rent a home in the UAE.
3. Complete a Federal Tax Authority application.
The documentation necessary for a Tax Residence Certificate:
- A duplicate of the passport.
- A duplicate of the UAE residency permit.
- A duplicate of the contract for the purchase of the property or the long-term leasing agreement.
- Income verification, such as a pay stub or pension statement.
- The latest six months’ worth of UAE bank account statements.
- Verification that the candidate has lived in the United Arab Emirates for a minimum of 180 days. It can be acquired from the Federal Authority for Identity and Citizenship or the General Directorate of Residency and Foreigners Affairs.
Within the following three days, the Taxation Residence Certificate will be provided. Together with the automatically generated Tax Identification Number, it can then be downloaded from the website.
To verify a UAE’s tax resident status abroad, one only needs to present their Tax Identification Number and Taxation Residence Certificate.
UAE Business Taxes
Corporate Tax
In June 2023, a 9% corporate tax rate will be implemented. Businesses making more than AED 375k ($102,000) annually will be subject to it. Most businesses continue to pay zero percent corporate tax until then.
In the oil and gas industry, foreign businesses are required to pay 55% corporation tax. Foreign bank branches pay 20%.
Dividends, capital gains, intragroup transactions, and reorganisations are all tax-free.
VAT
In the United Arab Emirates, value-added tax is 5%. Businesses that make more than AED 375 000 ($102,000) must pay VAT. A business must register with the FTA as a VAT payer in order to pay the tax.
Registration is optional for businesses making between AED 187,500 and AED 375,000.
Within 28 days following the conclusion of the tax period, VAT is often paid on a quarterly basis. However, some taxpayers may be assigned various tax periods by the Federal Tax Authority.
Excise tax
Products that the UAE government deems hazardous to the environment or human health are subject to an excise tax. The tax is computed as a percentage of the retail price less VAT and excise tax, or the product price determined by the FTA, whichever is higher.
The list of goods and their tax rates has been approved by the UAE Cabinet:
• 50% for carbonated beverages, excluding regular soda;
• 50% of all goods that include sweeteners or sugar;
• For tobacco products, 100%;
• Energy drinks at 100%;
• For electronic cigarettes, 100%.
Export and Import Duties
Depending on the type of imported goods, the import tax may change. However, it is typically 5% of the imports’ cost, goods, and insurance value (CIF).
However, a 50–100% tariff is applied to the import of some dangerous products, such as alcohol or tobacco. Others are imported tax-free, such as the majority of the Greater Arab Free Trade Area’s domestic goods.
Additionally, import taxes do not apply to goods brought into Free Zones until they are sold on the local market.
In the UAE, there is no Export Tax..
UAE Tax Emptions For Businesses
To reduce their tax liability, investors and business owners register their companies in the United Arab Emirates. With their unique tax and customs laws, free zones offer the best conditions for businesses.
UAE Free Zones advantages for businesses:
1. For 15–50 years following firm registration, there is no corporate tax.
2. No VAT.
3. There are no customs charges.
4. Income earned from foreign ventures by both people and corporations is exempt from taxes in the United Arab Emirates and can be taken out of bank accounts without restriction.
5. Instead of hiring a local partner and handing them 51 percent of the company when registering a business outside of Free Zones, an investor might also be the sole owner of the business.
How can a business obtain UAE Tax Residence?
A corporation is automatically regarded as a tax resident when it is registered in the United Arab Emirates.
However, it takes a year after registration to be eligible to apply for a Taxation Residence Certificate. In order to prevent double taxation and verify UAE tax residency abroad, this certificate is required.
The founders of the businesses submit an application to the FTA. Businesses must pay a registration charge of AED 1,750.
Documents required to get a company's Taxation Residence Certificate
1. The enclosed list of founders and shareholders, along with the trade licence.
2. The foundation contract.
3. Copies of the owners, partners, and managing directors’ passports, ID cards, and residency permits.
4. A financial statement for the certificate year that has been prepared or verified by a recognised audit firm in the United Arab Emirates.
5. The UAE bank’s corporate account statement for the previous six months.
6. The business property’s rental or purchase arrangement.
The applicant must select a start date for a fiscal year and indicate which country they would like to receive a Taxation Residence Certificate for when completing an application with the FTA.
The UAE Taxation Residence Certificate is not available to foreign businesses.
Tax exchanges and double taxation agreements
Double Tax Treaties
Singapore, India, the United Kingdom, and the majority of European nations are among the 138 nations with whom the United Arab Emirates has double taxation treaties.
The treaty addresses taxes on citizens of one nation who earn money in another. A person or business files a tax deduction in their home country after paying taxes in the nation where their income is earned.
According to UAE tax laws, individuals who are not tax residents must pay income taxes in their home country.
Exchange of Tax Information
The United Arab Emirates became a member of the Common Reporting Standard (CRS), a centralised mechanism for sharing tax data, in 2018.
More than 100 nations, including those in Europe, Canada, numerous Asian nations, and island nations like Antigua and Barbuda and Saint Kitts & Nevis, joined the CRS Agreement.
The agreement states that banks, investment firms, and insurance providers report non-residents’ bank accounts to the local government. The information is then shared between the nations by the authorities. The nations can identify debtors and levy taxes thanks to this method.