Corporate tax in the UAE
Tax considerations are always high on the agenda when setting up a new business. It’s one of several reasons why so many companies choose to set up in the UAE from every corner of the world. The UAE has a global reputation as a tax haven – and with good reason. While it is not true to say that the Emirates is an entirely tax-free environment, there are few taxes levied here, and where they do exist, they are incredibly low.
Is there a corporate tax in the UAE?
For many businesses, the answer is no. However, the UAE Ministry of Finance recently announced the introduction of a federal corporate tax applicable to:
- All businesses and individuals conducting business activities under a commercial licence.
- Free zone businesses (However, the MoF will honour tax incentives currently offered to existing free zone businesses.)
- Banking operations
- Businesses engaged in real estate management, construction, development, agency and brokerage activities.
Under the new rules, no corporate tax is levied on incomes under AED 375,000. The tax rate on income above this threshold is 9%, meaning it remains one of the lowest in the world.
The only real exceptions to this rule are companies that produce oil and gas, branch offices of foreign banks and some large multinationals that are taxed at a higher rate.
UAE corporate tax becomes application for the nation’s companies on either 1 June 2023 or on 1 January 2024, depending on the financial year followed by the business.
Corporate tax is not applied on individual salary and other employment income, a foreign investor’s income earned from dividends, capital gains, interest, royalties and other investment returns, investment in real estate by individuals, or dividends, capital gains and other income earned by individuals from owning shares or in their personal capacity.
Is there personal income tax in the UAE?
Personal income tax in the UAE is even more straightforward than corporate tax – it is always 0%. Providing you are a tax resident in the UAE, you will pay no tax whatsoever on your personal income.
Is there income tax in the UAE for foreigners?
Once again, the answer here is no – there is no income tax in the UAE for foreigners. The Emirates levies 0% on personal income. So, provided you are a tax resident in the UAE – i.e. you are not required to pay tax elsewhere – then you will pay no tax on any earned income. Set up in a UAE free zone, and you’ll also benefit from 100% import and export tax exemption and the ability to repatriate 100% of your capital and profits and retain 100% ownership of your business (something that is not always possible on the mainland).
What are the taxes payable in the UAE?
The only taxes of note in the UAE are VAT and customs tax. Customs tax is payable on goods coming into the Emirates and is levied at a standard rate of 5%. There are exceptions to this, however: tobacco and alcohol are subject to a higher rate, while other goods are entirely exempt. Free zone businesses are also usually 100% exempt from paying customs tax. VAT is levied in the UAE at a flat 5% on most goods and services, with the exception of exports outside the GCC and a few other goods and services such as education and medical equipment.