Taxation in the UAE - FAQ
April 7, 2019
The UAE is a tax-free country where many international companies establish new or branch entities, taking advantage of these benefits. The UAE is characterised by an almost complete absence of taxation with just a few exceptions.The UAE does not levy income tax on individuals. However, it levies corporate tax on oil companies and foreign banks. Excise tax is levied on specific goods which are typically harmful to human health or the environment. Value Added Tax is levied on a majority of goods and services. In this blog article we aim to inform you in more detail regarding taxation in the UAE.
- Income Tax. The UAE does not levy personal income tax.
- Corporate Income Tax. The Emirate of Dubai imposes corporate tax on companies engaged in the production and exploration of oil and gas at progressive rates up to 55% and branches of foreign banks at 20%. Free Zone companies enjoy Corporate Tax exemptions for up to 50 years.
- Value Added Tax (VAT). VAT was implemented in the UAE on 1 January 2018. Unless the supply is specifically zero rated or exempt, VAT is imposed on the supply of goods and services in the UAE as well as imports of goods and services. The standard rate of VAT is 5%. However, the export of goods and services outside the GCC region (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman), international transportation of goods and passengers, medicine and medical equipment, the first supply of residential real estate and certain healthcare and education services are subject to VAT at the zero rate. The supply of margin based financial services, life insurance, local passenger transport and residential real estate other than the first supply are exempt from VAT. A UAE business is required to register for VAT if the value of annual taxable supplies exceeds the mandatory registration threshold of AED 375,000. A UAE business may register for VAT if the value of annual taxable supplies exceeds the voluntary registration threshold of AED 187,500. Non-residents that are liable to account for VAT must register for VAT irrespective of the value of the supplies.
- Excise tax. In the UAE, excise tax became effective on 1 October 2017 and applies to tobacco products at 100%, carbonated drinks at 100% and energy drinks at 50%. The tax is based on the higher of the retail sales price of the excise goods or a standard price published by the Federal Tax Authority. The responsibility for accounting for excise tax falls on importers of the excise goods on imports into the UAE, producers of excise goods when they are released for consumption in the country and stockpilers of excise goods when the goods are acquired by a stockpiler and excise tax has not previously been paid on those goods.
- Customs duties. The UAE has enacted the GCC Customs Law under which customs duty is imposed at the first point of entry into the GCC. Customs duty applies to imported goods generally at the rate of 5% of the Cost, Insurance and Freight invoice value (CIF). However, certain goods may be subject to customs duty at a higher rate whereas other goods are exempt. the import of goods into Free Zones is generally not subject to customs duty and the duty is suspended up and until the goods are imported into UAE mainland.
- Municipal taxes. Dubai imposes a municipal tax on properties based on the annual rental value. This is generally payable by tenants at 5% for residential properties and 10% for certain commercial properties. The tax is payable through the monthly utility bills in installments.
- Hotel and tourism taxes. Dubai imposes various taxes on hotels based on the value of the hotel services. These include a municipality fee of 10% and a service charge of 10%. In addition, a Tourism Dirham fee is chargeable to hotel guests and tenants of hotel apartments per night of occupancy.
If you have any other questions regarding taxation in the UAE, please feel free to get in touch with one of our consultants by sending an email to firstname.lastname@example.org.