UAE (Dubai) Corporate Tax Regime - An Overview

CS Lalit Rajput , Last updated: 20 July 2021
Share

Dubai, a major business center in the Middle East has been treated as a tax haven for the Investors / Businessmen. The Taxation system is very satisfactory for the Businessmen and Investors. The corporate tax is set at a maximum rate in the oil and bank sectors in the Emirates.

Taxation aspects for Companies in Dubai

Corporate Tax

Corporate taxation in Dubai is limited only to banks and oil companies.
Oil companies in Dubai are subject to a maximum amount of 55% corporate income tax on the UAE-sourced income.
Branches of foreign banks in Dubai, subject to 20% tax rate on their Dubai source income.
Calculation method for the taxable income:

For Banks	For Oil Companies
According to their audited financial statements	According to their concession agreements

Free trade zones (FTZs) have their own rules and regulations and there is no corporate tax.

VAT (VALUE ADDED TAX) In DUBAI

In the year 2018, the VAT was introduced in the UAE to provide a new source of income. VAT is a tax on the consumption or use of goods and services levied at each point of sale.

Registration Criteria

Mandatory Registration	Optional Registration
If its taxable supplies and imports exceed AED 375,000 per annum.or Expected turnover to be more than AED 375,000 in the next 30 days.	Turnover or expenses (which were subject to VAT) were more than AED 187,500 in the last 12 months or Expect either your turnover or expenses (which were subject to VAT) to be more than AED 187,500 in the next 30 days.

Kindly note that: If you fail to register for VAT on time, a late registration administrative penalty of 20,000 AED will apply.

VAT Rate

UAE Authorities implemented the VAT rate of 5% on jewelry, tobacco, luxury cars, and alcohol industry etc. (low rate as compared to other countries worldwide) for particular goods and services.
VAT charged at 0% also on few services:
investments in precious materials;
the supply or residential properties;
education services;
healthcare services.

Excise tax in Dubai

UAE have implemented an excise tax, generally ranging from 50% to 100%, non-essential goods which includes tobacco products and carbonated drinks / energy drinks, luxury cars etc.

Dividend tax in Dubai

Companies established in UAE can get benefit from the double taxation treaties signed by UAE and there is no tax on dividends / no withholding tax imposed for foreign or local investments. dividend payments are not tax-deductible from the paying company.

Indirect taxes REGIME in Dubai

Hotels and entertainment activities	10% municipal tax
Import of alcoholic beverages;	50% tax
Purchase of alcohol	30% tax

Individual Taxation Aspects

UAE has been treated as a tax haven country for businessmen and investors. And No Income Tax Provisions / Compliance Obligations are applicable to individuals in UAE (DUBAI).

Disclaimer:Every effort has been made to avoid errors or omissions in this material. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. In no event the author shall be liable for any direct, indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information.