flag United Arab Emirates United Arab Emirates: Tax System

In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information

 

Corporate Taxes

Tax Base For Resident and Foreign Companies
A company is deemed to have a permanent establishment in the country if it has a branch, a place of management or another fixed place of business, or an agent that has and habitually exercises authority to conclude contracts on behalf of the foreign company.
 

Tax Rate

Corporate tax (effective from the financial years beginning on or after 1 June 2023)
  • 0% on taxable income not exceeding AED 375,000
  • 9% on taxable income exceeding AED 375,000
Tax on profits made by branches of foreign banks Generally 20%
Companies engaged in oil and gas and petrochemical activities 55% + rates under their individual UAE concession agreements
Tax applicable for all companies: the duty deducted by the municipality in each Emirate at the time of issuance or renewal of a trade licence 10% of the annual amount of the rent of offices and warehouses and 5% of the annual amount paid by a company to accommodate its employees.
 
Tax Rate For Foreign Companies
As a general rule, taxation in the UAE is based on the territoriality concept (and not on the worldwide one). Non-resident companies carrying out a trade or business in an Emirate through a permanent establishment in that Emirate are formally taxable under the relevant Emirate tax decree.

Branches of foreign banks are taxed at 20% in most Emirates.

Capital Gains Taxation
Capital gains are generally not subject to tax, unless they are derived by a company that is taxable under the purview of income tax or banking tax decrees.
Main Allowable Deductions and Tax Credits

Deductions are determined based on accounting principles and the tax decrees of the various Emirates. Expenditures that are not of a capital nature and are incurred wholly and exclusively for the purposes of the business are generally deductible.
Companies
can deduct up to 50% of the expenses incurred for entertaining customers, shareholders, suppliers, and other business partners, including costs for meals, accommodation, transportation, admission fees, entertainment facilities, and equipment, as well as any other expenses specified by a Cabinet decision.
The deduction of net interest expenses is limited to 30% of tax-adjusted EBITDA.

Non-deductible expenses include fines, penalties (excluding compensation for breach of contract), bribes or illicit payments, donations made to entities that are not Qualifying Public Benefit Entities, dividends/profit distribution, CT, recoverable VAT, taxes imposed outside the UAE, and any other expenses specified in a Cabinet decision.

A business is permitted to offset tax losses against the taxable income of future tax periods when computing the taxable income for that period. However, during any tax period, the set-off amount cannot exceed 75% of the taxable income for that specific period. Any remaining tax losses can be carried forward indefinitely to subsequent tax years.

Other Corporate Taxes
Most Emirates impose a municipality tax on properties, generally by reference to the annual rental value. The tenants are normally the taxpayer, although in some cases separate fees are payable both by tenants and property owners. In the Emirate of Dubai, the municipality tax on property is currently imposed at 2.5% for commercial properties (borne by the owner) at 5% of the specified rental index for residential properties (paid by the tenant).
Furthermore, a registration fee may also be levied on the transfer of ownership of land or property. For instance, a land registration fee is levied in the Emirate of Dubai at a rate of 4% of the sale value of the property (also applicable on the direct or indirect transfer of shares in an entity that owns real property).

There is a social security regime in the United Arab Emirates that applies to UAE and GCC national employees only. In most of the Emirates, and for UAE national employees, social security contributions are calculated at a rate of 20% of the employee's gross remuneration as stated in the employment contract. Out of the 20%, 5% is payable by the employee, 12.5% is payable by the employer and the remaining 2.5% is financed by the Government; in Abu Dhabi, the overall rate is 20%, of which 15% is paid by the employer.
From January 1st, 2023, the unemployment insurance scheme introduced through Federal Decree-Law No. 13 of 2022 is applicable to both Emirati and foreign workers. The scheme is designed to provide financial assistance to eligible individuals in the public and private sectors in the event of unemployment. Subscribers to the scheme are classified into two categories based on their basic monthly salary. The first category comprises individuals earning AED 16,000 or less per month, while the second category includes those earning more than AED 16,000 as their basic salary. Subscribers in the former category must pay a monthly subscription fee of AED 5, while those in the latter category must pay a monthly subscription fee of AED 10.

The different Emirates impose hotel levies (for instance, a fee of between AED 7 to 20 per room/night plus 7% on the total value of the invoice is levied in Dubai, whereas in Abu Dhabi it is equal to AED 15 per room/night plus 6% on the room price). Municipality fees on hotel sales are levied in Abu Dhabi (4%) and Dubai (7%). Hotels in all Emirates levy an additional service charge set at 10% of the hotel sale revenue.

Other Domestic Resources
UAE Federal Tax Authority
 

Country Comparison For Corporate Taxation

  United Arab Emirates Middle East & North Africa United States Germany
Number of Payments of Taxes per Year 5.0 20.8 10.6 9.0
Time Taken For Administrative Formalities (Hours) 116.0 204.0 175.0 218.0
Total Share of Taxes (% of Profit) 15.9 32.1 36.6 48.8

Source: The World Bank - Doing Business, Latest data available.

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Accounting Rules

 

Accounting System

Accounting Standards
IFRS financial statements are required for all companies listed on the UAE stock exchanges and for banks.
Accounting Law
The Commercial Companies Law of 2015
Difference Between National and International Standards (IAS/IFRS)
Companies are required to comply with IAS/IFRS norms. SMEs have the option to choose between IFRS for SMEs and full IFRS Standards.
 

Accounting Practices

Tax Year
From 1st January to 31st December.
Accounting Reports
Companies should provide an annual activity report audited by an auditor to the Ministry of Finance (for trading companies) or to the Ministry of Industry (for industrial companies). This obligation serves for the renewal of the company's licence.
Publication Requirements
The companies listed on the stock exchange should submit their accounts to the 'Emirates securities and commodities market authority' which imposes quarterly publication of balance sheets and income statements as well as an annually audited income statement.
 

Accountancy Profession

Accountants
Many local accountants are not from the Emirates, but rather from South Asia (India, Pakistan).
Member of the International Federation of Accountants (IFAC)
No.
 
 

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Consumption Taxes

Nature of the Tax
VAT (value-added tax)
Standard Rate
5%
Reduced Tax Rate
Goods and services exported outside the VAT-implementing GCC member states, international transportation, the supply or import of investment precious metals, the supply of crude oil and natural gas, the first supply of residential real estate, buildings specifically designed to be used by charity organisations, healthcare and education sectors are generally zero-rated.
Exclusion From Taxation
Certain financial services (including life insurance and reinsurance of life insurance as well as financial services that are not conducted for an explicit fee, discount, commission, rebate or similar type of consideration), the supply of residential real estate, transactions in bare land and domestic passenger transport services are exempt from VAT.
Method of Calculation, Declaration and Settlement
A value-added tax has been implemented in the United Arab Emirates as of 1 January 2018 following GCC regulations.

For UAE resident businesses, there is a mandatory VAT registration threshold of AED 375,000, with the voluntary registration threshold set at AED 187,500. No registration threshold applies to non-resident businesses making supplies on which the UAE VAT shall be charged. VAT returns generally are required on a monthly or quarterly basis depending on turnover. VAT grouping is allowed (conditions apply).

Other Consumption Taxes
Excise duties were introduced in 2017 for three types of products: carbonated beverages and products with added sugar or other sweeteners (50%), tobacco and electronic smoking devices and tools (100%), energy drinks (100%).

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Individual Taxes

Tax Base For Residents and Non-Residents

No personal tax is levied in the UAE. Individuals living and working in the country may be considered resident of the United Arab Emirates for purposes of a double tax treaty and obtain a UAE Tax Residency Certificate (under certain conditions).
Starting from March 2023, individuals can be considered a UAE tax resident if they satisfy any of the following conditions:

  • They have their primary or usual place of residence in the UAE and their centre of financial and personal interests is also in the UAE.
  • They have been physically present in the UAE for a consecutive period of 183 days or more within a 12-month period.
  • They have been physically present in the UAE for a consecutive period of 90 days or more within a 12-month period and are either a UAE national, hold a valid residence permit in the UAE, or are a citizen of any GCC member state, provided that they have a permanent place of residence or carry out employment or business activities within the UAE.
 

Tax Rate

No personal tax is levied N/A
Most Emirates impose a rental tax Residential tenants pay 5% of annual rent and commercial tenants pay 5% of annual rent in Dubai. Expat tenants pay 3% of annual rent whereas UAE citizens do not pay any rental tax in Abu Dhabi. All tenants pay 2% of annual rent as rental tax in Sharjah.
Real property tax A transfer charge is levied on the transfer of real estate in the UAE (4% in the Emirate of Dubai, borne equally by the buyer and the seller).
 
Allowable Deductions and Tax Credits
No personal tax is levied in the UAE, hence tax deductions are not applicable.
Special Expatriate Tax Regime
There is no special tax regime for expatriates in the UAE.

Non-GCC national employees who completed at least one year of service are entitled to an end-of-service benefit calculated as 21 days per year of basic wages for the first five years of employment, plus 30 days per year of the basic wage for each additional year of service (capped at two years’ remuneration).

Capital Tax Rate

Capital gains are not subject to taxation.

Social security contributions only apply to GCC nationals, with rates varying according to the Emirate (5% is payable by the employee in both Dubai and Abu Dhabi).

From January 1st, 2023, the unemployment insurance scheme introduced through Federal Decree-Law No. 13 of 2022 is applicable to both Emirati and foreign workers. The scheme is designed to provide financial assistance to eligible individuals in the public and private sectors in the event of unemployment. Subscribers to the scheme are classified into two categories based on their basic monthly salary. The first category comprises individuals earning AED 16,000 or less per month, while the second category includes those earning more than AED 16,000 as their basic salary. Subscribers in the former category must pay a monthly subscription fee of AED 5, while those in the latter category must pay a monthly subscription fee of AED 10.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Double-taxation agreements, Ministry of Finance
Withholding Taxes
No withholding tax is levied by the federal government of the UAE.
Bilateral Agreement
United Arab Emirates and Mauritius concluded a Double Taxation Agreement.

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Latest Update: April 2024