20 Apr Taxation in Dubai
Company incorporation in Dubai is a profitable venture because of its strategic business location, advanced infrastructure, supportive government, and of course, the lenient taxation laws.
Taxation in Dubai is very minimal and the most competitive in the world. Investors still get exemptions from import duties, taxes on capital gains, no taxes on personal income, and much more. Moreover, the government gives start-ups and SMEs due consideration by not levying any tax on profits up to Dh375,000. Not only is there any compliance burden, but also the government will continue to promote fresh investment..
The government continues to support new businesses and by introducing new norms like the double taxation agreement for the benefit of foreign investors. There’s much more to the UAE’s tax structure that you need to know. Therefore, you should get in touch with the local business consultants to understand if you need to pay taxes for your startup or does it come under the no taxation bracket.
Understanding the income tax laws in the UAE
Dubai is a tax haven because it doesn’t levy any income taxes on the employees and workers. The UAE Federal Government has made it clear that it won’t impose any income tax on an individual’s income from salary, perks, investment income, dividends, house property income and capital gains.
Furthermore, the new taxation laws (and the amendments) have introduced further tax reliefs and exemptions to startups and small businesses too. Therefore, there’s no need to worry about the Dubai income tax rate since you won’t be charged any during your business tenure in the Emirates.
However, you must note that if you’re taxable in your home country while earning sizable profits in Dubai, you might be subject to taxation. These income tax benefits apply to freelancers as well.
Therefore, all they need to do is obtain the necessary freelancer license and get started with their business activities without worrying about the associated taxes. Moreover, understanding taxation in the UAE is pretty straightforward when you connect with Shuraa’s legal advisors.
All you need to know about corporate taxes in Dubai
Dubai has come up with a new tax regime with a corporate tax of nine percent on net corporate profits from June 2023. The best part is that the government gives most consideration to SMEs by not imposing any taxes on net profits up to Dh375,000 (76,46,250 INR).
Each free trade zone in the UAE has an independent jurisdiction, and the tax rates of one such zone might vary slightly when compared with another. However, note that multinationals earning net profits of more than $1,02,000 only are liable to pay taxes.
The UAE also imposes a 20% tax on branches of foreign banks operating in the country, and on companies with concession agreements in the oil and gas sector of up to 55% at the emirate level. It’s critical to note that the Dubai corporate tax rate is always confidential. It can vary from 50-80% for foreign gas companies depending on the concerned jurisdiction.
Implying, some enterprises include a foreign company dealing in gas and oil production activities (hydrocarbon production) and branch offices of foreign banks launched in the UAE.
How is the value-added tax (VAT) charged in Dubai?
The value-added tax (VAT) made its way into the UAE at the very beginning of 2018. The Dubai tax rate for VAT is 5% and can also become 0% under certain circumstances. It’s considered among the lowest VAT rates in the world, and the credit for the same goes to the supportive economic department of the UAE.
Moreover, all VAT-registered enterprises can claim refunds from the concerned tax authorities by placing a request alongside the required documents.
VAT is also charged on tourist purchases, but even they have the facility to apply for a VAT refund on their purchase while they’re in the Emirates. This tax is imposed on companies functioning in the free-trade zones, the Dubai mainland, and also offshore establishments. You won’t be taxable under the VAT laws if you’re trading goods and services outside the GCC or carrying out specific educational and healthcare services in the UAE.
Other taxes in the UAE you must know
There are a few other taxes levied in Dubai on specific products and activities. The first among those is the excise tax applied on products that are conventionally harmful to our health.
This tax was introduced in 2017, and you’re liable to pay a 50% excise tax on carbonated drinks while the UAE tax rate for tobacco is 100%. Moreover, you also need to pay a 100% excise tax on energy drinks and electronic smoking devices (and their fluids/liquids).
The UAE government’s sole aim behind imposing high taxes on these products is to reduce their consumption, which will ultimately benefit human health. Remember that it’s your duty to register for excise tax if your business involves the production, trading, or stockpiling of any products liable for excise tax.
Furthermore, municipal taxes are also imposed on hotels, entertainment facilities, rental spaces, etc. All businesses and individuals need to pay the associated taxes on the official website of the Federal Tax Authority (FTA) on or before the specified timeline.
Consult with Shuraa
It’s critical to make the most of the tax benefits in the UAE and earn desirable profits from your business. But for that, you need to have sufficient knowledge of taxation in Dubai, especially when the new guidelines are out. Understandably, it can become very hectic for a foreign investor. That’s where Shuraa Business Setup steps in and relieves you of all your worries.
Our business experts hold prolific experience in business formation activities, and they’ll provide rich insights that’ll help make the most of the lenient taxation laws in the Emirates. Be its uncertainty regarding the corporate tax in Dubai or anything related to the Dubai income tax rate – all you need to do is collaborate with us, and we’ll take care of the rest.
Frequently asked questions
What is the tax rate in Dubai?
Dubai is the best location to start your business as you get several tax exemptions. The VAT is fixed at 5%, and you don’t need to pay any income tax or corporate tax in Dubai unless you’re a foreign company dealing in gas and oil (production, trading) or a branch office of a foreign bank.
Is Dubai still a tax-free country?
Investors prefer to launch their companies in Dubai because of its minimal taxation policies. Most companies operate under the tax-free regime while the remaining ones also pay small amounts of tax on their income. It’s a no-brainer to set up your business in Dubai if you want to work in tax-friendly laws.