Taxation in the United Arab Emirates is different from many other countries as it has a relatively low-tax regime and categorized as follows:
Corporate tax started last June 2023 at a 9% rate. It will apply to companies earning more than AED 375,000 a year. Until then, corporate tax for most companies remains at 0%.
Foreign companies in the oil and gas sector pay 55% corporate tax. Branches of foreign banks pay 20%.
There are no taxes for dividends and capital gains, as well as intra group transactions and reorganizations.
Value Added Tax
The value-added tax is 5% in the UAE. VAT is obligatory for companies earning more than AED 375,000. To pay the tax, a company must register as a VAT payer with the Federal Tax Authority (FTA).
For companies earning between AED 187,500 and AED 375,000, registration is voluntary.
VAT is usually paid on a quarterly basis within 28 days after the end of the tax period.
However, the Federal Tax Authority may appoint different tax periods for some taxpayers. In addition, the VAT laws vary depending on the goods and services offered for example there are separate Cabinet Decisions for Goods and Services Connected with Expo 2020 Dubai, the Mechanism of Applying Value Added Tax on Gold and Diamonds between Registrants in the State, and so on. A full list of Cabinet Decisions and Federal Tax Authority Decisions and the Federal Decree-Law No. 8 of 2017 on Value Added Tax can be found on the Federal Tax Authority website.
Excise tax is imposed on products the UAE government considers harmful to human health or the environment. The tax is calculated in percentage from the retail price minus excise tax and VAT or from the price of the product appointed by FTA - whichever is higher.
The UAE Cabinet approves the list of products and their taxes rates as follows:
- 50% for fizzy drinks, except for plain soda;
- 50% for all products containing sugar or sweeteners;
- 100% for tobacco products;
- 100% for energy drinks;
- 100% for electronic smoking devices.
The excise tax is paid by companies which manufacture, import, or store excise products. Such companies must register with the FTA as excise taxpayers. The tax itself is paid quarterly within 15 days after the end of the tax period.
Import and export taxes
The import tax may vary depending on the nature of imported goods. But generally, it is 5% of the cost, freight, and insurance value of imports (CIF).
However, certain harmful products, like tobacco or alcohol, are imported with a 50-100% tax. Others, like most national products of the Greater Arab Free Trade Area, are imported without any tax at all.
Goods imported into Free Zones are also exempt from import tax until they are transferred to the local market. The export tax is 0% in the UAE.
At Maitha Alzaabi Auditing, we help our clients to understand all they need to know about taxes scheme in the UAE. We provide all the steps from analyzing, registering, and periodical return filing. Our professional accountants and auditors will provide the right solutions and advisory for your business needs in terms of taxation. Our bookkeeping and accounting services allows us to accurately track our client’s financials and file taxation returns in a timely manner.
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