UAE does not levy income tax on individuals. However, it levies 5% value added Tax (VAT) on the purchase of goods and services, levied at each stage of the supply chain and ultimately borne by the end consumer.
Unites Arab Emirates (UAE), a country located at the Eastern end of Arabian Peninsula is a federal elective monarchy constituting seven emirates i.e. Abu Dhabi, Dubai, Sharjah, Ajman, Ras Al Khaimah, Umm Al Quwain and Fujairah. Known for its massive oil and gas reserves, UAE has always been in the limelight, but things took a turn when it started shifting its revenue from gas and oil to taxation and transitioned its focus on becoming a massive tourism and business hotspot. From introduction of VAT to Corporate tax implementation, UAE has come a long way in diversifying its economy.
As of today, UAE is the biggest business hub in the middle east with amplified business activity and as a global leader in finance, tourism, trade and technology. The Dubai International Financial Center (DIFC), a leading financial hub in the Middle East and Africa, hosts nearly 2500 companies. And the real estate market? Just in 2024, it saw a staggering $761 billion in transactions. With stats like these, isn’t it clearly depicting the importance of tax and accounting services in Dubai? Obviously, it is and that’s what we are here for. Sidra Salman & Co. (SS &Co.) Is one of the prestigious accounting firms in Dubai, UAE, operating since 2017 with years of work experience and a team of expert individuals.
In this blog, we’ll break down the tax rules in the UAE for you, straightforward and easy to understand.
Introduction to FTA
FTA is the federal government authority tasked with administration, collection and enforcement of federal taxes and it was enacted in 2016, by UAE president as Federal Decree law –13 of 2016. Enactment of FTA had important aspects such as,
- Achieving economic diversification
- Increasing UAE’s non-oil revenue
- Reducing dependence on oil resources in preparation of non-oil economy
- Enhancing UAE’s economic stability
- Helping business communities and consumers understand response with regard to taxation and guide them to full compliance.
The UAE’s tax journey began with the Federal Tax Authority (FTA) introducing Excise Tax, which later expanded to Value Added Tax (VAT) and ultimately led to Corporate Tax implementation.
Types of Taxes in the UAE
Indirect Taxes:
- Value Added Tax (VAT)
The UAE has introduced a federal Value Added Tax (VAT) with a general rate of 5%. Certain items are charged at 0% known as zero-rated goods, and others are exempt. Businesses with annual taxable supplies of more than AED 375,000 are required to register for VAT, and those with supplies of more than AED 187,500 can optionally register. The Federal Tax Authority (FTA) administers the collection of VAT and audits companies to ensure that they comply.
- Excise Tax
UAE excise tax was introduced by the Federal Tax Authority (FTA) in October 2017 to assist in curbing the use of products harmful to public health and the environment. It is an indirect tax charged on certain products, targeting goods such as tobacco products, carbonated drinks, energy drinks, and sweetened beverages. By raising the cost of these goods, the government seeks to discourage consumption, encourage healthier lifestyles, and minimize environmental degradation.
The FTA imposes excise tax at different rates based on the product category:
- Tobacco and Tabacco Products: A 100% excise tax is imposed on cigarettes, shisha tobacco, and other tobacco products.
- Energy drinks: These are also taxed at 100%, covering any drinks that are sold as delivering energy based on ingredients such as caffeine or taurine.
- Carbonated drinks: 50% taxation is applied on carbonated beverages, excluding beverages that have no sugar or sweeteners.
- Sweetened beverages: These drinks (such as juices, sodas, or drink powders) were later introduced and taxed at 50% if they contain added sugars or sweeteners.
This method coincides with the public health strategy of the government, as it tackles the emerging issues of obesity, diabetes, and other diseases.
- Personal Income Tax
No federal or Emirate-level personal income tax is levied in the United Arab Emirates (by Federal Tax Authority (FTA).
- Customs Duties
Customs duties are taxes that are charged on goods brought into the UAE. The rate differs based on the nature of the goods being brought in, as some products have higher rates applied to them. Customs duties have an important role in controlling trade and raising government revenue.
- Property Tax
Property tax is levied on the holding of real estate in the UAE. The charge rate depends on the property’s value and location, with the highest charge being placed on more valuable property. Property tax is generally collected by owners of property and varies from emirate to emirate depending on where the property is held.
- Tourism Tax
Tourism tax is charged on tourist services and tourist accommodations, such as hotel accommodation, holiday rental, and other tourist-related activities. The tax is usually factored into the price of hotel reservations and serves to finance the tourism industry and allied public service.
Direct Taxes:
- Corporate Tax
Corporate Tax (CT) is a type of direct tax imposed on the net profit or income of companies and other enterprises. Corporate Tax is also known as “Corporate Income Tax” or “Business Profits Tax” elsewhere. The competitive corporate tax implementation in the UAE is one of the best practices which supports the UAE’s status as a global business and investment hub and speeds up the UAE’s development and evolution to deliver its strategic goals. Corporate tax implementation regime also ensures that the UAE upholds its pledge to international tax standards of transparency and anti-base erosion and profit shifting.
Taxable Income must be calculated by making the relevant adjustments to the Accounting Income for that Tax Period.
- 0% for Taxable Income less than AED 375,000.
- 9% for Taxable Income above AED 375,000.
- 0% Corporate Tax Rate for specific persons eligible on a condition basis for Qualifying Free Zone Person.
- No Corporate Tax for entities qualified to avail Small Business Relief.
UAE Corporate Tax is imposed on the following:
- Juridical persons that are incorporated within the UAE or foreign juridical persons that are effectively controlled and managed in the UAE.
- Non-Resident persons having a Permanent Establishment or State Sourced income in the UAE.
- Non-resident juridical persons having a nexus in the UAE by virtue of deriving income from Immovable Property in the UAE.
- Natural Persons engaging in Business or Business Activities in the UAE and earning a Turnover of more than AED 1,000,000 per Gregorian calendar year from such Business or Business Activities.
Who is exempt from Corporate Tax?
- Government Entities.
- Government Controlled Entities and Qualifying Public Benefit Entities.
- Extractive Enterprises and Non-Extractive Natural Resource Enterprises.
- Public and private pension or social security funds.
- Qualifying Investment Funds.
- Juridical persons formed in the UAE are wholly owned and controlled by specific Exempt Persons.
- Any other Person as may be designated in a determination made by the Cabinet on the recommendation of the Minister.
Consult Tax Professional
Since you are a business owner, or a taxable individual, it is hard to keep yourself updated about Tax regulations especially corporate tax implementation and attend to business goals simultaneously. It is feasible to consult a tax professional and acquire tax and accounting services in Dubai, UAE to ensure that you abide by UAE tax compliance rules.
Wrapping Up
At SSCOGLOBAL our diverse suite of accounting and tax solutions enables your organization to sustain consistent growth and look toward long-term financial security. We assist you in automating your accounting workflow, so you are able to mail invoices, reconcile banks, take care of bills, monitor stock, and report in-depth analytics with ease. Outsourcing most of your backend job will save you money since it will enable you to focus more on your business and growing it. Contact us for customized solutions for corporate tax implementation and accounting services in Dubai, suited for your business.
