Corporate tax in the United Arab Emirates (UAE) is relatively low compared to other countries. The UAE does not have a federal corporate income tax system, which means that companies are not required to pay taxes on their profits at the federal level. However, certain emirates within the UAE, such as Dubai and Abu Dhabi, have implemented their own corporate tax systems.
The corporate tax rate in Dubai is currently set at 20%, which applies to companies that generate income within the emirate. This tax is applied to the company’s net profits, which are calculated after deducting expenses such as salaries, rent, and other operating costs. Companies that are based in free zones, such as the Dubai International Financial Centre (DIFC) and the Dubai Silicon Oasis Authority (DSOA), are not subject to corporate tax.
In Abu Dhabi, the corporate tax rate is set at 55%, which applies to companies that generate income within the emirate. This tax is also applied to the company’s net profits, after deducting expenses such as salaries, rent, and other operating costs. Similar to Dubai, companies based in free zones, such as the Abu Dhabi Global Market (ADGM) and the Khalifa Industrial Zone Abu Dhabi (KIZAD), are not subject to corporate tax.
The UAE has also signed Double Taxation Avoidance Agreements (DTAA) with over 80 countries to avoid double taxation of the same income in both countries. This means that if a company is based in a country that has a DTAA with the UAE and also operates in the UAE, the company may be eligible for reduced or exemptions on taxes.
Companies operating in the UAE are also required to file their tax returns annually with the relevant authorities. They are also required to maintain accurate records of their financial transactions and keep them for a period of at least five years. Failure to comply with tax laws and regulations can result in penalties and fines.
One of the notable changes in the UAE’s tax system in recent years is the implementation of the value-added tax (VAT) in 2018. VAT is a consumption tax that is applied to goods and services at a rate of 5%. This tax is imposed on the supply of goods and services within the UAE, as well as the import of goods into the country. However, there are certain exemptions and zero-rated supplies for some essential goods and services.
In conclusion, the corporate tax system in the UAE is relatively low compared to other countries, and the country does not have a federal corporate income tax system. However, some emirates within the UAE, such as Dubai and Abu Dhabi, have their own corporate tax systems. Companies operating in free zones are generally not subject to corporate tax, and the UAE has signed DTAA with over 80 countries to avoid double taxation of the same income. Additionally, VAT was implemented in 2018, and companies are required to file their tax returns annually and maintain accurate records of financial transactions.