The first thing that you have to remember is that the UAE imposes corporate taxes for foreign companies like subsidiaries of foreign banks and oil and gas companies. There are no taxes imposed by the UAE Government on individual income or wealth of local companies and residents of Dubai and other cities in the UAE. A company is regarded as a permanent establishment in the UAE in case it has a place of management, a branch or any other fixed place of business or even an agent which has authority to conclude business/contracts on the foreign company’s behalf. Based on the Abu Dhabi Income Tax Decree of 1965, Dubai Income Ordinance of 1969 and Dubai Income Tax Decree along with the Sharjah Income Tax Decree of 1968, each corporate organization which conducts business/trade via permanent establishments in the Emirate will be subjected to taxes at sliding scales. This applies for oil and gas companies, subsidiaries of foreign banks and their branch offices.
Taxes are applicable for companies in the UAE via the duty which is deducted in every Emirate by the Municipality at the time of renewing or issuing trade license. 10% of the annual amount of rent of offices and warehouses and 5% of annual amounts paid by companies for accommodating employees are applicable. Branches of foreign companies are usually taxed at 20% and non-resident companies are only taxed although taxes are not levied on income of corporate. Capital gains are not subject to taxes until and unless they arise from sales of company which is taxable under income tax or banking tax decrees.
Deductions are based on principles of accounting and tax decrees across the several Emirates. Deductions are not usually that relevant since most companies are not subjected to taxes on their income, with the exception of upstream oil and gas companies and branches of foreign banks. Municipality taxes are imposed on properties and tenants are obligated to pay this tax. In Dubai, municipality tax on property is 5% of the rental value (annual) for tenants or 5% of specified rental index for owners of property. Registration fees are also payable on ownership transfer of property or land. This is 4% of sale value for the property in Dubai.
Traders should however keep in mind that VAT is charged on almost all goods and services at 5%. This value added tax is exempted on supply of real estate (residential), specific financial services, bare land transactions and domestic passenger transportation. Reduced taxes are imposed on buildings used by charitable organizations, education, healthcare, first supply of natural gas/crude oil, global transportation and so on. The good thing is that traders need not pay income tax on their personal or individual income.
VAT came into being from 1st January, 2018. UAE resident businesses have to compulsorily register for VAT with the registration threshold being AED 375,000 and voluntary threshold fixed at AED 187,500. No threshold will apply for non-resident businesses offering supplies on which VAT will be chargeable. VAT returns are required to be filed on quarterly/monthly systems, based on turnover. Excise duties have been introduced already at 100% for tobacco and energy drinks and at 50% for carbonated beverages. VAT registration is something that you must do, depending upon the turnover and other conditions. GCC Filings will help you out with the entire procedure along with other aspects like company incorporation in UAE.
