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Corporate Tax in Dubai

Corporate Tax in Dubai

Dubai is now among the most popular destinations and it has become an attractive place for foreign investors because, along with the luxurious lifestyle that it offers, it is considered to be a tax-free city. But what does that mean, exactly? Now, we’ll try to answer some of the questions that we, as one of the accounting firms in Dubai, might be asked. We mention that our experienced team of accountants in Dubai is at your disposal with varied services (audits, annual financial statements, payroll, etc.)

Measures taken by Dubai authorities

On some level, Dubai is a tax-free city, but there are a few circumstances in which taxation will be applied, in one form or another. The UAE wanted to introduce the income tax for a while, in 2010, when headlines spoke of taxes that Dubai residents would have to pay. Instead, the rumor turned out to be imposed measures to collect fees regarding ID cards (Emirates) and car registration. The UAE (United Arab Emirates) Government does not impose income taxes to individuals living in the country, but companies will be levied a 9% corporate tax starting in the middle of 2023. Also, if a citizen is registered in other countries, for taxation purposes, and is also making profits in Dubai, he or she may be required to pay a few taxes. For more information about this system, you can talk to our advisors regarding any accounting services in Dubai.

Short facts about the tax system in Dubai

Besides the UAE taxation system, each emirate has its own system in place. Starting June 2023, Dubai also imposes a 9% corporate tax on profits above AED 375,000 (approx. USD 100,000). The following companies will still pay a separate corporate tax:

  •     companies, within Dubai, which are operating in the oil and gas industry,
  •     the branches of all foreign banks that are operating in Dubai.

The branches of the foreign banks are imposed to pay a 20% corporate tax rate, although the Dubai oil and gas companies have a 55% tax rate that is applied to the profits of the company. 

Levied taxes in Dubai

Since January 2018, the VAT rate of 5% was imposed for companies selling particular products and services in Dubai, as established by the International Monetary Fund. However, healthcare and education services, the exports, the supply of residential properties, and international transportation services are exempt from VAT taxation. As for the automotive sector, jewelry and electronics, the VAT rate of 5% is applicable, just like for rental or sale of commercial buildings in Dubai. Here is what you need to know about taxes imposed by the Dubai authorities:

  •     a municipal tax of 5% is required on the rental of any residential property within Dubai;
  •     10% municipal tax is applied on the rental prices of the commercial real estate;
  •     another municipal tax of 10% applies to the earning of the hotels (including all entertainment facilities).    

Also good to know for all foreign investors is that, within the Emirate, bringing or buying alcohol in the country has different other tax rates applied. 

The services of an audit firm in Dubai are recommended to company owners in this city. With the help of our experts who know the legislation in this regard, annual financial statements can be analyzed, and then complete and correct financial reports will be drawn up. The latter can reveal the financial position of a company. We also emphasize that company directors or managers are the ones who can approve the reports presented by our specialists.

The corporate tax in Dubai International Financial Centre

DIFC or Dubai International Financial Centre is one of the most prolific business destinations in Dubai and the preferred location for foreign investors who want to expand their portfolios in this area. Branches of foreign banks established in DIFC must observe the Law No.1 of 2009 that says the corporate tax of 20% rate is imposed on the generated incomes. It is important to know that non-regulated companies that have a commercial license are not subject to import and export duties, no fees on profit repatriation and no corporate tax for a period of 50 years provided that certain conditions are met. Besides that, the double taxation agreements are available in Dubai International Financial Centre, protecting businesses from double taxation. If you would like to know more about the taxation of companies in DIFC, we kindly remind you that you can talk to one of our accountants in Dubai. They are also at your disposal if you are interested in audits in Dubai.

Taxation in Dubai free trade zones

Dubai offers the most attractive tax system and the possibility for investors to enjoy their profits with a series of tax exemptions, including in the free trade zones under certain circumstances. The exception refers to the companies operating in the oil and gas sector, a field in which the corporate tax of 50% rate applies. Companies established in Dubai’s free trade zones are not subject to taxation, therefore, there is no corporate income tax imposed provided that certain condition are met (such conditions are to be determined). More than that, foreign companies activating in one of the prolific free trade zones of Dubai enjoy tax exemptions that prolong for up to 50 years. The double taxation treaties signed by the UAE with countries worldwide (China, USA, France, Greece, Israel, Switzerland, Belgium, Canada, Italy, Germany, Austria, Poland to mention a few) apply to enterprises established in Dubai’s free trade zones.

The Tax Registration Number in Dubai

The introduction of VAT came with a series of rules and regulations, among which, the requirement of obtaining the TRN or the Tax Registration Number through which a company can be identified from a tax point of view. The Tax Registration Number and the VAT certificate are necessary for companies with future operations in Dubai. The tax laws in the UAE might look complex for international entrepreneurs who do not have a complete idea about the new taxes imposed, so the assistance and guidance of our Dubai accountants will prove extremely helpful. Please feel free to talk to one of our advisors and let them tell you more about the taxation in Dubai.

Making investments in Dubai

Dubai is one of the most representative and appreciated business destinations in the world and a top choice for international financiers who want to generate large profits in sectors like tourism, real estate, oil & gas, import and export, logistics, manufacturing, automotive, media and entertainment, public relations, digital technologies, food & beverage, etc. The business opportunities are huge in most of the sectors, so the attraction for investments in the UAE is quite powerful. Investors from India, the UK, the USA, Saudi Arabia, and France made important investments in sectors like manufacturing, real estate, import, and export, but not limited to these. It is important to know that 33% of the UAE’s GDP registered in 2017 and 2018 was sustained by foreign direct investments. Below you can find other interesting facts and details about the economy and business direction of the UAE:

  1. According to 2019 Doing Business Report, the UAE ranks 11th out of 190 worldwide economies.
  2. Around USD 140,000 million was the total FDI stock in 2018.
  3. More than 378 greenfield investments have been successfully implemented in the UAE in 2018.
  4. Most of the FDIs are directed in sectors like real estate, construction, manufacturing, insurance, finance.
  5. Approximately USD 10,385 million was the total FDI inward flow in 2018.
  6. Experts in economy anticipate growth of up to 20% in FDI for the years to come. 

Frequently Asked Questions

Our accounting specialists have prepared a set of questions for those interested in corporate tax in Dubai. It is important to know from the beginning what kind of taxes are imposed in the business climate in the UAE, and then know what you have to pay in the future. We invite you, therefore, to discover some of these questions and answers, which will be useful to you before collaborating with our team.

1. Which companies have to pay corporate income tax in Dubai?
Companies registered in the banking sector, but also those in oil & gas must take into account the corporate income tax. These sectors are not the only ones where this tax is imposed in the UAE. All other businesses will fall under the new corporate tax rules which provides for a 9% levy starting with June 2023.

2. What is the corporate tax for companies operating in the banking field?
20% is corporate income tax for branches of foreign banks. Therefore, the holders of financial institutions of this kind must consider this tax, if they intend to open a subsidiary in the UAE, respectively in Dubai.

3. What corporate income tax is imposed on companies that conduct oil & gas operations in the UAE?
Enterprises with oil & gas activities are subject to a special tax regime. In this sense, the branches must pay a corporate income tax of 55%, applied to the company’s profits.

4. What taxation system is applied for companies registered in DIFC?
Companies operating in Dubai International Financial Center are exempt from taxes provided certain requirements are met. However, branches of foreign companies must pay a corporate income tax of 20%.

5. Is there a corporate tax for import and export companies in DIFC?
No, import and export companies registered in this free trade zone are exempt from paying corporate income tax for 50 years under specific conditions. This is a major benefit for international players who want to open their business in DIFC. More in this sense can be discussed with our accountants in Dubai.

6. What corporate tax applies to companies registered in Dubai free trade zones?
50% corporate income tax rate applies to companies in the oil & gas sector, even if they are registered in Dubai free trade zones. In the case of companies operating in other fields, except banking, they are exempt from paying corporate income tax for 50 years if certain requirements are met, a benefit offered by the business climate in the UAE.

7. How can double tax treaties help companies that pay corporate income tax in the UAE?
The UAE has signed a series of double tax agreements with which it offers protection against double taxation of profits. In addition, tax evasion can be avoided with the help of these treaties.

8. What activities must be registered in the UAE for the payment of taxes?
All companies with activities in the UAE must be registered for taxation. Even if the taxation system in the UAE is beneficial, registration must be done considering the new corporate tax regulation is about to enter into effect.

9. Why Dubai is an attractive destination for foreign investors?
Dubai is a top destination for foreign entrepreneurs who want to enjoy a great tax system. With the future 9% corporate income tax, investors will still benefit from very advantageous business conditions.

10. How can I register for paying taxes in the UAE?
Our accountants in Dubai are at your disposal with specialized assistance and support if you want to open a company and register it for taxation. We remind you that the UAE has recently implemented the VAT payment, and therefore, it is necessary to register the company from this point of view.

The services of our accountants in Dubai

Foreign investors who want to open their business in Dubai should consider the complete accounting services offered by our specialists. Registration for the purpose of paying taxes, bookkeeping, payroll, annual financial statements, audits in Dubai are some of the accounting services that can benefit both local and international entrepreneurs.

Even if an entire accounting department can be set up in a company, it would be advisable to consider the advantages of hiring the services offered by our accountants. In this sense, the costs of such a department and those of a team of experienced accountants in Dubai can be weighed. In addition, entrepreneurs who decide to work with us can benefit from personalized offers, depending on the needs of the company and beyond. So, you can rely on professionalism, experience, and transparency when working with our team of accountants in Dubai.

The registration for tax purposes, if it is the case, might seem complex for some entrepreneurs. One of our consultants can give proper support and tax advice at any time. In case you are looking for accountants in Dubai or audit firms in the city and for any other details regarding the taxes applied within the UAE, do not hesitate to contact us