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United Arab Emirates

Financial Year – 1 January – 31 December
Currency – United Arab Emirates dirham (AED)

Corporate Tax Summary

Residence – Tax residence: Each Emirate’s tax decree is based upon the French concept of territoriality. This concept taxes profits based on territorial limits; it does not tax profits earned outside these territorial limits.

Permanent Establishment (PE) – Those non-resident entities carrying out commercial transactions in any member state (Emirate) through a PE in that state are taxable under the relevant Emirate tax decree. The general definition of Permanent Establishment includes a place of management, a branch and an agent that exercises contractual authority on behalf of the said non-resident company.

Basis of Taxation – The United Arab Emirates currently is not a federal corporate income tax (CIT) regime. The majority of the Emirates introduced income tax decrees in the late 1960s and taxation is therefore determined on an Emirate-by-Emirate basis.

Under the tax decrees issued at the discretion of each of the Emirates, CIT may be imposed on all companies including branches and PEs at varying rates of up to 55%. Currently, CIT is only enforced in respect of corporate entities engaged in the production of oil and gas or the extraction of other natural resources.

In addition, some of the Emirates have their own specific banking tax decrees. These impose CIT on branches of foreign banks at the rate of 20%.

There are various Free Trade Zones (FTZs) in the United Arab Emirates which have their own rules and regulations and generally offer tax free status to businesses (and their employees) set up in the FTZs.

Under the above regulations, most entities registered in the United Arab Emirates are currently not required to file corporate tax returns in the United Arab Emirates.

Reference
Corporate Income Tax Rate (%)Up to 55% for oil and gas activities, 0% for most others companies and branches
Branch Tax Rate (%)20% for branches of foreign banks
Withholding Tax Rate:
Dividends – FrankedN/A
Dividends – UnfrankedN/A
Dividends – Conduit Foreign IncomeN/A
InterestN/A
Royalties from Intellectual PropertyN/A
Fund Payments from Managed Investment TrustsN/A
Branch Remittance TaxN/A
Net Operating Losses (Years)
Carry BackN/A
Carry Forward

Individual Tax Summary

Residence – There is no personal income tax in the United Arab Emirates and therefore no legislative definition of personal tax residence.

Individuals living and working in the United Arab Emirates may be considered resident of the United Arab Emirates for the purposes of a double tax treaty (DTT) and obtain a UAE Tax Residency Certificate if certain requirements are met.

Basis of Taxation – There is currently no personal income tax in the United Arab Emirates and as such, there are no individual tax registration or reporting obligations.

Filing Status – N/A

Personal Income Tax Rates

Taxable IncomeTax Payable – ResidentsTax Payable – Non Residents
N/AN/AN/A

Goods and Services Tax (GST)

Rate5%
Taxable TransactionsApplies to most goods and services, with some goods and services subject to a 0% rate or a VAT exemption (subject to specific conditions being met).
RegistrationFor UAE resident businesses, the mandatory VAT registration threshold is AED 375,000 and the voluntary registration threshold is AED 187,500. No registration threshold applies to non-resident businesses making supplies for which UAE VAT must be charged.
Filing and PaymentOn a quarterly or monthly basis, depending on the allocation by the Federal Tax Authority (FTA).

Other Taxes Payable

TaxReference
Payroll TaxN/A
Stamp DutyThere is no stamp duty or other transactional taxes on the incorporation of entities, the issuance of shares and on loan or other transaction documents.
Land TaxMost of the individual Emirates impose a municipality tax on properties. It is based on the annual rental value. It is the tenants’ obligation to pay the tax. In some cases, separate fees are payable by both tenants and property owners. For example, in the Emirate of Dubai, the municipality tax on property is currently imposed at 2.5% of the annual rental value for commercial properties (payable by property owners) and 5% for residential properties (paid by the lessee).
A registration fee may be levied on the transfer of ownership of land or real property. For example, a land registration fee is levied in the Emirate of Dubai at a rate of 4% of the fair market value of the property (a cost generally shared between the buyer and seller), payable to the Dubai Land Department. In Dubai, the registration fee may also apply on the direct or indirect transfer of shares in an entity that owns real property.
These levies are imposed and administered differently by each Emirate.

Hotel Tax and Tourism Levies
Most Emirates impose hotel levies, which apply on the value of hotel services and entertainment. These levies are imposed and administered differently by each Emirate.

A “Tourism Dirham” fee is levied in the Emirate of Dubai. This is a charge on hotel guests and tenants of hotel apartments ranging from AED 7 to AED 20 per room per night. In the Emirate of Abu Dhabi, the fee is equal to AED 10 per room per night.

The Emirate of Abu Dhabi also imposes a tourism fee of 3.5% and imposes a municipality fee that is levied on hotel stays at a rate of 2% on the total value of the invoice.

Due to the outbreak of COVID-19, the above levies on hotel stays have currently been waived or reduced, depending on the Emirate, for rest of the 2020 calendar year.

Last updated: 06.10.2020