Taxes in Dubai for individuals and legal entities. Taxation in the United Arab Emirates

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Most countries in the world replenish their budget through taxes, which is considered the norm. But there are states where most taxes are absent, whether you are a resident or not. Where is this tax haven located? In the United Arab Emirates. Of course, it is impossible to completely stop paying taxes in Dubai, but not in such large amounts. What is meant, now we will understand.

Opening a business

Having opened our business in the Emirates and started to work, we begin to habitually wait for the arrival of the tax inspector, or at least notice by mail. And he is not and is not. And it won't! And all because of the peculiarities of the tax system of the United Arab Emirates. According to them, everything that you and your employees earn goes to a bank account without deductions.

Don't let that surprise you. You have already paid it, only veiled. When registering a company, you paid the cost of a license inin the amount of 5-6 thousand dollars, why not a tax? And every year you will renew it by paying the same amount. So much for no taxes!

No taxes

But if you compare taxes in Dubai and in most countries, here you will not find the following types of payments:

• for income received;
• for capital gains;
• no dividends either;
• on roy alties;
• no salary deductions;
• for import and export, if the activity is carried out through free economic zones in the UAE;
• no asset tax;
• exempted from paying taxes and interest.

When registering a business, you will not find any quotas and trade restrictions, and financial control is not carried out here. So now it is clear why foreign investors are so eager to the Emirates. It doesn't matter if you are a resident or not. The tax system is the same for everyone.

But it was until January 1, 2018. The decline in world prices for "black gold" led to an economic downturn in the Arab countries, in the Persian Gulf. This forced the countries to sit down at the negotiating table on the introduction of VAT as a new source of filling the treasury.

For the period 2018-2019 the value added tax rate is only 5%. Saudi Arabia and the UAE introduced the tax on January 1st. But 5% is still the lowest compared to many countries in the world. With the introduction of VAT, countries are forced to develop and introduce a legislative tax base, as well astax inspectors who will monitor the implementation of the law. Of the Persian Gulf countries, only Qatar refused to impose a tax, because its gas reserves were not affected by the fall in oil prices.

What else can attract foreigners to the UAE

It's hard to believe, once in today's splendor of the Emirates, that half a century ago there were small fishing villages where people lived on the verge of poverty. But oil reserves were found, and the country began to develop. Although the wisdom of the rulers in the conduct of politics and the economy also played a role. The emirs themselves are interested in attracting foreign entrepreneurs.

What other benefits do businessmen get by setting up a business in the United Arab Emirates:

• Enviable location: the country is well located at the crossroads of most trade routes. And the distance to many capitals (Moscow, London, Hong Kong, etc.) is about the same. Which reduces the flight time to them.
• Seaports and international airports allow a business person to get to the right point or send cargo to the right place.

• The rapid development of the economy suggests that Abu Dhabi and Dubai will soon begin to actively push out of the economic arena such "monsters" as Delhi, Moscow, London and others.
• The Emirates consist of 7 principalities, each of which has differences in relation to foreign companies - the conditions for their registration, doing business, etc. This allows you to choose the area where your business will have conditionsbetter.
• More than 35 free economic zones in the UAE allow you to register a company without the participation of locals. The business is 100% owned by you, and upon obtaining a residence permit, you will also be exempt from export-import tax. You also decide whether to make the company offshore or onshore.
• No division into residents and non-residents. You are only required to comply with the laws, and your business will be fully supported.
• You can freely become the owner of luxury real estate at a lower price compared to other states. At the same time, real estate tax - 4% of the cost is paid once. Simultaneously with the purchase, you become the owner of a resident visa with the right to stay in the Emirates for 3 years. The same visa is issued when opening onshore companies.
• The flexibility of taxation and the absence of most tax deductions makes the UAE very attractive for building a business.

Now some bitterness. Doing business in the UAE exempts you from many taxes in this territory. But in the country of which you are a citizen, without living there, you will have to pay the necessary taxes. Although the Emirates has now signed an agreement with almost fifty countries to abolish double payments if doing business in the UAE.

Where's the catch?

Basic general information about tax payments you have received. But if you plan not only to do business here, but also to live permanently, then it is better to know about these daily fees in advance:

So, public transport here is extremely poorly developed, because almost everyone here has a car. And travel on the main roads of the country is paid. For example, in Dubai, you will be charged about a dollar for each trip

• In Europe, this is a normal practice, but Russians are very surprised by 10% of the cost of dinner in a restaurant, included in the bill.
• Although taxes are not paid in Dubai and other regions of the country on rental housing, but services for maintenance, water supply, air conditioning, etc. are paid, the fee for this is already included in your bill.

But in any case, all the listed fees and some others will be lower than in most other countries in the world.

Industries that pay taxes

And if everything is more or less clear with taxes in the UAE for individuals (there are practically none). That in relation to legal. faces are not so clear cut. First of all, this is due to the federal structure of the state, where the authorities of any emirate can establish tax payments on their own. True, such a right is used extremely rarely, which is why it can be argued that there is almost no tax burden for companies. The exceptions are a few activities. Here they are…

Oil industry

The largest tax deductions from 55 to 85% of operating revenue are levied on foreign companies engaged in oil production and refining. Moreover, the amount of tax depends on the agreement concluded between the government of the emirate and the company.

Such "unfair" taxation is due tothe fact that the UAE thrives precisely because of oil production, and the government is well aware that this is an industry with windfall profits. But the tax is paid if the company carries out oil production and processing on the territory of the Emirates. If the business is international, then it is exempt from payment.

For local companies registered in the emirate of Dubai, the so-called excess profit tax has been introduced. Moreover, the rate progressively grows with the increase in profit:

• 10% if profit varies between AED 1-2 million;
• 30% - AED 2-4 million profit;
• 40% - AED 4-5 million;
• 50% - more than 5 million

Foreign companies do not have to worry about this tax, as it is imposed only on local ones.

Banking

This is another activity that is taxed. In Muslim countries, lending money at interest is considered a great sin. Therefore, in the UAE, banking services are divided into two types: the usual, based on international standards, and based on the principles of Sharia.

The tax rate in the banking sector is about 20% of operating income in emirates such as Abu Dhabi, Dubai, Sharjah and Fujairah. And it makes no difference whether it is a foreign banking institution or a local one. In other emirates, the rate changes both up and down.

Tourism business

Another area in which there is a mandatory income tax is the tourism business and entertainment, as well as commercialreal estate. So, hotels in Dubai pay 17% of the profits, entertainment establishments - 5%. And owners of commercial real estate pay taxes in the amount of 10%.

In 2014, the concept of "tourist tax" was introduced in the UAE in three emirates. In Dubai and Ras Al Khaimah, its value depends on the category of the hotel, and in Abu Dhabi it is fixed and equal to 15 dirhams per day. This amount is paid not by the hotel owners, but by the tourists themselves at the time of check-in for the entire stay. If the length of stay is shortened for any reason, the overpayment is non-refundable.

Also, tourists in Dubai, and indeed other emirates, when checking into a hotel, should be ready to make a deposit. It has nothing to do with taxes in Dubai in hotels, but is just a guarantee of your integrity. The spread in the amount is very significant and depends on the star rating of the institution. For a period of 7 days, you can be charged from 50 to 600 dollars. But if you know the language and the gift of persuasion, then you can agree with the hotel owner not to pay a deposit, but simply empty the minibar and turn off the phone in your room.

But the UAE is just a union of emirates, where each monarch has the right to amend laws and issue his own decrees. Therefore, the Sheikh of the Emirate of Ajman signed a decree that from July to the end of December 2018, the tourist tax is reduced from 10 to 7%. Similar decrees have been issued in the emirates of Dubai and Abu Dhabi, where the fee for each night has been reduced from 15 to 10 dirhams.

Summarize

From year to year, rumors are spreading that this paradise for taxeswill soon end, and toughening against foreign companies will begin. But no concrete action has yet been taken. Yes, the leaders of the emirates understand that foreign companies are significant revenues to the treasury. Start smothering the entrepreneur with taxes, businessmen will pack their suitcases and leave for other countries that are more pleasant and loyal.

So for a long time the UAE will remain a tax haven for foreign businessmen. And you have a chance to take advantage of this and open an offshore here.