UAE Tax Guide for Businesses
Understanding Your Tax Obligations in the Emirates
The UAE has long been known for its tax-friendly environment, but the landscape has evolved. While there is still no personal income tax, businesses now need to be aware of Value Added Tax (VAT) and the recently introduced Corporate Tax. Understanding these tax obligations is essential for compliance and effective financial planning. This guide provides an overview of the key taxes applicable to businesses operating in the UAE.
Value Added Tax (VAT)
Introduction: VAT was introduced in the UAE on January 1, 2018.
Standard Rate: 5%
Who Must Register? – Mandatory Registration: Businesses with annual taxable supplies and imports exceeding AED 375,000. – Voluntary Registration: Businesses with annual taxable supplies/imports (or taxable expenses) exceeding AED 187,500.
Key Obligations: – Charge VAT on taxable supplies of goods and services. – Maintain proper tax invoices and records. – File VAT returns (typically quarterly) with the Federal Tax Authority (FTA). – Pay any VAT due to the FTA.
Exemptions & Zero-Rating: Certain supplies are exempt from VAT (e.g., some financial services, residential property) or zero-rated (e.g., exports, international transportation).
Corporate Tax
Introduction: The UAE introduced a federal Corporate Tax, effective for financial years starting on or after June 1, 2023.
Rates: – 0% on taxable income up to AED 375,000. – 9% on taxable income exceeding AED 375,000. – A different rate may apply to large multinationals meeting specific criteria under Pillar Two of the OECD BEPS framework.
Who is Subject to Corporate Tax? – UAE resident companies (Mainland and Free Zone). – Foreign companies with a Permanent Establishment in the UAE. – Individuals conducting business activities exceeding AED 1 million turnover.
Free Zone Benefits: “Qualifying Free Zone Persons” can benefit from a 0% Corporate Tax rate on “Qualifying Income” (primarily income from transactions with other Free Zone entities or from foreign sources), provided they meet certain conditions (e.g., maintaining adequate substance, not electing to be subject to the standard rate).
Key Obligations: – Register for Corporate Tax with the FTA. – Maintain proper financial records. – File an annual Corporate Tax return. – Pay any Corporate Tax due.
Other Taxes & Fees
- Customs Duty: A 5% customs duty applies to most imported goods (with exemptions for Free Zone imports).
- Excise Tax: Applies to specific goods deemed harmful to health or the environment (e.g., tobacco, sugary drinks, energy drinks).
- Municipality Fees: Various fees may apply, such as tourism fees on hotel stays.
Staying Compliant
Compliance with UAE tax laws is crucial. Penalties for non-compliance can be significant. T4ME offers tax registration, accounting, and advisory services to help you meet your obligations.