Taxation in the UAE

Direct taxes

The federal government does not impose taxes on profits or the material wealth of natural persons and legal entities. Nevertheless, most of the emirates adopted internal acts regulating taxation issues. In accordance with these acts, profits may be taxed at a rate of up to 50% on the taxable profits of companies that have ever been created. In practice, the application of the provisions of the acts is limited to oil exporting companies and foreign banks.

Corporate income tax is levied on foreign oil companies (oil producers and oil exploration companies). Although the tax rate for oil companies is usually 55% of operating profit, the actual tax paid by oil companies is calculated on the basis of special individual concessions between the company and the relevant emirate. The tax rate can vary from 55% to 85%. Taxation of foreign banks does not occur in all emirates. Branches of foreign banks are taxed at a rate of 20% in the emirates of Dubai, Abu Dhabi, Fujairah and Sharjah. The tax base does not differ significantly between the emirates. At the same time, the governments of the emirates of Dubai, Fujairah and Sharjah adopted special acts that relate to the taxation of branches of foreign banks, while in Abu Dhabi they did not accept such acts.

Also, special tax acts exist for most state-controlled joint ventures and some foreign banks. Submission of tax returns by enterprises that conduct other activities in the United Arab Emirates. Also, remittances, including dividends, interest on capital, royalties, or payment for the provision of technical services, etc., from other companies that operate within the UAE are not taxed. Free zones within the UAE, which make it possible to register 100% of the authorized capital to non-residents, provide tax incentives to companies that operate within such zones for a period of 15 to 50 years.

Indirect taxes

Some emirates set local taxes. In the emirate of Dubai, a 10% tax is levied on hotel incomes and revenues from entertainment services. In all emirates, with the exception of Abu Dhabi, the tax is levied on the leasing of commercial real estate - at a rate of 10% and income from renting accomodation - at a rate of 5%. In the emirate of Abu Dhabi, the real property rental income is not taxed, but the owners of the leased property are required to pay an annual license fee of the established amount.

Customs (import) duties are levied at a rate of 5%, at the same time, there are lots of goods that are not subject to duty, such as medicine, most food, industrial and technical goods and raw materials for industry enterprises, etc. The companies created in free zones are also exempted from payment of import duties, provided that the goods do not move beyond the specified zone. In the event that goods are moved outside the free zone - the import duty is collected at a standard rate of 5%.

Double Taxation Agreements

Double taxation agreements were concluded between the UAE and a number of countries. So, the taxes paid on the territory of the UAE can be claimed as a tax credit in the country of residence of the foreign company, depending on the terms of the agreements on the cancellation of double taxation and the domestic laws of the country of residence of the foreign company.

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