In Dubai, which is part of the United Arab Emirates (UAE), taxation for mainland companies is quite favorable compared to many other countries.
*Corporate Tax*:
– Dubai, and the UAE as a whole, historically did not levy an income tax on corporate profits for most businesses. However, a federal corporate tax was announced to be introduced from June 2023 at a standard rate of 9% on taxable profits exceeding AED 375,000 to align with global tax regulation efforts.
– Companies engaged in the extraction of natural resources are generally subject to taxation prescribed by the individual emirates, and Dubai is no exception; these companies are taxed separately at rates decided by the emirate.
*Value Added Tax (VAT)*:
– The UAE implemented VAT at a standard rate of 5% in 2018. It applies to most goods and services, with some exempt or zero-rated goods and services, such as basic food items, healthcare, and education.
– Businesses with taxable supplies and imports exceeding the mandatory registration threshold of AED 375,000 per annum must register for VAT.
*Personal Income Tax*:
– There is no personal income tax in Dubai, so individuals do not pay taxes on their earnings from employment, whether they are UAE nationals or expatriates.
*Social Security Contributions*:
– UAE nationals are required to contribute to social security schemes; however, this does not apply to expatriates, who typically rely on end-of-service gratuity payments and their own personal savings and investments for retirement.
*Customs Duty*:
– Imported goods may be subject to customs duties, typically at a rate of 5%, but free zones offer exceptions to these rules. Goods produced in GCC countries that meet certain conditions and goods imported for personal use within certain limits may be exempt from duty.
*Free Zone Companies*:
– Companies set up in Dubai’s many free zones benefit from a different set of tax rules, including a guarantee of zero corporate tax for a certain number of years, no personal income taxes, and other benefits.
*Withholding Tax*:
– There is no withholding tax on dividends, interest, or royalties in Dubai, which makes it an attractive destination for international business.
*Other Taxes*:
– There is also no capital gains tax or inheritance tax in Dubai.