DIB Trade Country Profiles Tax System

United Arab Emirates: Tax System

Corporate Taxes

Tax Base For Resident and Foreign Companies: A company is deemed to have a permanent establishment in the country if it has a branch, a place of management or another fixed place of business, or an agent that has and habitually exercises authority to conclude contracts on behalf of the foreign company.

Tax Rate

Corporate tax (except for oil and gas companies, and subsidiaries of foreign banks)	0%. There are no taxes levied by the Federal Government on income or wealth of companies and individuals.
The Abu Dhabi Income Tax Decree of 1965, the Dubai Income Ordinance of 1969 and the Dubai Income Tax Decree, as well as the Sharjah Income Tax Decree 1968 dictate that: Every corporate body that conducts trade or business through a permanent establishment situated in the Emirate is subject to tax at a sliding scale (in general this only applies to oil, gas and petrochemical companies and branch offices of foreign banks). However, corporate income tax is not enforced in the Emirates.	Different rates may be agreed with the relevant authority under specific government concession agreements
Income less than AED 1,000,000	0%
AED 1,000,000 <= Income <= AED 2,000,000	10%
AED 2,000,000 <= Income <= AED 3,000,000	20%
AED 3,000,000 <= Income <= AED 4,000,000	30%
AED 4,000,000 <= Income <= AED 5,000,000	40%
Income >= AED 5,000,000	55%
Tax on profits made by branches of foreign banks	Generally 20%
Tax applicable for all companies: the duty deducted by the municipality in each Emirate at the time of issuance or renewal of a trade licence	10% of the annual amount of the rent of offices and warehouses and 5% of the annual amount paid by a company to accommodate its employees.

Tax Rate For Foreign Companies

As a general rule, taxation in the UAE is based on the territoriality concept (and not on the worldwide one). Non-resident companies carrying out a trade or business in an Emirate through a permanent establishment in that Emirate are formally taxable under the relevant Emirate tax decree, although no taxation is imposed on corporates' income.

Branches of foreign banks are taxed at 20% in most Emirates.

Capital Gains Taxation

Capital gains are generally not subject to tax, unless they are derived by a company that is taxable under the purview of income tax or banking tax decrees.

Main Allowable Deductions and Tax Credits

Deductions are determined based on accounting principles and the tax decrees of the various Emirates. In general, deductions are not that significant as most companies in the United Arab Emirates are not subject to taxation on income (except for upstream oil and gas companies and branches of foreign banks operating in the country).

Other Corporate Taxes

Most Emirates impose a municipality tax on properties, generally by reference to the annual rental value. The tenants are normally the taxpayer, although in some cases separate fees are payable both by tenants and property owners. In the Emirate of Dubai, the municipality tax on property is currently imposed at 2.5% for commercial properties (borne by the owner) at 5% of the specified rental index for residential properties (paid by the tenant).
Furthermore, a registration fee may also be levied on the transfer of ownership of land or property. For instance, a land registration fee is levied in the Emirate of Dubai at a rate of 4% of the sale value of the property (also applicable on the direct or indirect transfer of shares in an entity that owns real property).

There is a social security regime in the United Arab Emirates that applies to UAE and GCC national employees only. In most of the Emirates, and for UAE national employees, social security contributions are calculated at a rate of 20% of the employee's gross remuneration as stated in the employment contract. Out of the 20%, 5% is payable by the employee, 12.5% is payable by the employer and the remaining 2.5% is financed by the Government; in Abu Dhabi, the overall rate is 20%, of which 15% is paid by the employer.

The different Emirates impose hotel levies (for instance, a fee of between AED 7 to 20 per room/night plus 7% on the total value of the invoice is levied in Dubai, whereas in Abu Dhabi it is equal to AED 15 per room/night plus 6% on the room price). Municipality fees on hotel sales are levied in Abu Dhabi (4%) and Dubai (7%). Hotels in all Emirates levy an additional service charge equivalent to 10% of the hotel sale revenue.

Other Domestic Resources

UAE Federal Tax Authority

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions that a medium-sized company must pay in a given year.

Country Comparison For Corporate Taxation

	United Arab Emirates	Middle East & North Africa	United States	Germany
Number of Payments of Taxes per Year	5.0	20.8	10.6	9.0
Time Taken For Administrative Formalities (Hours)	116.0	204.0	175.0	218.0
Total Share of Taxes (% of Profit)	15.9	32.1	36.6	48.8

Source: Doing Business - Latest available data.

Accounting Rules

Accounting System

Accounting Standards: IFRS financial statements are required for all companies listed on the UAE stock exchanges and for banks.
Accounting Law: The Commercial Companies Law of 2015
Difference Between National and International Standards (IAS/IFRS): Companies are required to comply with IAS/IFRS norms. SMEs have the option to choose between IFRS for SMEs and full IFRS Standards.

Accounting Practices

Tax Year: From 1st January to 31st December.
Accounting Reports: Companies should provide an annual activity report audited by an auditor to the Ministry of Finance (for trading companies) or to the Ministry of Industry (for industrial companies). This obligation serves for the renewal of the company's licence.
Publication Requirements: The companies listed on the stock exchange should submit their accounts to the 'Emirates securities and commodities market authority' which imposes quarterly publication of balance sheets and income statements as well as an annually audited income statement.

Accountancy Profession

Accountants: Many local accountants are not from the Emirates, but rather from South Asia (India, Pakistan).
Member of the International Federation of Accountants (IFAC): No.

Consumption Taxes

Nature of the Tax: VAT (value-added tax)
Standard Rate: 5%
Reduced Tax Rate: Goods and services exported outside the VAT-implementing GCC member states, international transportation, the supply or import of investment precious metals, the supply of crude oil and natural gas, the first supply of residential real estate, buildings specifically designed to be used by charity organisations, healthcare and education sectors are generally zero-rated.
Exclusion From Taxation: Certain financial services, the supply of residential real estate, transactions in bare land and domestic passenger transport services are exempt from VAT.
Method of Calculation, Declaration and Settlement: A value-added tax has been implemented in the United Arab Emirates as of 1 January 2018 following GCC regulations.
For UAE resident businesses, there is a mandatory VAT registration threshold of AED 375,000, with the voluntary registration threshold set at AED 187,500. No registration threshold applies to non-resident businesses making supplies on which the UAE VAT shall be charged. VAT returns generally are required on a monthly or quarterly basis depending on turnover. VAT grouping is allowed (conditions apply).
Other Consumption Taxes: Excise duties were introduced in 2017 for three types of products: carbonated beverages and products with added sugar or other sweeteners (50%), tobacco and electronic smoking devices and tools (100%), energy drinks (100%).

Individual Taxes

Tax Base For Residents and Non-Residents: No personal tax is levied in the UAE. Individuals living and working in the country may be considered resident of the United Arab Emirates for purposes of a double tax treaty and obtain a UAE Tax Residency Certificate (under certain conditions, including their physical presence in the country for more than 183 days within any 12-month period).

Tax Rate

No personal tax is levied	N/A
Most Emirates impose a rental tax	Residential tenants pay 5% of annual rent and commercial tenants pay 5% of annual rent in Dubai. Expat tenants pay 3% of annual rent whereas UAE citizens do not pay any rental tax in Abu Dhabi. All tenants pay 2% of annual rent as rental tax in Sharjah.
Real property tax	A transfer charge is levied on the transfer of real estate in the UAE (4% in the Emirate of Dubai, borne equally by the buyer and the seller).

Allowable Deductions and Tax Credits: No personal tax is levied in the UAE, hence tax deductions are not applicable.
Special Expatriate Tax Regime: There is no special tax regime for expatriates in the UAE.
Non-GCC national employees who completed at least one year of service are entitled to an end-of-service benefit calculated as 21 days per year of basic wages for the first five years of employment, plus 30 days per year of the basic wage for each additional year of service (capped at two years’ remuneration).
Capital Tax Rate: Capital gains are not subject to taxation.
Social security contributions only apply to GCC nationals, with rates varying according to the Emirate (5% is payable by the employee in both Dubai and Abu Dhabi).

Double Taxation Treaties

Withholding Taxes: No withholding tax is levied by the federal government of the UAE.

Sources of Fiscal Information

Tax Authorities: Overview of the UAE's tax measures in response to Covid-19
Abu Dhabi Department of Finance
Dubai Department of Finance
Ras Al Khaimah Finance Department
Umm Al Quwain Department of Financial & Administrative Affairs
Sharjah Finance Department
Ministry of Finance, Federal entity
Other Domestic Resources: Official government portal
Country Guides: PwC Tax Guide - United Arab Emirates

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