Understanding Dubai's Tax System for Business Owners

  • March 29, 2023
  • Dushyant Sharma
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Dubai is repeatedly termed the futuristic city of the world. Built mainly on Oil money, the Gulf City has risen to the ranks of the foremost metropolitans of the world since the last decade. Such dignity as a ‘World City’ is awarded to Dubai because of its corporate-centric reforms. The UAE Authority has made Dubai very conducive for business persons as well as Franchises from all around the world. The benefits are not limited to UAE nationals but also foreign nationals as well as establishments. You can have many benefits from Company Formation in Dubai. Still, the foremost of them is Dubai’s Corporate Tax Benefits & Exemptions as well as Company’s complete ownership to the Foreign Nationals.

Let us dive deep into the taxation regime employed by the UAE Authority in Dubai for Business professionals to make an informed decision before venturing into a business company setup in Dubai.

 

Employed Taxation System of Dubai for Business professionals

Suppose you are looking to register a Company in Dubai. In that case, you must acquaint yourself with the applied Taxation system by Dubai Authority which makes it an attractive location for business owners. Here are some of the formative tax systems employed by the Corporate Authorities in Dubai.

No Corporate Tax in Dubai

The most beneficial factor for Company Formation in Dubai is that it does not impose any Corporate Tax on companies operating within any of the following jurisdictions:

  • Dubai International Financial Centre or DIFC
  • Dubai Free Zones

Any company registered and operating outside these specified Free Zones will be subjected to corporate Tax at a rate of 15% of the earned gross revenue.

In Dubai, oil, gas, petrochemical, and banking companies are also subjected to corporate Tax at a 50% tax rate. The Branches of Foreign Banks operating on the Gulf Sand are subject to a rate of 20%. However, to register a Company in Dubai, Company Owners can benefit from free trade zone registrations because of the tax exemptions as well as no customs duties for up to 50 years. Also, the repatriation of profits from free zones is free of charge to Foreign Nationals.

Low VAT thresholds in Dubai

VAT, or Value-added Tax, was introduced in the UAE in 2018. The current regime for VAT in Dubai stands at a rate of 5%. Consequently, every Company registered with theDubai’s Corporate Authority must apply & register for VAT registration. But such is the case with the Companies whose annual revenue exceeds AED 375,000 or 102,042 American dollars. The Tax is applicable if their annual revenue exceeds the specified threshold.

Customs Duty Exemptions on Certain Goods

Mosts Goods imported into the Gulf City are subjected to appropriate customs duty, but the UAE Authority exempts some goods as imported duty-free. They also offer certain exemptions as well as waivers on these goods if they are of corporate importance, such as the official amenities.

No Withholding Tax on Company’s instruments

Dubai has been a mecca for its natives as well as corporates, as it does not employ any personal income tax. Dubai is also appropriately famed for not imposing any withholding tax on the following financial instruments related to a registered Corporate in Dubai as an offering to its non-residents:

  • Dividends
  • Royalties
  • Interest Payments

Here, before we conclude, let us inform you that Dubai's tax system is generally beneficial to Business people around the world. Still, there are always some additional latent taxes applicable to specific industries or the undertaken commercial activities by the Businesses. Also, tax laws and regulations can be susceptible to change in any economy. So, we advise you to apply for a consultation with our Taxation Experts on prevalent tax laws before making any rash decision.

Also read:  A Complete Guide to register a Sole Proprietorship in Canada


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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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