Taxes in Dubai and UAE

If you think about Dubai, you probably imagine a tax haven; in fact, most believe it a country where taxes are not paid; but is it really that way? Currently, the Dubai government has only ratified a tax on profits of branches of foreign banks (taxed at 20% of their taxable income) and of all companies operating in the oil, petrochemical and gas sector (a fixed rate of 55% on their taxable income in Dubai and 50% in the other Emirates, in addition to being required to pay royalties on production). There are no taxes on capital gains, the capital itself and dividends.

There is no real federal legislation on income taxes, each emirate has issued a decree, but the application of this decree is, as seen, limited to foreign banks and oil companies. However, in order to have a business in the UAE you need to pay an annual license fee (depending on the type of business and where it is opened). It is a bit different if you decide to open out of Free Zones (which allow 100% of foreign ownership), where you need to have a 51% local member who will still be entitled to a profit (fixed or variable depending on agreements); this is not a real tax, but it is still a cost for those who want to open an activity.

And there are a number of other fees: the company may need resident visas for the entrepreneur, his or her family and their employees. Then, there is the newly-implemented EChannel (a sort of company registration needed to issue the necessary Immigration Card to issue visas). And from 4 February all those who want to apply for a new work visa must produce a certificate of good conduct that must be translated, certified and stamped by the proper Embassy and the Ministry of Foreign Affairs.

Other fees are scattered more or less everywhere: Tourism Fee in the Hotels, the Salik (motorway toll), and so on. An additional fee of 10 AED called Innovation Fee has recently been introduced on all transactions concerning government procedures; the revenues generated will finance the Dubai Future Foundation (DFF) and the subsequent development of the Emirate.
Most customs duties are very low and may even be excluded for certain categories of products like in the case of materials to be used for the production of goods to be re-exported. But in other cases they reach 100% of the value of the product (alcoholic beverages, energy drinks, tobacco).

Then, on 1 January 2018 the United Arab Emirates introduced VAT: a true revolution in the economic and financial landscape. At present, companies with an annual turnover of between AED 187,500 and AED 375,000 can choose whether to register or not, while those with less than AED 187,500 will remain exempt for now. The change has far-reaching implications for companies that will need to make use of professional figures or service companies for their management.

The tax is set at 5% but basic foodstuffs, education and health care will be exempt; in addition it will cover transactions involving the exchange of products or services within the UAE and with Saudi Arabia.

So, you might not have to pay real taxes in the UAE but, there are however a number of costs to consider when doing business. Is it convenient to live or open a company in Dubai? Taking a look at neighboring countries (in particular Qatar and Saudi Arabia), you can see that businessmen opening activities there need to consider the cost of setting up the companies, the possible share capital to be paid, the mandatory office that will pay 10% and 20% of taxes respectively on all that is generated with foreign countries. And even if all the generated income is foreign, a certified auditor needs to be accounted for. So today opening a business in a Free Zone is still your best bet (not requiring the visa requirement, physical office, accounting records, share capital to be paid).

Taxes in Dubai and UAE

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