Step-by-Step Guide For UAE Taxation System:
The United Arab Emirates follows a unique tax system characterized by low tax rates.
The UAE federal tax system is administered by the Federal Tax Authority (FTA), which was founded in 2018. The current VAT rate in the country is 5%.
UAE Taxation System: In January 2022, the UAE Ministry of Finance declared the enactment of a federal corporate tax starting from June 2023. The standard rate of corporate tax is 9%, some exempt businesses and those with net annual profits under AED 375,000 (US$102,100) are under the rate of 0%, which is defined according to the global minimum corporate tax rate agreement and are charged a corporate tax at the rate of 15%.
UAE Federal Government Excise Taxes:
Free zone businesses can be exempt from corporate tax as long as they do not do business with them in the UAE and follow other UAE guidelines. The federal government also charges excise taxes on energy drinks, liquids, alcohol, vaping liquids and devices, and cigarettes. Some further exemptions will be made available for small businesses. For Example, people running businesses that fall under the new rules will be required to register with the Federal Tax Authority and submit tax returns on the annual term.
Taxation categories in the UAE:
- VAT Tax
- Corporate tax
- Excise tax
- Double taxation
- UAE taxation system for foreigners
- Import and export tax
- Custom duties
Value Added Tax (VAT) UAE:
UAE Taxation System: The Value-Added Tax (VAT) in the UAE levies on goods and services. The VAT rate of the UAE is 5%. Yet, specific items are excluded from VAT. In 2020, the UAE exempted some personal protective equipment used in the period of the COVID-19 pandemic, such as health items and textile masks, single-use gloves, disinfectants, chemicals, and antiseptics.
Additional, goods and services that carry a 0% VAT rate like:
- Investment-grade precious metals.
- Exports and goods and services outside the GCC.
- Some education and healthcare services.
- Newly constructed residential properties.
- International transportation.
Corporate Tax UAE:
Federal Tax Authority (FTA) administration will be liable for the collection, and implementation of the Corporate tax. Corporate tax is a sort of direct tax levied on the net income or profit of corporations and other entities from their business. According to the UAE Federal Decree-Law No. 47 of 2022 on taxation of businesses and corporations (the “Corporate Tax Law”), businesses will come to be subject to UAE Corporate Tax from the onset of their first financial year that begins.
Excise tax in UAE:
The UAE executed an excise tax starting in 2017. It is an indirect tax that is imposed on goods that the government considers harmful to human health or the environment. Like:
- 50% on carbonated drinks (except for unflavored carbonated water).
- 100% on energy drinks that contain stimulating substances which include caffeine, taurine, ginseng, and guarana.
- 100% on tobacco and tobacco products
Double taxation UAE:
The United Arab Emirates is expanding its Double Taxation Agreements (DTA) and Bilateral Investments Treaties (BIT) network to motivate strategic global alliances. The UAE has ensured about 243 DTAs and BITs to reduce taxes on investments and profits from indirect and direct taxes.
What is Tourist facility tax in UAE?
- Restaurants, hotels, and resorts ( may impose the following taxes:
- On the room rate(10%)
- Tourism fee (6%)
- Service charge (10%)
- Municipality fee (0-10%)
- City tax (6–10%)
What is the UAE Taxation System for foreigners?
The UAE does not have any income tax, regardless of residency status. Yet, those who are not tax residents of the UAE may have to pay income tax in their country of residence.
What are Customs duties in UAE?
For most commodities, customs duties are computed at 5% of the Cost, Insurance, and Freight (CIF) value. Some categories are exempt, such as alcohol has a 50% duty, while tobacco products have a 100% customs duty added. VAT is applied at 5% to gasoline.
This article is best to understand the UAE Taxation System. All information has been collected to provide you with the taxation system of UAE.