Overview of Tax Compliance in Abu Dhabi

The primary regulatory organization in charge of managing taxes in Abu Dhabi and the entire UAE is the Federal Tax Authority (FTA). The FTA guarantees compliance, directs taxpayers, and supervises the application and enforcement of tax rules. The seven Emirates collectively forming the United Arab Emirates are a federation with autonomous federal and local governments. Historically, the UAE has been known for low tax rates. Both the federal government and local governments have the right to tax individuals as well as companies. In light of 137 countries' double tax treaty agreements, citizens of the United Arab Emirates (UAE) are exempt from paying taxes on international pension plans.

Types of Taxes in Abu Dhabi

• Corporate Income Tax:The taxes that are applied to the companies on the profits that they make are referred to as corporate income tax. Companies that earn more than AED 375000 in a year are required to pay corporate income tax at the rate of 9%. If countries are not earning more than AED 375000, they are not required to pay corporate income tax. In the UAE, corporate taxes only apply to banks from other countries and oil companies. Nevertheless, the country offers 46 free zones where companies with United Arab Emirates registrations can enjoy tax advantages that can be extended. Except in cases where the company is subject to another income tax category, capital gains taxes are not applicable.
• Value Added Tax:The Value Added Tax was not levied in Abu Dhabi until January 1st 2018. The standard rate of VAT is 5% on some goods and services in Abu Dhabi, while some goods and services are also exempted from VAT. The companies that earn more than AED 375000 are required mandatorily to pay VAT. The companies have to register under the Federal Tax Authority as VAT payers. The non-compliance of these regulations by the companies results in punishment and fines.

Exports of products and services to nations outside of the Gulf Cooperation Council (GCC) members where VAT is in effect are subject to the 0% value-added tax (VAT) rate. It also applies to some specialized industries, including healthcare and education, the provision of natural gas and crude oil, and the first sale of residential real estate.

• Property Tax:In the United Arab Emirates (UAE), transfer costs are associated with buying and selling real estate. Depending on the Emirate, the price varies, with Abu Dhabi charging 2% of the property's value. There could also be a registration cost when real estate or land ownership is transferred.

• Tourist Tax: A tourist tax, often referred to as a visitor tax or an accommodation tax, is a charge or levy levied on tourists or visitors who travel to a specific location and remain there for a specific amount of time. A tourist tax is intended to bring in money for the local government or tourism bureaus and to fund the maintenance of local tourist facilities, services, and attractions. All hotels in the Emirates impose an additional service fee equal to 10% of their sales earnings. The Emirate requires hotels in Abu Dhabi to charge a 4% municipality fee. A hotel sale is the money received by a hotel from the services provided to visitors or guests, including fees for lodging, meals, beverages, and other expenses.
• Customs Duties: The cost, insurance, and goods (CIF) of imported goods are all subject to a 5% customs fee. The GCC Customs Union was established in 2003 with the goal of removing economic barriers and customs regulations among GCC member nations. The United Arab Emirates is a member of this organization. Products imported into the UAE Free Trade Zones (FTZS) are, therefore, exempt from customs taxes.
• Inheritance Tax: A person's property, assets, and obligations are dispersed in accordance with the legal guidelines known as inheritance law. It controls the distribution of assets and rights from the decedent, sometimes referred to as the testator or the decedent, to their heirs or beneficiaries. Abu Dhabi does not have any inheritance tax as of now, as issues related to inheritance are dealt with according to the Islamic Sharia principles.
• Excise Tax: An indirect tax that the government imposes on a particular commodity or activity is known as an excise tax. It is often imposed on things that are seen as dangerous, such as cigarettes, alcohol, or those that have an adverse effect on the environment or human health. An excise tax has two purposes: to bring in money for the government and to deter people from using or consuming the products or engaging in the activities that are subject to the tax. Excise taxes are often paid by manufacturers, producers, or importers, who then pass the cost of the tax on to consumers. They are typically included in the price of goods or services.

An excise tax was implemented by the United Arab Emirates (UAE) in 2017. The following list includes the standard tax rates:

• There is a 100% tax rate on all tobacco and tobacco goods, e-cigarettes, e-cigarette accessories, e-cigarette liquids, and energy drinks.
• A 50% tax rate applies to sweetened and carbonated beverages.

• Stamp Duty Tax:No stamp duty tax is levied in Abu Dhabi.

What are Free Zones in UAE?

In order to draw foreign investment and foster economic progress, free zones in Abu Dhabi are specialized economic zones that provide a wide range of incentives and advantages. These zones are intended to simplify company processes and provide an atmosphere that is beneficial for both domestic and foreign businesses. In Abu Dhabi, free zones are specifically defined locations that provide both domestic and international enterprises with a variety of advantages and incentives. To draw in investments, promote innovation, and increase economic diversification, these specialized economic zones were created.

The free zones in Abu Dhabi are thoughtfully designed and well-located to provide easy access to various transit networks, such as airports, seaports, and major roads. 100% foreign ownership is permitted for businesses, allowing investors from outside the United Arab Emirates (UAE) to fully manage their companies. Free zone businesses are also often excluded or have lower rates of corporate taxes and customs fees on imports and exports, which greatly lowers operating expenses and boosts profitability. There are more than 40 zones throughout the Emirates.

Tax exemption of UAE Companies (Free Zones)

The UAE Free Zones have the following benefits for businesses:

• 15-50 years from the date of incorporation, tax-free status for companies.
• Value Added Tax (VAT) is not present.
• There are no customs costs.
• Income from overseas business operations carried out by individuals as well as companies is not taxed in the UAE and is thus free to be withdrawn from bank accounts.
• Contrary to the requirement outside the Free Zones, where finding a partner in the region and giving them 51% ownership of a company is required, investors have the option of being the sole proprietors of their companies.

Tax Period in Abu Dhabi

The financial year in Abu Dhabi is from January 1st to December 31st.

Services Offered by Enterslice

International Tax Planning:

• Enterslice assists companies in making outbound and inbound investments with the strategic management of taxes.
• Indirect tax, customs, and trade challenges are all things they help with, as well as transfer pricing, cross-border cash planning, dividend repatriation, fundraising, and currency problems.
• They also provide services to international employers.

Tax Preparation Services:

• Enterslice offers tax preparation services to help individuals, partnerships, and companies prepare their tax returns.
• They are in charge of value-added tax and income tax computation and filing.

Tax Optimization:

• Enterslice analyses how businesses handle their tax obligations and provide administration, analytics, and reporting services for tax information. 
• To streamline tax operations, they create efficient tax procedures and create technological roadmaps.

Corporate Tax Advisory Services:

• Corporate tax consulting services are offered by Enterslice. 
• These services include general tax advice as well as advice on indirect and direct taxes, among other company taxation-related topics. 
• Additionally, they provide assistance with tax compliance and counsel on methods for money repatriation.

Corporate Tax and Regulatory Compliance:

• Enterslice helps companies make sure that corporate tax laws are followed. 
• They provide thorough due diligence services, litigation assistance, and advice on tax compliance, in addition to consultancy and advisory services.

International Tax Advisory Services:

• Enterslice specializes in resolving cross-border tax needs.
• They help with compliance with the law, transfer pricing transactions, and other tax concerns that come up in the context of foreign companies.