Tax Compliance Services in Dubai: A Quick Overview
Dubai is one of the 7 emirates of the United Arab Emirates UAE, and the federal government has exclusivity in respect of the taxation system. However, the national government hasn't issued any tax laws leaving each emirate to decide the manner of imposing taxes on individuals residing in this destination and companies incorporated in the country.
The Dubai taxation system was reliant on a set of tax decrees issued in 1969. However, in 2018 several tax laws were issued by the government of UAE, such as the introduction of the value-added and excise tax. Also, starting from June 2023, the corporate tax shall be imposed @9% in Dubai.
A significant part of Dubai's tax legislation is regarding the double tax agreements signed by the UAE. Currently, the UAE has more than 100 such conventions signed,implying that local and foreign citizens and enterprises can benefit from various tax exemptions or reductions on certain incomes.
Types of Taxes in Dubai
The different types of taxes levied in Dubai are –
- Corporate Tax (CT): The corporate tax in Dubai is levied @9% for profits exceeding 375 0000.Natural persons won’t be liable for corporate tax on income derived from employment, real estate, share investments, or other personal income that is not related to UAE trade or commerce; however, the Non-residents must pay tax on income earned in Dubai as well as taxable income from PE.The Business adjusted accounting net profit of the business will attract corporate tax.There shall be the exclusion of the corporate tax on the extraction of natural resources, as it will remain subject to emirate-level corporate taxation and the branches of foreign banks. Capital gains and dividends are exempted from corporate tax upon the fulfilment of certain requirements. TheDubai Corporate tax scheme permits a credit for taxes paid in another country against the Dubai CT responsibility on income with a foreign source. Generous loss transfer and utilization rules will be available to businesses. The Transfer pricing is applicable as per the OECD guidelines.Accounting profit, as per international accounting standards but relaxation for certain assessees. An alternative mechanism for the determination of taxable income simplified financial and tax reporting obligations for certain taxpayers (e.g., Start-ups and small businesses)
- Value-Added Tax (VAT): VAT was introduced in Dubai on 01.01.18. The general VAT rate is 5% and is levied on most goods and services, with some goods and services liable for a 0% rate or an exemption from VAT (depending upon the meeting of specific conditions). VAT registration is voluntary for companies with turnovers of less than 187,500 AED and mandatory at the time a company has a turnover of more than 375,000 AED. A VAT exemption applies to certain financial services and to the subsequent supply of residential real estate. Further, transactions in bare land and domestic passenger transport have been exempted from VAT.
- Excise Taxes: The excise tax was introduced on 1st October 2017, being levied ontobacco and tobacco products, energy drinks and carbonated drinks made by Dubai, thereby expanding the scope of excise tax for including electronic smoking tools and devices, sweetened drinks, and liquids used in electronic smoking devices and tools on 01.12. 2019
The applicable tax rates are given below
- 100% on tobacco and tobacco products, liquids used in electronic smoking devices and tools, electronic smoking devices and tools and energy drinks.
- 50% on carbonated drinks and sweetened drinks
- Municipal or Property Tax: Most Emirates levy a municipality tax on properties, mostly as per the annual rental value. Generally, there is an obligation on the tenants to pay such tax. In some cases, the tenants and the owners be required to pay separate fees. In Dubai, the municipality tax on the property is currently levied @ 5% for residential properties (to be paid by tenants) and 2.5% on the commercial properties' annual rental value (to be paid by property owners). There can be the imposition of registration fees on the transfer of ownership of real property or land. These levies are levied and administered differently by each Emirate.
- Withholding Tax: With theintention to have a broader yet robust corporate taxregime for the reduction of compliance burden for assessees, a 0% withholding tax is levied on some types of Dubai -sourced income derived by non-residents insofar as it isn't attributable to the non-resident's PE. The withholding tax rate which shall be applicable and the categories of income to which the same shall apply may depend on the decision issued by the Cabinet. Given the 0% withholding tax rate, no registration or filing obligation is expected in this destination.
Taxation in Dubai Trade Free Zones
Companies incorporated in Dubai’s free trade zones entail numerous benefits, the best being the non-imposition of taxes. There are various investment incentives provided to foreigners setting up businesses in these free zones, but the thing is the complete ownership which is allowed in these jurisdictions. Dubai International Financial Centre, Dubai Healthcare City,Jebel Ali Free Zone, Dubai Internet City, Dubai Multi Commodities Centre, Dubai Gold and Diamond Park, Dubai Cars and Automobile Zone, International Media Production Zone, Dubai Studio City, and Dubai Biotechnology and Research Park are representative and significant free trade zones with no taxes on incomes. Therefore there is the non-imposition of corporate tax under certain specific conditions. In the same category of special zones with benefits, the companies established here can have more than just one activity, can perform the operations in complete business confidentiality, and can have bank accounts in Dubai.
Also, foreigners who opened companies in Dubai’s free trade zones are permitted for purchasing properties, especially in the production zones. There is also the absence of any customs duties at this destination. However, in case the company is dealing in trading activities in mainland Dubai, attention should be paid to such taxes. Establishing a business in Dubai’s free trade zones has less bureaucracy and formalities. It is recommended to take legal support in the case of a foreign investor, along with understanding the business requirements in this area.
It must be noted that companies operating in Dubai's banking sector or in the oil and gas field attract corporate tax. As for other types of activities in Dubai, various tax exemptions are applicable.
Taxation in DIFC
One of the most significant and prolific free trade zones in Dubai is DIFC or Dubai International Financial Centre, which has a large number of companies, local or established, with foreign capital. The taxation in this special free zone is introduced by Law No.1 of 1999,referring to the banking sector and oil and gas field in Dubai. The tax is mostly imposed on branches of foreign companies in Dubai. There are other tax exemptions in DIFC, such as no taxation on profits repatriation and no import & export duties.
Services provided by Enterslice
Management of tax matters, along with regular routine business, can be difficult. Enterslice is an expert tax consultant in Dubai with a dynamic workforce which can help entrepreneurs with numerous tax specialities along with incorporating the same into their business as a strategic model.
Our skilled professionals can assist in the assessment of both thepersonal and business tax requirements of our clients, followed by creating a strategic financial plan that's tailored to their company’s needs. Our personnel have the skills and knowledge required for the comprehension of the taxation system. Furthermore, we provide services for our clients using sophisticated tools and methodologies. We offer the following services in respect of tax compliance in Dubai.
Advisory on Corporate Tax
- Resolving queries of the clients in respect of the applicability of tax provisions as raised by the organization
- Reviewing the transactions for the adoption of tax positions
- Formulation of tax-efficient structures
- Identification of the opportunities for tax optimization
- Regular updates
- Reviewing the withholding tax on transactions with foreign jurisdictions
Assistance in the Implementation of Corporate Tax
- Carrying out the organisation's legal structure
- impact assessment
- Analysis of the impact of the bottom line and profits after tax
- Reviewing the sufficiency of the tax year opted by the company and modifying the same in the event of any insufficiency
- Reviewing the processes undertaken by the corporation to be in consonance with the prescribed tax rules and regulation
Corporate Tax Compliance
- Registration of Corporate Tax
- Calculation of payable taxes
- Preparing and filing Corporate tax returns and other tax reporting requirements
- Reviewing the tax return formulated by the company
- Assistance in corresponding with the tax authorities in the event of any queries being raised by them
Advisory on Mergers and Acquisitions
- Tax due diligence
- Structuring an acquisition or disposition
- Tax modelling
- Assistance in Vendor Documentation
- Positions and those of the acquired business
International Tax Planning
- International tax planning regarding the change in Business, expansion into new jurisdictions and cross-border transactions
- Restructuring of an International group
- Coordinating international tax reporting
- Management of global compliance management
- Group tax health checks
- Structure planning for Global capital, including efficient cross-border finance, repatriation and cash access planning.
Advisory on Excise
- Registration for excise tax
- Reviewing the Entity for the identification of the product listing and classification for qualifying registration
- Advise on stock/inventory counting and duty calculation
- Advise on stockpilers
- Ongoing Excise duty return filing and compliance services
- Tax Agent
- Excise duty consultancy on latest amendments/updates from FTA
Advisory on VAT
- VAT health check
- VAT compliance (VAT return preparation and submission)
- VAT audit support
- Tax agency support
- VAT due diligence review
- VAT refund support
- Formulating and submitting the voluntary disclosures
- Formulating and submitting the VAT clarification requests to the FTA.
- Formulating and submitting the VAT reconsideration requests to the Federal Tax Authorities.