Dubai is a tax-free nation with significant tax benefits for people who live and work there. However, there are a few scenarios where people have to pay taxes. To prevent people from being forced to pay taxes to two distinct governments on money generated in one country, the UAE has also negotiated several double taxation avoidance agreements (DTAA) with other nations.
The Dubai Tax System is new and different. You can't decide to live in Dubai without understanding how the tax system works and what to expect. To have an in-depth understanding consult a business expert.
Tax Structure in Dubai
Taxation is an essential aspect to consider before moving to a new country. It gets even more challenging if you plan to relocate from one country to another. In both cases, the tax system of your country of origin and the UAE plays a vital role. If you want to be aware of the tax system played in UAE, you can seek assistance from business experts.
Types of Dubai Taxation System
There are numerous tax payments in Dubai, which can initially seem confusing. This article breaks down the different types so you understand your responsibilities as a business owner.
Residents of Dubai and the UAE are exempt from paying income tax. Also, there are no taxes on inheritance, capital gains, rental income, or real estate transfers. Here is a list of the taxes calculated in Dubai, though.
- Corporate Tax
- Withholding Tax
- Customs Duties
- Municipal or Property Tax
- Hotel tax and Tourism Levies
The Ministry of Finance declared that it would introduce federal corporate tax (CT) on the net profits of businesses.
As per the Ministry of Finance, the corporate tax rates are:
0%for taxable income up to AED 375,000
9 % for taxable income above AED 375,000
Note: Depending on the business's financial year, either 1 July 2023 or 1 January 2024 will be the tax's start date, and all emirates will implement the corporate tax.
Withholding taxes are not applied in the UAE to payments made by UAE entities to another entity or person, such as royalties, interest, dividends, etc. (resident or non-resident).
Customs taxes are charged on imported products. All imported items from overseas, excluding those in transit to the GCC, are subject to a 5% tariff. However, depending on the tariff, the duty differs for specific commodities. GCC-originating items are classified as UAE-local goods as long as at least 40% of the raw materials used to make them are from GCC countries.
Municipal or Property Tax
In the Emirate of Dubai, the municipality tax on the property is currently imposed at 2.5% on annual rental value for commercial properties (paid by property owners) and 5% for residential properties (paid by tenants).
Hotel Tax and Tourism Levies
Hotel services and entertainment value is subject to a 5%–10% hotel tax in most Emirates. Additionally, up to 10% of tourist fees or charges may be added to the cost of several tourist and entertainment activities (e.g., events and shows). Each Emirate imposes and manages these fees differently.
VAT applies to the supply of a broad base of goods and services and the importation of goods, with some very limited exceptions. The standard rate on VAT in Dubai is 5%, and certain supplies of goods and services are zero-rated or exempt from VAT. Moreover, know about VAT registration in the UAE.
In conclusion, if you want to get a few extra days or months over the last year's tax return, it's best to file soon. Remember that the sooner you start with your tax affairs, the better off you will be once it comes time to make that tax return. Moreover, to know how to start a company, explore the company formation in Dubai.
Why Choose Us
Business Setup Worldwide is an emerging consulting company that guides you in resolving any tax-related business queries in UAE. Also, if you have any doubt regarding company incorporation to the bank account assistance, contact us. We are there to assist you.