After setting up a new business, it is mandatory for a company to file taxes according to regulation required by the government of the country in which business is operating. Every firm has to pay tax on the profit at the end of its year. And therefore, a country’s tax regime is always a key factor for any business considering moving into the new markets.
Yemen is situated near the growing markets of Asia, Africa, and Europe, which will potentially help the country in growing its business into wider markets. The taxation policy in Yemen involves a lot of paperwork and requires a huge amount of time to file for various types of taxes.
How Does the Tax in Yemen Work?
Companies resident in Yemen are subject to tax on all their income wherever earned. A company is said to be resident if:
- It has a place of business, management, or supervision in Yemen, regardless of whether the country was formed under the Yemeni law or foreign law
- The participation of the Yemeni state or any other state-owned legal person in the company exceeds 50% of the share capital
And for non-resident companies in Yemen, the tax is subject to the income earned in Yemen.
The two main tax laws in Yemen are the Income Tax Law 17 of 2010 and the General Sales Tax Law 19 of 2001. Yemen has double tax treaties with Ethiopia, Iran, Pakistan, and Turkey and with most Arab countries (excluding Saudi Arabia). The detailed overview of different taxes paid in Yemen is as follows:
Corporate Tax
The standard corporate tax in Yemen is 20%. Other rates are applicable to specific categories. They are:
- 50% for telecommunication
- 35% for oil, gas and mining activities and international telecommunication
- 15% for investment projects
Profit Tax
A profit tax is applied to the net income of a business which includes all the types of business entities incorporated in Yemen. Under Yemeni law ‘net income’ is defined as ‘income achieved by a business (company) during the year after deducting acceptable expenses’ where acceptable expenses are the expense incurred in the creation of income, either directly or indirectly. The tax applicable under this type is 25%.
Capital Gains Tax
Capital gains are taxed as part of ordinary business income. For non-resident companies, capital gains on the sale of shares in resident companies and immovable property are taxed at 20% in Yemen.
Zakat
Zakat is one of the most important pillars of Islam. It is mandatory for every Muslim who is financially stable, to pay Zakat to the poor and needy. Zakat is collected under the Islamic rules of the Zakat Authority from all commercial enterprises and professional firms at a rate of 2.5% of their net income.
Withholding Tax
A withholding tax is a type of income tax to be paid to the government by the payer of the income rather than the recipient of the income. In Yemen, the withholding tax is levied as under:
| Dividends |
0% |
| Interest |
10% |
| Royalties |
10% |
| Fees (technical) |
10% |
| Fees (management) |
10% |
No withholding tax is levied on branch profits.
Personal Tax
The taxation of the income of individuals (employment, pensions, interest and dividend income) is done on a territorial basis. The tax is levied up to 15% of the total income. Non-resident individuals are subject to income tax at a rate of 20%. An employer deducts the tax from the salaries/wages of each employee and remits it to the Yemen Tax Authority.
Our Offerings
We at Business Setup Worldwide utilize our knowledge to provide companies with a range of effective solution. Our tax services in Yemen include:
- Corporate direct tax returns
- Preparation of transfer pricing documents
- Tax accounting, effective tax-rate analysis, foreign tax credits, and balance-sheet analysis
- Transactional tax returns including personal tax, property tax and other such taxes in Yemen
Why Us?
Business Setup Worldwide provides taxation services in Yemen. We provide comprehensive tax compliance support for corporate and transactional taxes. We help our clients minimize the risk of forfeiture and maximize future benefits via a wide range of tax process and operations management solutions. Our advisors in Yemen have in-depth knowledge about the tax provisions in Yemen and keep themselves updated with the new laws which help them in providing valuable services to the clients. Contacts us today for more information.
