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A guide on UAE Tax Types You Must Know

A guide on UAE Tax Types You Must Know

The United Arab Emirates has a lot for you always and in every way. The land gives immense opportunities to establish your business. But do you know what the tax system has to say? Yes, we tell you everything you need to know about the tax system in the UAE, from the need for income tax and tax-free zones business to property taxes and VAT. 

A surprise about the UAE tax system is that there is no federal income tax. However, soon after hearing this, it is not advisable to plan a business thinking you will be scot-free. No, it’s not like that! 

Check out if you have to pay tax, or approach one of the best tax consultancy services for a hassle-free process. 

Come, let’s see what the tax types to pay as a business or an individual while you are in the United Arab Emirates are. 

Taxes in the UAE

The absence of taxes is one of the main reasons many expats start a business in this region. With no income tax paid and no corporate tax or inheritance taxes, the UAE makes you feel comfortable with the tax-free system in many ways. 

Let’s see the federal tax system in the UAE.

  • Income tax

There is no income tax to be paid in the UAE. Also, there is no tax return and individual tax within the region. This system can be followed by the residents of the Emirates who are self-employed and freelance too.

  • Individual tax

If you are a GCC national and an employee at any organization in the UAE, you are subject to 17.5% of the social security regime. The UAE nationals must pay 5%, and the rest, 12.5%, must be paid by the employer. Those companies and employees in the Free trade zone are also subjected to social security commitments. Since every GCC nation has different regulations, residents are requested to follow their respective countries’ contributory rules. No social security commitments exist for non-GCC nationals in the UAE. For any clarification, you can contact Auditors in Dubai

  • Corporate tax

All the oil organizations and foreign banks need to pay corporate taxes. The free zone business is exempted from paying taxes, and there are 45 such free zones in the UAE. The period to which these firms are exempted from UAE taxes can be extended. 

  • Double taxation

To encourage business partnerships globally, the UAE is spreading its wings of Double Taxation Agreements and Bilateral Investments Treaties. There are 193 BITs and DTAs aiming to reduce the investment taxes and revenues indirect and direct taxes. 

  •  Taxes on tourist facility

The following taxes apply to the hotels, restaurants, and resorts.

Room rent: 10%

Service charge: 10%

City tax: 7-10%

Municipality fee: 10%

Tourism fee: 6%

  • Tax on property transfer 

If you transfer property in the UAE, you are intended for a tax of 4% on the property. Even though the tax burden has to be shared by both the buyer and seller, the buyer must pay the transfer price. Approaching the best accounting firm in Dubai with professional tax consultants can ease your work.

  • The municipality or Rental tax

It is to be noted that rented properties tax differs between the regions in the Emirates itself. If you are a residential tenant in Dubai, then the tax you must pay will be 5% of the rent. The commercial tenants must pay 10% of the annual tax as well. But in Abu Dhabi, there is no property tax applicable to tenants, whereas expats pay 3%. Sharjah demands a rental tax of 2% on the properties.

  • VAT services in Dubai

For the businesses in UAE, VAT is 5%. If the products imported and supplied exceed about AED 375000 per year, it is essential to register the VAT company. If the business has a turnover of AED 187500, then it may register voluntarily. 

A business that is VAT registered should:

-Apply VAT on the taxable products

-Reclaim VAT for the products purchased

-Maintain records for government processes

-VAT costs are covered for foreign businesses

  • Import and export taxes in the UAE

5% of the Cost, Insurance, and Freight (CIF) value must be paid for custom duties. Some categories are exempted from import and export taxes. For example, 50% duty must be paid for alcohol, 100% customs duty for tobacco products, etc.

Takeaways

Since UAE doesn’t demand any income tax, many people think there is no need for any professional tax consultants in Dubai. But the truth is that there are various categories which you have to pay. Understanding a clear picture through experienced consultants at Audit Firms in Dubai would be the best choice to avoid huge taxes later. For larger businesses, professional financial advice is the call of the hour. 

 

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AVA Consultants is an approved Auditing/Accounting firm and VAT Consultants operating from Dubai- UAE.

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