The Emirates is an international business center. Many entrepreneurs are eager to open their own business here, besides, the conditions here are favorable. This is influenced by a well-developed business infrastructure, favorable tax policy, and a lot of excellent specialists. In the article, we will try to figure out why there are no taxes in Dubai, and can this statement be considered correct?
The tax situation in Dubai
It is fair to note that there are taxes in Dubai, but the tax system itself is much softer and more loyal, and some fees are really completely absent, for example, income tax on residents’ incomes. The corporate tax is 9% and is imposed on income over 375 thousand dirhams. Oil companies, regardless of revenue, must pay 55 to 58% to the treasury, and foreign banks 20%. Expatriates also do not contribute to the social security system.
This situation makes it possible to significantly reduce the tax burden on the company. The released funds can be used for further business development and promotion. Even taking into account the availability of a paid license, which must be systematically renewed and some other fees, it is still more profitable to do business in the Emirates.
Tax policy for individuals
There is no tax on the income of an individual in Dubai. This is already obvious. What does the rule apply to all sources of profit:
- investment;
- salary;
- dividends and other things.
Any personal income of an individual is not subject to any type of tax in the UAE. The same rule applies to non-residents and foreigners. they also do not owe the state anything from their income. But here it is necessary to take into account the tax legislation of the native country. Social security was described earlier. Contributions in this system are an obligation exclusively for citizens of the country.
Tax policy for business
Companies have different tax conditions. If we talk about corporate tax, companies are required to pay it at a rate of 9% on income exceeding 375 thousand dirhams. You can not pay tax on:
- dividends from local organizations;
- a certain income category of a company with a FEZ;
- profit for firms with an annual turnover of less than $ 3 million.
The following types of deductions are allowed for companies:
- income-related expenses;
- entertainment (up to 50%);
- interest expense (up to 30% of EBITDA).
You cannot make a deduction for donations, grants, or gifts to charitable organizations that do not have a license to operate. Also, deductions for fines, penalties, bribes, and other payments that do not have legitimate grounds are not accepted.
Entrepreneurs often wonder why taxes are not paid in Dubai. The answer, apparently, is rooted in the culture of this country, the desire to become a leader among economically independent states. Whatever the answer to this question, entrepreneurs continue to actively use the benefits offered by the legislation. Such benefits include the absence of a tax on:
- capital gains;
- dividends;
- interest on investments.
More recently, VAT has been introduced, which has a rate of 5%, one of the lowest. If the company has a turnover of more than 375 thousand in local currency, it must undergo mandatory registration for VAT payment. It is not necessary to register those whose turnover is kept within 180 – 375 thousand..
There is an excise duty in the emirates. It applies only to goods that pose a potential threat to humans or nature. There is a tax on exported goods, but only for certain categories and under certain conditions. In general, there are fewer taxes, and those that exist have low taxation rates.
Taxes on real estate
The rental of real estate is not taxed. It is replaced by a fee included in utilities, which is 5% of the rental price of the premises for the year. The sale of real estate does not have a tax on the transfer of property. It is replaced by a transfer fee of 4%, which is divided between the buyer and the seller. But registration fees for real estate transactions are present. their size depends on the type of transaction.
Certificate of Tax Residency
To officially obtain the status of a tax resident of the Emirates, you will need to obtain an appropriate certificate. It is issued by the Ministry of Finance of the country. To do this, the candidate must be registered as a resident for at least 180 days. You can confirm this by providing the appropriate documents:
- passport;
- Residence permit;
- confirmation of the actual address of residence;
- confirmation of legal income in the country.
The positive aspects of Dubai’s tax system
Someone will find more advantages than disadvantages in the UAE tax system, and for most entrepreneurs this is indeed the case. But don’t take it lightly. Look at the situation sensibly and weigh the pros and cons. Nevertheless, it cannot be denied that:
- There are many advanced companies concentrated in the Emirates;
- there is all the necessary infrastructure for successful business development;
- the most loyal conditions for taxes and fees;
- there is access to any markets in the world;
- Real estate with high investment potential is constantly being built;
- loyal attitude towards expats from Russia and CIS countries;
- It is an advanced state with a high level of digitalization.
There are really a lot of advantages and it sounds attractive to many businessmen who have already left for the UAE to develop their business.
Conclusion
Today, the situation is such that many economically attractive sites are unavailable. In this regard, the Emirates represent an excellent prospect, and in some places, they even outshine countries that previously had a reputation for being particularly attractive for investment. We propose to personally investigate the question of why there are no taxes in Dubai, or rather most of them. Visit this unique place, open your business on the territory of the most advanced Arab state.
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