An Introduction to UAE Taxes

The United Arab Emirates has positioned itself as one of the most progressive business markets in the world, offering numerous incentives to investors hoping to take advantage of one of the most robust global markets and the ample business opportunities it provides.

Taxation in the UAE can vary depending on the territory. Non-residents and investors conducting business are formally taxable under government law; however, this is not widely enforced. Capital gains are not subject to taxes, and deductions are based on the decrees in that particular sector.

Some Emirates impose minimal municipality taxes on properties. These typically run at 2.5% for corporate sites and 5% for residential properties. These taxes are generally paid by the tenant.

Despite the lack of income and corporate taxes, both employees and employers are responsible for paying into a social security system. Generally, these rates are calculated at 17.5% of an employee’s yearly gross remuneration, with the employee responsible for 5% and the company responsible for 12.5%.

Additionally, the Emirates does impose minimal tax levies for various businesses in sectors such as hospitality at an average rate of 7% of the total bill.

For investors, entering the Emirates has become part of a keenly orchestrated tax-saving strategy. It allows businesses to operate efficiently with minimal overhead and return all profits to their home nation. Like the many free zones, some sectors offer complete foreign ownership, eliminating the tradition of requiring a local sponsor to own a majority interest.

The UAE Strives to Remain a Monolith of Business Amid New Tax Changes

For years, the UAE tax system has brought thousands of investors to the region seeking to conduct business that’s free from the financial constraints of taxation. And, for years, this system has worked. However, in 2021, the members of the G7 summit endorsed a major plan to implement a 15% minimum UAE income tax.

This decision has caused an enormous uproar among Emirati nationals and giant corporations like Google, Apple, and Facebook, who frequently use the UAE, and especially Dubai, as a means to avoid capital gains tax.

In the wake of the pandemic and the subsequent economic hurdles it has caused, the UAE has been forced to shift gears to maintain its status as a global economic leader. As a part of this push, the government has developed several reforms, including allowing foreigners full ownership of businesses outside of free trade zones. This swing now gives foreign parties the power to form a company without requiring a local sponsor to possess a majority share.

But officials didn’t stop there. Stacking on to the adjustments allowing full foreign ownership, the UAE has made significant changes with a string of immigration reforms to retain foreign talent while providing citizens with more time before their visa expires. These changes include creating a new ‘green’ visa aimed at foreigners not attached to a business enterprise. The overall approach hopes to foster a larger workforce while simultaneously creating more jobs.

Additionally, officials have moved to reduce government procedures and consolidate fees in an earnest bid to minimize the financial impact from both Covid-19 and the G7 decision. The Emirati government hopes to preserve the vast amount of foreign investments while simultaneously drawing in new businesses. Many economic experts believe that even with the advent of a new tax regime that may or may not throw off future investors, companies will continue to prosper throughout the region.

It’s no secret that these comprehensive tax changes will have tremendous impacts on tax-saving investments and the market overall, even with the UAE streamlining its practices to stay afloat among the tumult. Likewise, businesses and investors entering the Emirati market will need to remain updated on the regulations and tax laws as they develop.

During these times, many businesses and investors are choosing to hire third-party consultancies to help them make sense of the quickly changing Emirati business world. These advisors, like MSZ Consultancy, are highly familiar with business practices across the seven Emirates and are up to date on the influx of evolving regulations. These advisors are capable of helping investors form businesses, secure visas.

Investing in the UAE? MSZ Can Help!

For years, the UAE has fostered its economy by offering unique tax and immigration incentives that have driven businesses and investors to the region. This has allowed the nation to move away from oil as its primary source of income.

With the effects of the pandemic throwing the global economy into disarray, the Emirates have shifted their focus to maintaining their grasp as a market leader. During a recent G7 summit, leaders proposed a new taxation policy that will charge businesses at a rate of no less than 15%. Additionally, the authorities are implementing swift changes and simplifications to governmental regulations, fees, and policies. These adjustments are aimed at reducing extraneous overhead and minimizing the overall economic downturn.

With huge corporate entities like Walmart, Amazon, and Google often using the region to minimize tax costs, it remains to be seen how these changes will affect the UAE as a whole. The sweeping reforms in tax laws may cause these investors to move away from the region. However, many economists believe these large financial institutions may prefer to weather the proverbial storm with the understanding that the Emirates remains one of the most cost-effective regions to conduct business.

With over a decade of experience helping businesses navigate the tricky terrain of business in the Emirates, we have the skills and expertise to help you succeed. Our firm has abundant knowledge of business operations across all seven Emirates and dedicated staff to help maximize your investments.

We work with businesses of any size! Whether you’re a new startup hoping to get your feet in the door of one of Dubai’s free zones or a large corporation seeking PRO services, we have the knowledge to help you succeed.

Our talented team of business experts will help you sail through company formations, visa renewals and applications, and even bank account setup. There is no better way to invest in your business than by hiring the best. Give us a call today at +971 52 544 1248 and let our specialists help you maximize your business potential!

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