TAX Laws in UAE
One of the more well-known advantages of living and working in the United Arab Emirates is the lack of income tax. However there are other taxes such as value-added and corporate taxes that are quite simple and straightforward. However, there remain a few things you should be aware of depending on whether you’re a freelancer or launching a new business while residing in the UAE.
Let us outline them!
VAT Rate
Prior to the federal value-added tax (VAT) being imposed in 2018, the Federal Tax Authority (FTA) was founded and is in charge of regulating the federal tax system in the UAE.
In the UAE, the standard VAT rate is 5%.
Some products and services are exempt from VAT, whereas some products qualify for a zero percent rate.
While registering for VAT, some VAT registration criteria must be met.
Businesses who have taxable supplies in a given year that surpass the current AED 375,000 registration threshold are required to register for VAT.
Businesses are also free to take part in this if their taxable supplies surpass the current voluntary registration threshold of AED 187,500.
Companies must pay VAT to the Federal Tax Authority (FTA), also in charge of audits.
Please read: Step-by-Step Guide to VAT Registration Process for UAE Companies
Corporate Tax Rate
The federal corporate tax became operative in June 2023, as stated in a January 2022 announcement by the UAE Ministry of Finance.
9% is the standard corporate tax rate.
However, certain enterprises are excluded from this rate, and those with net annual income under AED 375,000 (US$102,100) are eligible for a rate of 0%.
This implies,
Businesses with net profits below AED 375,000 are subject to 0% Tax.
Businesses with net profits above AED 375,000 are subject to 9% Tax.
Please read: 5 Simple Steps To UAE Corporate Tax Registration
Companies operating in free zones are exempt from corporate tax as long as they adhere to other UAE regulations and don’t conduct business with the UAE mainland.
Please read: Things You will stumble while creating registering for Corporate tax
The federal government also imposes excise taxes on energy drinks, cigarettes, alcohol, vaping devices, and liquids.
The following products are subject to excise taxes in the UAE:
50% off fizzy beverages
50% off of any item that has sweeteners or sugar added.
100% on tobacco goods
100% on energy drinks
100% of vaping liquids and electronic cigarettes
Please read: What are the new corporate tax rules in Dubai 2024?
Final Words
If you are a taxable person in the UAE, you must follow the regulations on submitting the corresponding taxes.
Businesses that operate in the UAE are increasingly subject to tax inquiries. You must obtain the necessary assistance from professionals to understand corporate tax registration deadlines and fines for failing to file taxes.
Therefore, Paci.ai can help you with corporate taxes and VAT registration for your company.
Get in touch with us right now to learn more about the VAT registration process and company taxation.
Please read: UAE Tax Laws: What Every Business Owner Should Know
