Types Of Taxes Imposed On Businesses In The UAE

Types Of Taxes Imposed On Businesses In The UAE

In this article, we will briefly touch on the various types of taxes imposed on businesses in the UAE. These include VAT, Customs duties, and Excise tax. To understand these taxes in more detail, you should first understand what each one is. VAT refers to the value-added tax that companies pay on their products and services. Excise tax is a special type of tax that applies to goods and services imported or exported into the UAE. If you are still unfamiliar with these taxes, you must hire a professional tax consultant in Dubai to handle your tax matters. 

VAT:

A new tax on corporate earnings is set to take effect in June 2023 in the UAE. The UAE is seeking to align itself with new international standards, including the implementation of a global minimum tax on multinational corporations. The Group of 20 countries endorsed this tax last year. However, the UAE may still be included on the “gray list” of countries that do not do enough to combat money laundering and terrorism financing. While these tax measures may not affect business investment, investors should be aware of their ramifications.

Corporate tax:

The UAE’s new corporate tax regime will reduce the compliance burden on companies while shielding small and medium-sized enterprises. The government says the tax is in line with international taxation standards, and the new rules are designed to diversify state revenue away from oil and hydrocarbons. The UAE’s Undersecretary of the Ministry of Finance stated that the new tax measures will help the UAE maintain its global leadership status as a hub for business.

Customs duties:

The government of the UAE generates most of its revenue through taxes, which can be quite significant for some industries. While some sectors contribute the lion’s share, other sectors are excluded. Alcohol and tobacco are heavily taxed. They pay a minimum tax of 50% on imports and another 30% at the point of sale. Council tax is charged when utility bills are produced, and toll taxes are also a significant component of the government’s budget.

Capital gains tax:

The recent announcement by the UAE government that it would introduce a new capital gains tax for businesses is controversial. The tax rate is based on Pillar Two of the OECD’s BEPS project. It will still apply to individuals and businesses engaged in the extraction of natural resources. The UAE will also continue to apply tax decrees issued by its respective Emirate to qualifying intragroup transactions and reorganizations. It will also continue to apply to foreign investor income derived from capital gains, dividends, interest, and royalties.