Corporate tax in United Arab Emirates

Summary

Corporate Income Tax Rate (%) 0*
Capital Gains Tax Rate (%) 0*
Branch Tax Rate (%) 0*
Withholding Tax (%) 0*

* No taxes are imposed by the federal government of the United Arab Emirates. See Section B for further information.

Taxes on corporate income and gains

Corporate income tax. Although no federal taxation currently exists in the United Arab Emirates (UAE), each of the individual Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain) has issued corporate tax decrees that theoretically apply to all businesses established in the UAE. However, in practice, these laws have not been applied. Taxes are currently imposed at the Emirate level only on oil and gas produc­ing companies in accordance with specific government conces­sion agreements, and on branches of foreign banks under specific tax decrees or regulations or in accordance with agreements with the Rulers of the Emirates in which the branches operate.

The preceding paragraph describes how the practice has evolved in the UAE at the level of the individual Emirates. No general exemption is contained in the Emirates’ tax decrees. Persons in­vesting in the Emirates should be aware of the risk that the tax decrees may be more generally applied in the Emirates in the future and of the remote risk that they may be applied retroac­tively. They should also bear in mind the potential introduction of federal-level taxation in the medium to long term.

In August 2015, the UAE Ministry of Finance (MoF) announced the potential introduction of corporate tax in the UAE. No further details have been provided with respect to the proposed tax rate or timeline. The MoF stated that after an announcement has been made that the draft law has been finalized, it will be at least 12 months before businesses will be required to fulfill their UAE corporate tax obligations. This will allow businesses to prepare for the implementation of the corporate tax.

Tax incentives. Several of the Emirates have free zones that offer tax and business incentives aimed at making the UAE a global financial and commercial center. The incentives usually include tax exemptions for a guaranteed period, the possibility of 100% foreign ownership, absence of customs duty within the free zone and a “one-stop shop” for administrative services. The free zones include, but are not limited to, the Dubai Airport Free Zone (DAFZ), Dubai International Financial Centre (DIFC) (typically for financial services), Dubai Internet City (DIC), Dubai Media City (DMC), Dubai Multi Commodities Centre (DMCC), Dubai World Central (DWC) and Jebel Ali Free Zone (JAFZ). Approxi­mately 30 free zones are located in the Emirate of Dubai alone.

Customs duties

The UAE is a member of the Gulf Cooperation Council (GCC), together with Bahrain, Kuwait, Oman, Qatar and Saudi Arabia. On 22 December 2002, the GCC member states approved regula­tions for the implementation of the GCC Customs Law, which unifies customs procedures in all GCC customs administrations and establishes a unified GCC customs union. All GCC member states have enacted the GCC Customs Law. However, the practi­cal implementation of the law is not completely consistent.

The UAE is a member of the World Trade Organization. Unlike some of the other GCC member states, the UAE has not signed any free-trade agreements as a stand-alone partner. However, the GCC is a partner with respect to several free-trade agreements, some bilateral and some with other trading blocks.

Under the GCC Customs Law, most foreign imports are subject to customs duty of 5% of the Cost, Insurance and Freight (CIF) invoice value of the imported goods, except tobacco and alcohol (which generally attract higher rates), and the items on the exemp­tion list (which generally attract lower or zero rates). This import duty is levied at the first point of entry to the GCC. No export duty is imposed on goods leaving the GCC.

In general, goods do not incur customs duty on import into, and on transfers within, a UAE free zone, and no export duty is im­posed on goods removed from a UAE free zone. However, if the goods leave the free zone for a destination within the GCC, cus­toms duty is levied on the import at the first point of entry into the GCC.

Foreign-exchange controls

Neither the federal government of the UAE nor the individual Emirates impose foreign-exchange controls.

Tax treaties

The UAE has tax treaties currently in force with the following jurisdictions.

Albania                            India                        Poland

Algeria                            Indonesia                 Portugal

Armenia                          Ireland                     Romania

Austria                            Italy                         Russian Federation

Azerbaijan                       Japan                       (limited)

Bangladesh                      Kazakhstan              Serbia

Belarus                            Korea (South)          Seychelles

Belgium                           Latvia                      Singapore

Bosnia and                      Lebanon                  Slovenia

Herzegovina                    Lithuania                 Spain

Brunei Darussalam          Luxembourg            Sri Lanka

Bulgaria                           Malaysia                  Sudan

Canada                            Malta                       Switzerland

China                               Mauritius                 Syria

Cyprus                            Mexico                    Tajikistan

Czech Republic               Montenegro             Thailand

Egypt                               Morocco                  Tunisia

Estonia                            Mozambique           Turkey

Finland                            Netherlands             Turkmenistan

France                             New Zealand           Ukraine

Georgia                           Pakistan                   Venezuela

Germany                         Panama                    Vietnam

Hungary                          Philippines              Yemen

In addition, treaties with the following jurisdictions are in various stages of negotiation, renegotiation, signature, ratification, trans­lation or entry into force.

Andorra                    Guernsey                          Mauritania

Argentina                  Guinea                              Moldova

Barbados                   Hong Kong SAR              Nigeria

Belize                        Jersey                               Palestinian

Benin                        Jordan                               Authority

Comoros                   Kenya                               Peru

Croatia                      Kyrgyzstan                       Slovak Republic

Ecuador                     Libya                                Uganda

Ethiopia                     Liechtenstein                     United Kingdom

Fiji                            Macedonia                        Uruguay

Greece                       Malawi                             Uzbekistan