- December 25, 2018
- Posted by: Shuraa Tax Consultant
- Category: Tax Query – Word of Advice (Ask)
The United Arab Emirates has always maintained a tax-friendly environment in the country. Businesses for several years have taken advantage of this environment and flourished, but times are changing, and UAE has introduced few taxes. However, UAE is still liberal compared to the rest of the world and does not charge huge taxes.
But it is always good to learn about the taxes if you have a business in the UAE or are planning to start one! So here are the types of taxes in the UAE that you must take an account of –
Value Added Tax in the UAE or VAT in UAE
Value Added Tax (VAT) started in January 1, 2018. Value-added tax is also referred to as indirect tax or GST in some Asian countries. This is a consumption tax charged on a product at each stage of sales. The VAT is charged on each point of sale in the supply chain, unlike sales tax which is charged only at the point of final sales. In the UAE the standard VAT rate is 5%. However certain supply of goods, services is 0% rated, few supplies are exempt. Business can claim VAT paid on business expenses, purchase in relation to taxable supplies. Please contact us to know the applicability, obligations, implementation of VAT to your business.
Excise Tax in UAE
The excise tax was launched in UAE on October 1, 2017. The excise tax is charged in the UAE only on certain products considered to be unhealthy such as tobacco, alcohol, confectionery, soft drinks, and fast food. Excise is levied on the manufacturer as well as on the customer, but it depends from product to product. The discerning factor between VAT and excise in the UAE is that excise is imposed only on certain goods. Excise taxes for carbonated drinks is 50%, for tobacco Products is 100%, for energy drinks 100%.
UAE corporate tax
The UAE levies the corporate tax on oil companies and foreign banks only. It has not yet an applied corporate tax on other industries. Businesses registered in the free zones are exempt from corporate tax for certain time and such time can be extended. Rules and regulations of independent free zones apply. Speak to a tax consultant to understand better.
Double taxation in the UAE
The UAE has 94 agreements in place with other nations to avoid double taxation on investments overseas. The agreements on the Avoidance of Double Taxation are aimed to promote the country’s development goals and diversify its sources of national income.
UAE’s agreements on the Avoidance of Double Taxation also eliminates double taxation as well as additional indirect taxes and tax evasion; eliminate any obstacles related to cross-border trade and investment flows; provide protection to taxpayers from double taxation, whether direct or indirect; promote the exchange of goods and services and the free movement of capital.
Taxes on a tourist in the UAE or UAE Tourism Taxes
Restaurants, hotels, hotel apartments, resorts etc. in the UAE might charge one or more of the following taxes:
- 10 percent tax on the room rate
- 10 percent service charge
- 10 percent municipality fees
- City tax (ranging from 6 to 10 percent)
- 6 percent tourism fee
UAE has implemented tourist VAT refunds effective from 18th November 2018 to claim VAT paid by tourists during UAE visit.
Income tax in the UAE
The UAE does not levy income tax on individuals.
Customs Duty is a tax imposed on imports and some time on exports of goods. Federal Customs Authority draws customs policies, supervises the execution of customs-related laws and legislation. The rate of customs duty in UAE is 5 percent, however for alcohol, it is 50% and for cigarettes, customs duty is 100%. The customs duties for most of the items are calculated on Cost, Insurance, and Freight (CIF) value. Certain items are banned to import inside UAE few examples are gambling tools and machines, pirated content.