Every state in the world provides its citizens and residents with many facilities and conveniences. Against these conveniences, every state in the world puts taxes on its populations.
When we categorize taxes in general, there are two categories: corporate taxes and personal taxes.
Also, when we talk about taxes in the UAE, we can say that the UAE offers many tax advantages to its citizens.
In this post, you’ll learn about different kinds of taxes in the UAE, including corporate tax and VAT regulations. So, read everything.
Personal Income Tax in the UAE
In the first world countries, states levy heavy personal income tax that ranges from 20% to 52%. Combining personal income tax with other taxes, citizens in the first world countries pay almost half of their income in taxes.
On the other hand, the UAE is people-friendly. The UAE government does not levy any tax on personal income. It means that you have to pay nothing, regardless of how much you earn in the UAE.
Taxation-Free Zones in the UAE
The UAE has established many Free Zones where companies do not have to pay corporate tax on a federal level. However, they may have to pay some fees.
Corporate Tax in the UAE
Every company incorporated in the mainland UAE has to pay 0% corporate tax if its income is less than 375000 AED.
If a company has an income that exceeds 375000 AED, it has to pay 9% corporate tax on the taxable income.
Taxable income is the total amount earned minus 375000 AED.
Value-Added Tax in the UAE
The UAE government introduced VAT in 2018. On the sales of goods, the UAE applied a 5% tax, and this tax is applicable at each step of the supply chain of goods.
In short, when a product is sold at a point of sale, the price of the product includes a 5% VAT.
If a business does not comply with VAT regulations, it faces fines and penalties.
Withholding Tax in the UAE
The UAE government does not levy any withholding tax on its residents. It means that your royalties, dividends, and interests are exempt from tax in the UAE. That’s why the UAE is an ideal place for international transactions and intellectual property rights.
Real Estate Tax in the UAE
The UAE government does not levy any kind of property tax on its citizens and residents. However, every property owner has to pay a municipality fee for their properties.
Common Misconceptions about the Taxes in the UAE
People think that when there is no personal income tax in the UAE, you have to pay nothing to the government. However, it is a wrong concept. Every resident has to pay VAT on products purchased, as well as, the applicable local fees.
Wrap up
There is no personal income tax in the UAE. Yet, companies have to pay a 9% corporate tax on income exceeding 375000 AED. Also, every person in the UAE has to pay a 5% VAT on every product purchased.
If you want custom tax advice in the UAE, feel free to contact us. We’ll provide you with the best solution for your tax planning needs in the UAE. Have a great day.
