The United Arab Emirates’ tax system presents a unique landscape for both individuals and corporations, characterized by several attractive tax incentives. This overview explores the intricate details of taxation within the UAE, where personal income, inheritance, and gift taxes are notably absent, reflecting the country’s approach to fostering a prosperous economic environment. At the heart of the corporate tax structure is a newly introduced 9% tax on certain businesses, which signifies a pivotal development in the UAE’s fiscal policy.
United Arab Emirates’ Tax System Overview
| Personal Income Tax | None |
| Corporate Income Tax | 9% |
| Inheritance Tax | None |
| Gift Tax | None |
Legal System
The United Arab Emirates (UAE) is a federation comprised of 7 Emirates, Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairahi. The legal system of the UAE is based on a mix of civil law and Sharia.
Currency
The currency of the UAE is the UAE Dirham (AED). There are no foreign exchange controls.
Personal Income Taxation
Under the United Arab Emirates’ tax system, no personal income tax is imposed on individuals, or gift, inheritance or wealth tax. However, individual Emirates impose tax on certain transactions.
Corporate Income Tax
The UAE introduced Federal corporate income tax under the CT Law, effective on June 1, 2023, based on the financial year of the company. The law imposes 9% corporate income tax on the world-wide income of certain domestic UAE corporations and foreign corporations that are managed and controlled from the UAE with income over 375,000 Dirhams. The CT law also introduced a participation exemption regime.
In addition, the individual emirates have authority to impose corporate income tax, but only do so on oil and gas exploration and production companies (up to 55%), and foreign banks (20%).
Value Added Tax (VAT)
The UAE levies VAT on the sale of goods and services at 5%, subject to exemptions.
Anti-Avoidance Rules
As part of the CT Law, the UAE introduced General Anti-Abuse Rules (GAAR), Transfer Pricing rules, and Thin Capitalization rules. The UAE also has Economic Substance rules. However, the UAE does not have CFC rules.
Local Trust and Foundation Laws
The Dubai International Financial Centre (DIFC), and the Abu Dhabi Global Market (ADGM) have introduced trust and foundation laws.
Double Tax Treaties (DTTs)
The UAE has a broad network of DTTs, including with most of the G20 countries.
Foreign Investment Protection
The UAE has BITs and FTAs with a number of countries for the protection against expropriation of investments that provide for international arbitration.
Common Reporting Standard (CRS)
The UAE, as part of the United Arab Emirates’ tax system, has implemented CRS for the automatic exchange of account information, but has elected not to receive information under the non-reciprocal MCAA.
FATCA
The UAE has a FATCA Model 1B IGA with the United States, and does not receive information from the US.
In conclusion, the United Arab Emirates’ tax system is structured to enhance its appeal as a global business hub. With no personal income, inheritance, or gift taxes, and a moderate corporate income tax, the UAE offers a favorable tax environment. United Arab Emirates’ tax system is further complemented by its robust legal framework, absence of foreign exchange controls, and the strategic implementation of VAT, all designed to support economic growth and attract foreign investment. Additionally, the UAE’s commitment to adhering to international financial regulations is evidenced by its adoption of various anti-avoidance measures and participation in global tax agreements. This blend of tax incentives and regulatory compliance positions the UAE as a leading competitive economy in the international arena.
