Tax Compliance in UAE

Which-States-Have-the-Highest-and-Lowest-Income-Tax-ftrWe all know that the United Arab Emirates is an oil rich country. But did you know that Dubai is converting itself to a service based economy?


Every country requires monetary resources to undertake its developmental activities. Now, think about Dubai. World class infrastructure, a marvellous cloud-touching skyline, diverse culture… I could go on… With depreciating oil prices, UAE has started building an economy based on tourism and service receipts. However, that is not enough. Unlike most of the jurisdictions, investors from around the world were rushing to the UAE due to its investor friendly corporate environment and ‘tax-free’ regime. The UAE Government has not imposed any tax on income earned by its residents (i.e. the country does not have any corporate or income tax). However, the Emirates have imposed the tax on the companies depending on their activities. For instance, Abu Dhabi has imposed the Decree number 4 of 1972 and the Dubai Government has enacted the Dubai Income Tax Ordinance of 1969, as amended. Although, these only apply to branches of foreign banks and certain companies invested in the oil and gas sector. The Department of Finance levies a corporate tax of twenty percent (20%) from branches of foreign banks in the UAE (depending upon the specific Emirate they are incorporated in).

Tax is any country’s pivotal source of income and there are two (2) types of taxes: (i) direct taxes and (ii) indirect taxes. It is more accurate to say that UAE had not imposed direct taxes. However, indirect taxes are something that the residents never noticed due to the employment and/ or investment opportunities that the country provided. For example, Salik toll. Salik is road tax that the Government of Dubai imposes on the residents (we all know). But isn’t this an indirect form of tax? Think about it…

UAE is all set to implement Value Added Tax and therefore, it is pertinent for the companies in the United Arab Emirates to have substantial knowledge about the different forms of taxes in the country to ensure compliance and escape tax avoidance. Companies that are invested in the import-export industry should also be aware of the customs duties that are levied by the Customs Department. Companies should furnish the Customs Department (of the respective Emirate) with the following documents to obtain an approval for import, export, transfer or transit: (i) Bill of Lading (or airway bill); (ii) delivery order and (iii) trade licence (copy). The Customs Department may also require additional documents such as the invoice, certificate of origin of goods, packaging list etc. depending on the genre (or type) of goods.

efile-tax-creditsIf you are not aware of the above-mentioned laws or regulations, you are advised to contact a law firm with dedicated teams of lawyers who are well-conversant with the taxation regime of the UAE to avoid any encumbrances. To know more about tax compliance, contact our astute tax attorneys or read our questionnaire on the taxation regime in the UAE.

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