Seven emirates make up the United Arab Emirates, a federation with independent federal and local administrations. UAE has always been a low-tax country. The federal government and local governments have the power to collect taxes from residents and businesses. The federal government currently collects sales tax, corporate income tax, and special consumption tax. Some emirates charge taxes on property, transfers, excise duties, and tourism.
Some emirates also impose corporate tax on oil companies and foreign banks. The federal tax system in the UAE is administered by the Federal Tax Agency (FTA), which was established before the introduction of the Federal Value Added Tax VAT in 2018.
The country’s current standard tax rate is 5%. In January 2022, the UAE Ministry of Finance announced the introduction of a federal corporate income tax from June 2023. The standard corporate tax rate is 9%, and some exempt companies and profitable companies with annual net profits of less than AED 375,000 (US$102,100) qualify for corporate tax duty max. 0% tax rate and those who meet the criteria of the Global Minimum Tax Agreement receive a corporate income tax of 15%.
Companies in a free zone can be exempt from corporate income tax as long as they do not do business with the UAE mainland and do not comply with other UAE guidelines.
The federal government also levies excise taxes on alcohol, energy drinks, vaporizers and devices, and cigarettes. From 1 January 2018, federal VAT will apply in the UAE. The standard VAT rate is 5%, some products are 0%, while certain products and services are VAT-free.
VAT registration is mandatory for companies whose annual taxable supply exceeds the mandatory registration threshold (currently AED 375,000) and voluntary for companies whose annual taxable supply exceeds the voluntary registration threshold (currently AED 187,500). The Federal Tax Administration (FTA) is responsible for collecting VAT from businesses and conducting inspections.
VAT is 0% for the following main categories of supply:
Export of goods and services outside the GCC;
International transport and related supplies. ;
Supply of certain marine, air, and land transportation products (such as aircraft and ships) years after their construction;
Supply of certain health services and related goods and services
From 2023, the United Arab Emirates will adopt the federal corporate income tax in June. The standard corporate tax rate is companies receive a tax rate of 0 percent, while companies that meet the criteria of the Global Minimum Corporate Tax Agreement receive 15 percent. Companies located in a free zone may be exempt from federal corporate income tax. taxes as long as they do not trade with the UAE mainland. The Internal Revenue Service is responsible for collecting and conducting audits of federal corporate taxes. All UAE companies, including tax-exempt, free zone, and zero-rated firms, must register for federal corporate income tax. Some emirates, including Dubai and Abu Dhabi, impose a flat 20 percent corporate tax on the earnings of foreign banks headquartered in those emirates.