Tax & VAT

Corporate Tax & VAT in the UAE

The UAE serves as a prime destination for businesses, but understanding its taxation laws, particularly corporate tax and Value Added Tax (VAT), is crucial.

While the UAE is renowned for its tax-efficient environment, it's important to note that specific sectors & activities may encounter certain levies of corporate tax. These levies are often tailored to address the unique needs and challenges of particular industries, ensuring equitable taxation and sustainable economic growth across the country.

Meanwhile, VAT, introduced in 2018 at 5%, applies to most goods and services consumed domestically. Compliance is essential to avoid penalties, making professional assistance invaluable.

TAG offers expert guidance on tax obligations, optimizing strategies, and ensuring compliance, enabling businesses to thrive in the UAE's competitive landscape.

  • Coprorate Tax
  • VAT
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Coprorate Tax

In June 2023, the UAE introduced a significant change to its tax landscape by imposing a 9% corporate tax on certain companies. This development marked a departure from the country's longstanding tax-free environment for corporations and signaled a shift towards greater fiscal sustainability and economic diversification. However, it's essential to note that the corporate tax is not universally applied and varies depending on various factors, including the company's industry, revenue, and activities.

The introduction of corporate tax in the UAE underscores the government's commitment to modernize its tax system and align with international best practices. By levying corporate tax on select companies, the UAE aims to enhance revenue generation, support public services and infrastructure development, and promote economic resilience in the face of global uncertainties.

Additionally, the implementation of corporate tax reflects the country's evolving role as a global business hub, signaling its maturity and competitiveness in the international arena.

Businesses affected by the corporate tax in the UAE must navigate this new regulatory landscape carefully to ensure compliance and minimize tax liabilities. Professional assistance from firms like TAG can be invaluable in understanding the implications of corporate tax, optimizing tax strategies, and ensuring regulatory compliance. With expert guidance, businesses can adapt to the changing tax environment in the UAE and continue to thrive in this dynamic business destination.

VAT

VAT

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of production and distribution. In the UAE, VAT was introduced in 2018 at a standard rate of 5%. VAT applies to most goods and services consumed domestically, and businesses are required to register for VAT if their annual turnover exceeds the mandatory threshold.

TAG offers expert assistance to businesses navigating the complexities of VAT in the UAE. Our services include VAT registration, compliance, and reporting. We help businesses understand their VAT obligations, optimize their tax strategies, and ensure compliance with local regulations. With TAG's expertise and support, businesses can manage their VAT affairs efficiently and effectively, minimizing risks and maximizing opportunities for growth and success.

FAQ

Corporate tax is a tax levied on the profits of companies. As of June 2023, the UAE has implemented a 9% corporate tax on certain companies that meet specific criteria, marking a significant change from its previous tax-free environment.

A Freezone company should meet the following conditions to benefit from the 0% CT rate:

Maintain adequate substance in the UAE
Derives qualifying income (as to be specified in a cabinet decision yet to be made)
Has not elected to be subject to 9% CT
Complies with transfer pricing provisions (as applicable).

Qualifying Free Zone Persons that meet conditions will have to pay tax at the following rates:

0% on qualifying income
9% on taxable income that does not meet the qualifying income definition.

VAT is a consumption tax levied on the value added to goods and services at each stage of production and distribution. In the UAE, VAT was introduced in 2018 at a standard rate of 5%. It applies to most goods and services consumed domestically.

Businesses with an annual turnover exceeding the mandatory threshold are required to register for VAT in the UAE. Once registered, businesses must charge VAT on their sales, file VAT returns, and remit VAT to the government.

TAG offers expert guidance and support to businesses navigating corporate tax and VAT in the UAE. Our services include tax planning, compliance, registration, and reporting, helping businesses optimize their tax strategies and ensure compliance with local regulations amidst the recent changes in corporate taxation.

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