What are the taxes for foreign companies in UAE?

Understanding your tax responsibilities is crucial as an international entity operating in the UAE. The tax environment in the UAE is multifaceted and can fluctuate based on your business’s nature and location.

The Corporate Tax in UAE

The recent implementation of the Federal CT Law is noteworthy. This regulation applies to all commercial activities across all Emirates, starting from fiscal years on or after 1 June 2023.

The law establishes varying tax rates contingent on your business’s taxable income. For example, companies with taxable income not exceeding AED 375,000 are exempt from tax. However, taxable income surpassing AED 375,000 attracts a tax rate of 9%.

This tax reform is a part of the UAE’s strategy to augment non-oil revenue and sustain its reputation as a commercial hub.

Tax-Free Zones for Foreign Businesses

The UAE boasts over 30 free zones. These zones have unique tax, customs, and import regimes and are structured around specific industry categories with regulations and import and export taxes.

Operating your business in one of these zones could mean a 0% tax rate, even when interacting with the mainland on strategic activities like manufacturing, goods processing, and logistics services.

These zones offer numerous advantages. You can completely own your business, enjoy 100% import and export tax exemptions, repatriate all your capital and profits, and receive corporate tax exemptions for up to 50 years.

Taxes on Branches of Foreign Companies

Managing a branch of an international company in the UAE requires familiarity with the UAE CT Law. Under this regulation, branches of non-resident entities might be considered Permanent Establishments in the UAE. The income attributable to such branches could be subject to UAE CT.

However, the UAE doesn’t impose a branch profits tax. Profit repatriation between branches and their head offices isn’t subject to withholding tax or other forms of repatriation tax.

Understanding Double Taxation Avoidance Agreements

DTAAs are treaties between two or more countries to prevent double taxation on the same income. The UAE has signed DTAAs with several countries to protect international companies operating in the UAE from the risk of double taxation.

If the UAE has a DTAA with a tax haven in your home country, you can claim relief from UAE tax on certain types of income. It’s advisable to consult with a tax advisor to understand how these agreements could affect your tax responsibilities in the UAE.