Mainland (Dubai, United Arab Emirates)

Tax Residency - Companies that are incorporated or otherwise formed or recognised under the laws of the UAE will be considered a resident person. This covers companies incorporated in the UAE under either mainland legislation or applicable Free Zone regulations.

Companies incorporated overseas that are effectively managed and controlled in the UAE may also be deemed tax resident in the UAE.

Basis - Companies are subject to corporate tax on their worldwide income.

Tax Rate – UAE Companies are subject to tax as follows:

• 0%, for taxable income not exceeding AED 375,000;
• 9%, for taxable income exceeding AED 375,000;
• 15% for Multinational Enterprises (Groups with revenues over AED 3.15 billion)

Capital Gains - Capital gains from the disposal of capital assets are treated as ordinary income and subject to corporate taxes.

Dividends - Dividends from resident companies are generally exempt from corporate income tax. Dividends from foreign companies is exempt from tax if: 

• the shareholding is at least 5%
• a 12-month uninterrupted holding period (or the intention to hold for 12 months) is in place
• the participation is subject to tax in its country or territory of residence at a rate that is not lower than 9%, and
• not more than 50% of the assets directly or indirectly owned by the participation consist of an ownership interest or entitlements that would not qualify for the participation exemption if these assets were held directly by the taxable person.

A shareholding of less than 5% may qualify for the exemption where the acquisition cost of the shares exceeds AED 4 million.

Withholding Taxes - There are no withholding taxes on payments of dividends, interests and royalties to nonresidents.

Foreign-Source Income - A company may elect to have profits from a foreign permanent establishment exempt from tax. Such exemption is available as long as such profits are subject to foreign taxes at a rate not less than 9% in the foreign jurisdiction. Losses, income, expenditure, and foreign tax credits in relation to the foreign permanent establishment will not be deductible for UAE tax purposes if the tax exemption is elected.

Anti-Avoidance Provisions - Transactions between related parties must comply with the arm’s-length principle. Transfer pricing documentation must be prepared if

• the taxable person is part of a multinational enterprise (MNE) group with a total consolidated group revenue of at least AED 3.15 billion in the relevant tax period, or
• the taxable person has revenues of at least AED 200 million or more in a relevant tax period.

VAT – VAT of 5% applies to sales of goods and services in the UAE, including the import of services and goods. The export of services is generally zero-rated.

Generally, services which are taxable if provided within UAE then the same needs to be considered as VATable if received from a service provider located outside of UAE (import of services) under reverse charge mechanism, meaning that the recipient of the service in the UAE must pay VAT for such service.

If a FZ company provides services from its place of business in the UAE to a person whose place of establishment or fixed establishment is outside the UAE, it becomes an export of service, and is generally exempt from VAT.

Other taxes – In U.A.E. there is no personal income tax, capital gains tax, real property tax, inheritance tax or estate duty, capital transfer tax, gifts tax or wealth tax.

There is a real property tax levied on the transfer of properties, at rates that vary from 2% to 4%, depending on the Emirate where the property is located. Some municipalities, e.g. Dubai, also levy an annual property tax on the assessed rental value of the property.