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Corporate Tax in Dubai

Corporate Tax in Dubai

Updated on Tuesday 07th November 2017

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From the investors point of view, Dubai is a major business center in the Middle East and a tax haven that comes with varied advantages. The taxation system is satisfactory especially for business persons interested in performing the activities in the free zones of Dubai where there is no corporate tax. There are also exceptions which apply in the oil and bank sectors in the Emirates, where the corporate tax is set at a maximum of 55% rate. For a better understanding of the taxation system in Dubai, you may address your concerns to our lawyers in Dubai who can also help entrepreneurs set up their companies in compliance in the legislation in the UAE. 

Taxes for companies in Dubai

Companies incorporated in Dubai are required to pay taxes on their earnings, but not all companies have to do so. Corporate taxation in Dubai is limited only to banks and oil companies. Other types of companies in Dubai are not subject to corporate tax.
Oil companies in Dubai are subject to a maximum amount of 55% corporate income tax on the UAE source income. As for branches of foreign banks in Dubai, these are obliged to pay 20% tax on their Dubai source income. The calculation method for the taxable income is different for the two types of taxable businesses: the tax for banks is calculated according to their audited financial statements, while for oil companies the tax is due according to their concession agreements. Oil companies also have to pay other types of taxes in Dubai, like royalties. Please consider that the companies mentioned above are not subject to withholding taxes on remitted dividends and interests abroad. Our Dubai law firm can give you more information about the calculation methods.

Other information about taxes in Dubai

Even if Dubai is nowadays a preferred business hub because there are no taxes on profits and no Value Added Tax (VAT), the things are going to change starting from January 2018. The financial authorities decided to add a VAT rate of 5% for particular goods and services. The rate is low compared to other countries worldwide, but numerous companies will have to comply with the new legislation in this matter. Companies which activate in the jewelry, tobacco, luxury cars, and alcohol industry must implement the VAT starting with next year. Besides that, an excise tax was already imposed on non-essential goods in the UAE.
We remind that branches in Dubai are treated just as any other company in Dubai and they are not subject to additional taxes. Once the new taxation system will be accepted and implemented in 2018, these should comply with the new requirements. Companies in Dubai are considered tax residents if all of their shares are owned by UAE residents and if all or a substantial part of the company’s income comes from a trade or business in Dubai.

Details about the excise tax in Dubai

Starting with October 2016, the financial authorities in the UAE have implemented an excise tax of 50% rate on tobacco products and carbonated drinks. These are considered unhealthy products which are also going to be levied with the 5% VAT in 2018. One should know that the excise tax was implemented in the countries part of GCC (Gulf Cooperation Council).
Our attorneys in Dubai can give you more information about the regulations for foreign companies and the special free trade zones where foreign investments are facilitated. You can contact our law firm in Dubai for comprehensive information and legal assistance.


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