Overview of the Legislative Framework Regulating Taxation in the UAE
Not long ago, the United Arab Emirates used to be a tax-free jurisdiction. Still, today, companies registered in the country must pay the following taxes:
- Value Added Tax (VAT) at a rate of 5% on most goods and services. This tax was introduced on January 1, 2018, by Federal Law No. 8/2017. It is mandatory for local companies registered on the mainland, outside free economic zones if their annual profit exceeds 375,000 dirhams (AED). VAT payment is also regulated by Cabinet Decisions No. 52/2017 and No. 46/2020.
- Excise tax — introduced by Federal Law No. 7/2017 and supplemented by subsequent regulatory acts: Cabinet Decisions No. 37 and No. 38 of 2017, No. 52 and No. 55 of 2018, Ministerial Decisions No. 236 and No. 237 of 2019. Excise tax is paid by companies involved in importing, manufacturing, and storing tobacco products, electronic devices, vaping liquids, carbonated, sweetened, and energy drinks. The excise tax rates are 50% and 100%.
- The corporate income tax was introduced on June 1, 2023, according to Law No. 47/2022. It imposes a tax on corporate profits if they exceed the exempt minimum of 375,000 AED. The Corporate Tax rate is 9%. The payment procedure and exemptions from this tax are regulated by Law No. 47 and other regulatory acts: Federal Tax Authority (FTA) Decisions No. 5, 6, and 7, and Ministry of Finance Decisions No. 82 and 83, adopted in 2023.
Significant changes essential for corporate tax planning and tax optimization in the Emirates have been made to the tax legislation by Cabinet Resolution No. 85/2022, which took effect on March 1, 2023. These changes enable obtaining UAE tax residency under more favorable conditions and allow individuals conducting business in the country to avoid double taxation.
Benefits of Tax Planning with Dynasty Business Adviser
Tax optimization and planning for enterprises, organizations, and companies through business incorporation in the UAE is a complex task requiring in-depth knowledge of the Emirates’ legislation related to paying taxes, duties, levies, and the operation of commercial companies.
Since the UAE consists of 7 emirates and 45 free economic zones, where local laws operate alongside federal ones, tax planning and optimizing obligatory payments becomes even more complicated. By turning to our company, you will have assistance in the following:
- Receive consultation support and real help from professional lawyers and business specialists who live and work in the country and are well-acquainted with UAE legislation.
- Save time studying UAE laws and organizing an effective corporate structure without spending money on flights to handle organizational matters. The specialists at Dynasty Business Adviser will undertake all work that does not require your presence in the Emirates.
- Achieve the goals of strategic tax planning by setting up a business in the UAE in an optimally short time with minimal financial expenses.
Tools Used in International Tax Planning
To optimize the tax burden through business incorporation in the UAE, we employ a wide range of tools:
- Consolidating assets and business will increase their value financial indicators and grant access to the capital market. Additionally, this will reduce the costs of maintaining the management apparatus and allow for tax-free intercompany settlements within the consolidated group.
- Building holdings and related structures to achieve asset consolidation objectives, freedom of fund and capital movement within the holding facility, and confidentiality of information about ultimate beneficiaries.
- Confirmation of economic tax presence in the UAE and obtaining tax residency status, allowing for the elimination of double taxation for citizens of countries with which the Emirates have signed international agreements.
- Creation of trust funds — ensuring owner confidentiality, preserving earned funds and facilitating tax-free inheritance. This can be in the form of a family or Sharia-compliant trust.
- Registration of offshore companies in a tax-free jurisdiction within one of the three free zones, enabling international operations beyond the UAE or functioning as a holding company.
- Opening bank accounts is protected from the automatic exchange of financial information.
- Utilization of nominee services — employing nominal directors and shareholders with limited rights.
Stages of Tax Planning by Dynasty Business Adviser
Tax planning to optimize mandatory payments to the government is a multi-stage process. We will assist you with the following:
- Develop a business model that optimizes tax costs and creates secure structures while maintaining confidentiality.
- Conduct a detailed audit of existing contracts to eliminate risks of non-compliance with current legislation.
- Choose the location for incorporating structural units and their legal form to obtain permits for the selected types of activities.
- Obtain licenses and undergo registration procedures.
- Process resident visas and open bank accounts.
- Properly manage tax and accounting records, ensuring compliance with tax obligations.
- Obtain tax residency status.
Cost of Tax Planning Services
Determining in advance the exact cost of tax planning and tax optimization services for your business provided by Dynasty Business Adviser is not possible. The price of these services depends on numerous factors, including the type of business activity, the complexity of the corporate structure, the location of incorporation, the number of employees requiring resident visas, the size of office space, the number of licenses needed, and other nuances. Our manager will provide you with an exact quote after a detailed consultation.
Turn to our company for assistance in international tax planning; this will save you time and money. Our services will be much more cost-effective than attempting to tackle this task alone!
