Most countries of the world replenish their budget with taxes, which is considered the norm. But there are states in which most taxes are absent; it does not matter whether you are a resident or not. Where is this tax haven located? In the United Arab Emirates. Of course, it is impossible to completely stop paying taxes in Dubai, but not in such large amounts. What is meant, now we will understand.
Open a business
Having opened our business in the Emirates and getting started, we begin to habitually wait for the arrival of a tax inspector, or at least a notice by mail. But all of it is not and is not. And will not be! And all because of the peculiarities of the tax system of the United Arab Emirates. According to them, everything that you and your employees earn will go to a bank account without deductions.
And let it not surprise you. You already paid it, only in a veiled way. When registering a company, you paid the cost of a license in the amount of 5-6 thousand dollars, why not tax? And every year you will renew it by paying the same amount. So much for the lack of taxes!
What taxes are not present
But if you compare taxes in Dubai and in most countries, then here you will not find the following types of payments:
- on income received;
- capital gains;
- dividends are also absent;
- on royalties;
- there are no deductions from wages;
- import and export, if the activity is conducted through free economic zones in the UAE;
- no asset tax;
- exempt from taxes and interest.
When registering a business, you will not find any quotas or trade restrictions, and financial control is not carried out here. So now it’s clear why foreign investors in the Emirates are so eager. After all, there is no difference whether you are a resident or not. The tax system is the same for everyone.
But that was until January 1, 2018. The decline in world prices for black gold has led to an economic downturn in the Arab countries, in the Gulf region. This forced the countries to sit at the negotiating table on the introduction of VAT as a new source of filling the treasury.
For the period 2018-2019. the value added tax rate is only 5%. Saudi Arabia and the UAE introduced a tax on January 1. But 5% are still the lowest compared to many countries in the world. With the introduction of VAT, countries are forced to develop and introduce a legislative tax base, as well as tax inspectors, who will monitor the implementation of the law. Of the Gulf countries, only Qatar refused to impose a tax, because its reserve, built on gas production, was not affected by the fall in oil prices.
What else can attract UAE foreigners
It is hard to believe, having fallen into the splendor of the Emirates today, that half a century ago there were small fishing villages where people lived on the verge of poverty. But oil reserves were found, and the country began to develop. Although the role played by the wisdom of the rulers in the conduct of politics and economics. Emirs themselves are interested in attracting foreign entrepreneurs.
What other benefits do businessmen get when organizing business in the United Arab Emirates:
- Enviable location: the country is successfully located at the crossroads of most trade routes. And the distance to many capitals (Moscow, London, Hong Kong, etc.) is about the same. Which reduces the flight time to them.
- Seaports and international airports allow a business person to get to the right point or send cargo to the right place.
- The rapid development of the economy suggests that Abu Dhabi and Dubai will soon begin to actively push such "monsters" as Delhi, Moscow, London, etc. from the economic arena.
- The emirates consist of 7 principalities, in each of which there are differences in relation to foreign companies - the conditions for their registration, conducting business, etc. This allows you to choose the place where the conditions are better for your business.
- More than 35 free economic zones in the UAE allow you to register a company without local participation. The business is 100% owned by you, and when you receive a residence permit, you will also be exempt from export-import tax. You also decide whether to make the company offshore or onshore.
- Lack of division into residents and non-residents. You are only required to comply with the laws, and your business will be supported in every way.
- You can freely become the owner of elite real estate at a lower price, in comparison with other states. Moreover, real estate tax - 4% of the price is paid once. Along with the purchase, you become the holder of a resident visa with the right to stay in the Emirates for 3 years. The same visa is issued at the opening of onshore companies.
- The flexibility of taxation and the absence of most tax deductions makes the UAE very attractive for building a business.
And now a little bitterness. Doing business in the UAE frees you from many taxes in this territory. But in the country of which you are a citizen, without living there, you will have to pay the necessary taxes. Although the Emirates at the moment have signed an agreement with nearly fifty countries on the abolition of double payments, if business is carried out in the UAE.
Where's the catch?
You have received basic general information about tax payments. But if you plan not only to conduct business here, but also to live permanently, then it is better to know about these everyday gatherings in advance:
- So, public transport here is extremely poorly developed, because the locals almost all have a car. And travel on the main roads of the country is paid. For example, in Dubai you will be charged about a dollar for each trip.
- In Europe, this is normal practice, but the residents of Russia are very surprised by 10% of the cost of a dinner in a restaurant, included in the bill.
- Although taxes in Dubai and other regions of the country for rental housing are not paid, but the services for maintenance, water supply, air conditioning, etc. are paid, the fee for this is already included in your bill.
But in any case, all of the fees listed and some others will be lower than in most other countries of the world.
Industries that pay taxes
And if the taxes in the UAE for individuals are more or less clear (there are practically none). That in relation to jur. persons are not so clear. First of all, this is due to the federal structure of the state, where the authorities of any emirate can establish tax payments on their own. True, they use this right extremely rarely, which is why it can be argued that there is almost no tax burden for companies. An exception are several activities. Here they are...
Oil industry
The largest tax deductions from 55 to 85% of operating revenue are taxed by foreign companies engaged in oil production and refining. Moreover, the amount of tax depends on the agreement concluded between the government of the emirate and the company.
This “unfair” taxation is due to the fact that the UAE is thriving precisely because of oil production, and the government is well aware that this is an industry with excess profits. But the tax is paid if the company carries out oil production and refining in the territory of the Emirates. If the business is international, then it is exempt from payment.
For local companies registered in the emirate of Dubai, the so-called excess profits tax has been introduced. Moreover, the rate increases progressively with increasing profits:
- 10%, if the profit varies within 1-2 million dirhams;
- 30% - profit of 2-4 million dirhams;
- 40% - 4-5 million dirhams;
- 50% - more than 5 million
Foreign companies can not worry about this tax, since it is imposed only on local ones.
Banking sector
This is another taxable activity. In Muslim countries, lending money at interest is considered a great sin. Therefore, in the UAE, banking services are divided into two types: familiar, based on international standards, and based on Sharia principles.
The tax rate in the banking sector is about 20% of operating profit in such emirates as Abu Dhabi, Dubai, Sharjah and Fujairah. And it makes no difference whether it is a foreign banking institution or a local one. In other emirates, the rate changes both up and down.
Travel business
Another area in which there is a mandatory income tax is the tourism business and entertainment, as well as commercial real estate. So, hotels in Dubai pay 17% of the profits, entertainment - 5%. And owners of commercial real estate pay taxes in the amount of 10%.
In 2014, the concept of “tourist tax” was introduced in the UAE in three emirates. In Dubai and Ras al-Khaimah, its value depends on the category of the hotel, and in Abu Dhabi it is fixed and is equal to 15 dirhs per day. This amount is paid not by the hotel owners, but by the tourists themselves at the time of check-in for the entire stay. If the length of stay for any reason is reduced, the overpayment is not refundable.
Also, tourists in Dubai, and indeed other emirates, checking into a hotel, should be prepared to make a deposit at the same time. It has nothing to do with taxes in Dubai in hotels, but is just a guarantee of your decency. The spread in total is very significant and depends on the starryness of the establishment. For a period of 7 days you can take from 50 to 600 dollars. But if you know the language and the gift of persuasion, then you can agree with the owner of the hotel not to pay a deposit, but simply free the minibar and disconnect the phone in your room.
But the UAE is only a union of the emirates, where each monarch has the right to amend laws and issue his decrees. Therefore, the Sheikh of the Emirate Ajman signed a decree that from July to the end of December 2018, the tourist tax is reduced from 10 to 7%. Similar decrees were issued in the emirates of Dubai and Abu Dhabi, where the fee for each night was reduced from 15 to 10 dirhams.
To summarize
From year to year, rumors are spreading that this tax haven will soon end and toughening will begin in relation to foreign companies. But there have been no concrete actions yet. Yes, emirate leaders understand that foreign companies - significant revenues to the treasury. Start strangling the entrepreneur with taxes, businessmen will pack their bags and leave for other countries that are more pleasant and loyal.
So for a long time the UAE will remain a tax haven for foreign businessmen. And you have a chance to take advantage of this and open an offshore here.