Tax Planning

Corporation tax

The UAE federation does not impose a federal corporate income tax at the current time. It is accepted that corporate income taxes may be imposed on all organisations and companies (it should be noted this this includes branches as well as permeant establishments), but regulations at the moment are such that income tax is only obligatory on oil and gas companies and branches of foreign banks which have operations in the emirates. Not all the emirates have the same policies. For instance some emirates have facilitated their own banking tax decrees at 20%.

It needs to be noted that UAE free trade zones have their own tax regulations. For example, for companies who have set up for a period of 15 to 50 years, guaranteed tax holidays are offered to companies and their employees.

Personal income tax

Currently no employees pay income tax in the UAE. There is a social security system available to employees who are GCC nationals (Gulf Cooperation Council, political and economic alliance of six Middle Eastern countries—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman) and therefore contributions have to be paid into it. In the UAE, contributions to the system are calculated at a rate of 17.5% of an employee’s gross salary. It will apply regardless of free tax holidays. In effect, the employer is expected to pay 12.5 % and the employee pays the remaining 5%.

VAT

At the present time VAT is not recognised in the UAE. However, the UAE and member countries of the GCC are looking to introduce the system in the near future.