Taxes in Dubai – Short Overview of its types for newcomers

Can you imagine a life somewhere where you do not have to pay taxes? It sounds way too pleasing and attractive right, but at the end of it is just wishful thinking. Isn’t it? Well technically it is not, there are a few countries that abide by the no-tax policy. Don’t be so shocked, we’re not lying and it is nothing but the truth. The most famous out of them all is the tax policies of Dubai. The policies of this country are unique and attractive from the policies of other countries. Do you want to know the difference? Read the content explained further about the taxes in Dubai. Without delaying much here we go.

Dubai Tax History

The Dubai scheme goes way back to the year 1960’s, ever since that time the UAE federal system and their local government believed in the non-collection of direct taxes. But it does not mean that the government does not need money for further development in the city. They do earn from the royalties of emirate-owned oil companies and some other things. Ever since the government has surely diversified its tax collection portfolio without compromising on their no direct tax policy.

Value Added Tax (VAT)

From January 1, 2018, the UAE government came forward with a new taxation scheme known as VAT. The standard VAT rate is 5% and some of the items do qualify in the category of 0% VAT. It simply means that some items are exempted from the VAT. Additionally, the businesses must get their registration done under the VAT. Businesses with a turnover of above AED 375,000 will be liable to pay the VAT at an implied rate. Dubai’s Federal Tax Authority is responsible for the collection of VAT from business and the audit conduction as well.

What is a VAT Tourist Refund?

All foreign tourists visiting the UAE are entitled to a VAT refund for the items purchased and exported with the traveler on their departure. This refund will only apply to the items that have not been used in the UAE city. To avail of this refund, the minimum receipt requirement is AED 250 i.e. USD 68. Also, the purchases need to be made within 90 days of departure.

Exemptions to VAT

Given below list of categories that will be fully exempt from the VAT, thus have a look at the exempted list now:

  • The supply of some financial services (clarified in VAT legislation);
  • Residential properties;
  • Bare land; and
  • Local passenger transport

Dubai Corporate Taxes

Corporate tax return filing is essential for all businesses. In the UAE, all entities that meet the specified criteria and thresholds for taxable profits are required to register for corporate tax. Timely and accurate corporate tax return filing is essential to avoid penalties and legal consequences. Entities must compute their corporate taxes annually, file returns with the Federal Tax Authority (FTA) as required, and maintain accurate records of income and expenses. Failure to comply can lead to substantial fines and potential prosecution. The corporate tax return must be filed within nine months after the end of the relevant tax period.

Tax Rates

As per the Ministry of Finance, Corporate Tax Rates are:

  • 0% for taxable income up to AED 375,000
  • 9% for taxable income above AED 375,000 and
  • a different tax rate (not yet specified) for large multinationals that meet specific criteria set regarding ‘Pillar two’ of the OECD Base Erosion and Profit Shifting Project”.

Free Zones

Free zone-based businesses are exempt from federal corporate taxes if they conduct no business with the UAE mainland, if not, the free zone business is required to pay federal corporate taxes on the income derived from the UAE mainland.

Dubai Real Estate Lifestyle

Apart from business investments, another thing you can indulge yourself in is luxury living. Now luxury living requires residency in a lavish place. We know a place known as Club Place by Emaar, and it will be quite appropriate for you to commence luxury living. These apartments are located in the high-end location of Dubai with ample of location benefits as well.

Looking for a way to invest your money wisely? Go for Dubai and put your funds there. Don’t do anything rash without conducting proper research.

Taxes in Dubai – Short Overview of its types for newcomers

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