Umm Al Quwain Free Trade Zone tax system: audit, reporting and optimization of taxation of United Arab Emirates companies and individuals: VAT, income tax and capital gains

There is no income tax on individuals in the UAE.

The UAE is a federation of seven emirates. Previously, profit tax was introduced by the emirates at their own level (there was no federal tax on corporate profits / income). In the emirates where income tax has been introduced, it is imposed only on companies involved in oil and gas extraction and refining, as well as branches of foreign banks.

As of June 1, 2023, the UAE has also introduced a federal income tax that applies to:

1. companies and other legal entities incorporated in the UAE;
2. individuals conducting business activities in the UAE;
3. foreign legal entities actually managed from the UAE.

The federal income tax rate is 9%. Companies registered in free economic zones (FEZs) are subject to taxation, but there are situations where a 0% rate applies.

Social contributions are payable only to nationals of the UAE and other member states of the Gulf Cooperation Council (GCC).

The contribution rate for UAE nationals is normally 17,5%:

12,5% of the remuneration is paid by the employer and 5% is withheld by the employer from the employee's remuneration.

Higher rates are set in Abu Dhabi: 20% (the employer's contribution is 15%).

The standard rate of VAT is 5%.

There is no tax at source in the UAE.

There is no stamp duty in the UAE.

The annual fee for companies is AED 2 000. The fee is payable at the end of each year of incorporation, as is the registration agent fee.

Municipal tax is collected on rented premises. Generally, the tax base is the annual rental value.

The tax is usually levied on tenants, in some cases both tenant and landlord.

The rate for commercial property is usually 10%.

Registration fees may be charged, particularly for land and real estate transactions.

There are also fees in respect of hotel and tourist businesses.

The UAE has entered into 99 Double Tax Treaties (DTC) and 8 Tax Information Exchange Agreements (TIEA) with the following jurisdictions:

99 DTCs: Algeria, Andorra, Armenia, Austria, Azerbaijan, Bangladesh,Barbados, Belarus, Belize, Belgium, Bosnia and Herzegovina, Bulgaria, Brunei, Burundi, Hungary, UK, Guinea, Germany, Greece, Hong Kong, Georgia, Jersey, Egypt, Venezuela, Vietnam, India, Indonesia, Ireland, Italy, Jordan, Kazakhstan, Kenya, Canada, China, Colombia, Comoros, Kosovo, Kyrgyzstan, Latvia, Lebanon, Libya, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Macedonia, Mauritius, Morocco, Spain, Yemen, Mauritania, Mexico, Mongolia, Mauritius, Mozambique, Netherlands, New Zealand, Nigeria, Pakistan, Panama, Paraguay, Poland, Portugal, Romania, Saint Kitts and Nevis, Senegal, Serbia, Seychelles, Singapore, Slovakia, Slovenia, Sudan, Syria, 8 TIEAs: Argentina, Czech Republic, Ecuador, Equatorial Guinea, Estonia, Ethiopia, Fiji, Finland, France, Montenegro, South Africa, Sri Lanka, Switzerland, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, Uruguay, Uzbekistan, Japan.

8 TIEAs: Argentina, Colombia, Denmark, Faroe Islands, Finland, Iceland, Norway, Sweden.

In addition, the UAE has signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral Convention entered into force for the UAE on September 1, 2019.

There are no currency controls in the UAE.