Is UAE still a tax haven?
UAE is known as a tax-free country. UAE businesses have enjoyed the tax-free status for decades. However, the year 2018 has been revolutionary as Value-Added Tax (VAT) was introduced. The VAT system was implemented not just in the UAE but in most of the GCC countries.
The new taxation system has made companies adapt themselves with the applied tax regimes of the nation. The companies need to be compliant with the UAE Federal Tax Authority and shed 5% on value-added-tax (VAT). Companies are also expected to file all their tax returns in an orderly manner and maintain records as mentioned by the tax authorities.
So, does this mean that UAE is no more a tax haven for businesses and commercial entities?
The country is most definitely still a tax haven for businesses willing to start a company in the UAE. UAE is a preferred destination for several businesses that prefer channeling their funds through tax havens rather than shelling out heaps of money in tax-driven countries.
No doubt that companies do need to comprehend with the updating tax rules in the UAE. Dubai and other parts of UAE will certainly remain tax-free in many ways even after the implementation of VAT in 2018.
- VAT will have to be paid by the end-users, as VAT is charged on goods and services so it will not have a huge difference on the businesses apart from accounting them.
- The goods and service prices may increase but it ultimately depends on the chain of suppliers to determine and deal with the competition, which can be compensated by the end user.
- Implementation of VAT will not largely affect company profits and there will be no taxation on income or on salaries in the country.
- The ration of VAT charged in the country is way lower compared to most countries in the UAE.
- The UAE Federal Tax Authority has also leveraged several business and suppliers under zero-rate VAT.
- Some of the basic supplies important to common man are also completely exempted from the system of VAT in the UAE.
- Governments have also only added an excise tax on items that are at discretionary and would not majorly affect the lower spectrum of the society with the system of VAT in the UAE.
The taxable companies and businesses need to assure that the application of tax would significantly be fast and full proofed in accordance to the UAE’s Federal Tax Authority. Nevertheless, the above-mentioned pointers state how UAE will sustain its tax-free credibility and the country will continue to be a tax haven for business establishments.
If you would like to know more about the value-added-tax VAT in the UAE and the implications that it would have on starting a business in Dubai or anywhere across the emirates, talk to a business setup consultant from Shuraa Business Setup.