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In this handbook we explain the most common enquiries received by our clients prior to their relocation in the UAE. Detailed articles about UAE tax, VAT, incorporation costs and relocation advice can be obtained from our email distribution lists and website.
UAE - United Arab Emirates.
What this term means and why it is important for you.
The United Arab Emirates are 7 emirates next to each other in the same geographical region. Similar to countries they may have their own rules and laws within them but they also have the UAE rules and regulations that affect all of them. For the purpose of this article the most important being the UAE tax laws which apply not only to 1 emirate but to all.
Therefore, it is very important to pay attention to whether a local law or regulation is a local one or a UAE one.
Most Popular Emirates
The most popular emirates in the UAE are of course Dubai and Abu Dhabi. Dubai being popular for its luxurious lifestyle and corporate set up and Abu Dhabi for its financial muscle. The other 5 emirates are: Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah.
Free Zones
Within these emirates there are different free zones, think of them as business areas or geographical locations where businesses can set up their companies to service different needs, industries and purposes. In other words there are different free zones which appear to service companies than construction companies and different free zones suitable for medical purposes.
All free zone companies follow the UAE laws and regulations affecting them.
Free Zone Company Creation vs Mainland Company Creation
There are distinctive characteristics between the two as a mainland company is usually incorporated to provide services within the UAE and typically requires a local partner (a local shareholder with majority shareholding) and in most cases requires an audit whilst a free zone company is a lighter company usually used by non locals who operate within the UAE or outside the UAE. All free zone companies follow the UAE laws and regulations affecting them.
Free Zone Company Creation
Companies created in the free zones have their free zones incorporation certificates and statutory paperwork as well as local requirements affecting them. Different requirements apply to different free zones therefore choosing the right free zone is ideal for your purposes.
Need assistance choosing the right free zone for your company set up?
Contact us at k.tramountanellis@berkley.ae and we will provide you with the most suitable options for your business. Our office will take care of the entire process in a seemingless manner, an A to Z approach.
Corporate Taxation and VAT
Direct and indirect taxations (company tax and company VAT) are governed by the UAE tax laws. As a result all companies within all 7 emirates are bound by these laws. This is why when discussions and publications take place about the UAE 9% corporation tax there is no mention of free zones or mainland companies. Same applies for VAT applications.
With the introduction of Corporation Tax and VAT ALL companies are required to prepare and file their tax returns to the local tax department. This is where a local auditor such as Berkley is needed to fulfil this role.
Need help with your tax return?
Contact us at k.tramountanellis@berkley.ae and we will assist you with consultation, preparation and filing of your company’s tax return. Our office will take care of the entire process in a seemingless manner, an A to Z approach.
Company Maintenance
All companies incorporated from 2023 are required to prepare and submit their tax returns. This task is performed by a professional audit and assurance firm like Berkley.ae. In order to prepare their tax returns they must have their accounting records up to date and in accordance with IFRSs (International Financial Reporting Standards). Some of the company financial statements need to be audited, usually if the company has been created in mainland or if the company is dealing with government projects, banks, insurance companies, companies listed in the stock exchange and so on.
Company Audit Requirements
The majority of free zone companies do not require a statutory audit. On the other hand, companies created in mainland and companies dealing with insurance, banks, locally listed companies and companies engaged in governmental projects are required to have their audit completed.
Some company types also require a statutory audit such as:
- FZCO,
- Free Zone Establishments (FZE),
- Companies registered with the DMCC, Meydan Free Zone, DWC, and JAFZA.
Determining whether your Free Zone requires an audit is something that must be verified by your local audit team. We strongly advise you to seek assistance from regulated service providers like Berkley.
Individual Salary - Company Payroll Requirements
In the entire UAE, not only in Dubai and Abu Dhabi, there is the notion that salary should be tax free. As such when a company has employees it does not pay any type of taxes locally nor it withholds taxes from the employees of the company. As such there is no payroll requirement or services as the gross salary reported is the net paid to the employees.
Corporation Tax
As per Ministry of Finance, CT rates are: 0% for taxable income up to AED 375,000. 9% for taxable income above AED 375,000.
What are the provisions related to Free Zone Persons under UAE Corporate Tax?
The Corporate Tax Law allows a Qualifying Free Zone Person to benefit from a 0% Corporate Tax rate on their Qualifying Income. Other income, which is not Qualifying Income, is subject to Corporate Tax at the standard rate of 9%.
What is qualifying income in UAE corporate tax?
Qualifying Income is income that is derived from activities that are considered to be part of the Free Zone's business purpose. This form of income is usually exempt from taxes. This includes specific business activities that earn income eligible for the 0% tax rate.
Determining qualifying income could be a complex matter and we strongly advise you to seek assistance from regulated service providers like Berkley.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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