Some of Dubai’s rules may seem harsh, but ultimately they’re intended to protect you and your money.
The following is a Guest Post by Nadir Alex Askar. You can read more about him here. If you want to submit one yourself please contact us for details.
There are very few topics that create as much controversy in the business world as the issue of taxation. Taxation in any part of the world is a serious matter that many choose to avoid rather than deal with; some even go as far as ending up in jail. Recently, I have been involved in a discussion where this subject had come up and it made me think about how different tax rules are perceived by people in different parts of the world.
The topic was about taxation in Dubai, and I could not help but realize how much there is to know about it before you can make a firm decision on where to move your business. While for some people moving to another country means leaving their home behind and losing all contact with what they knew, for others it means gaining new opportunities, broadening their horizons and opening up a whole new life of possibilities.
For those who choose to call “downtown” Dubai home for business purposes, they are presented with an entirely different tax system than someone who lives in the suburbs or even across the border in Sharjah.
The first thing you need to know about Dubai and taxes is that everything related to it falls under the law of one emirate only: the Emirate of Dubai. Although some people mistakenly believe otherwise, this also includes different tax matters such as VAT, sales taxes, trade licenses and similar issues. All those are regulated differently in each emirate within UAE but when it comes to Dubai, business owners are provided with a rather simple and straightforward tax system.
One of the first things you learn about Dubai is that it has no income taxes on residents or non-residents, as long as their official residency status remains the same throughout the year. The income tax exemption does not apply to foreign companies operating in the UAE under licensing or similar laws, nor does it apply to interest-bearing accounts in Dubai banks.
Most business owners (and I am specifically referring to the local ones who own a company within Dubai) are not required or expected to pay taxes for their existing companies, provided that they are making profits and paying other applicable corporate fees and economic levies. Those who are planning to how to start a business in Dubai have different options regarding the registration of their company; while some choose to register as Free Zone companies, others opt for a classic local setup. In either way, they won’t be required to pay income taxes on their profits as long as the funds are not distributed among shareholders but rather reinvested within the company.
Financial transactions are generally not subject to taxes in the United Arab Emirates unless they involve banking institutions. In Dubai and other emirates, real estate is not taxed either, although there are some exceptions.
It’s important to remember that even though you (as a business owner) may be exempt from paying income tax on profits made from your business, you may be liable to pay other fees and charges applicable for business owners within Dubai. Those are in no way related to income tax but rather ensure that your business operates legally, adheres to economic regulations and complies with local laws.
The most common of those is the annual financial statement (AFS) that all companies are required to submit. The AFS is a document that includes the last annual financial statement of the company as well as information about its activities for that year, and it must be submitted to the Dubai Department of Economic Development by April 30th of each year. Furthermore, companies are required to submit an AFS Update every 6 months providing further details on their current status and operations.
Other fees and charges directly related to running a business include registration fees for your company, annual renewal of your trade license and so on. You need to consider whether or not you will be making use of any government services when starting a business in Dubai, as there could be further costs involved in that regard (for example, if you are starting a business in Dubai Media City and plan to make use of their communication services).
Like any other part of the world, there are some risks associated with starting a business in Dubai. However, it is important to remember that all countries tend to share similar concerns when dealing with businesses; the main difference between them usually lies in how those risks are addressed. For those who are planning to start a business in Dubai, all applicable laws and regulations will have to be taken into account as part of the process.
Of course, there is also the issue of real estate in Dubai – although not directly associated with taxes, it usually plays an important role when starting a business in certain areas. Real estate is not taxed in any emirate of the UAE as long as it is not rented out (this means that you cannot buy a place with the purpose of starting your business there, but can use it for residential purposes). However, properties within Dubai are relatively expensive and tend to be sold rather than rented. While this may seem like a challenge considering where to start a business in Dubai, it is rather easy to overcome by renting a property to use for your company’s needs and paying monthly fees.
In Dubai, you are required to have a bank account in order to open up any business. This is just one of the many strict rules that will protect your money and assets. You may think these rules may seem harsh at first glance but they’re designed with good intention—to keep both you and your wallet safe! If you want more information on this article or would like to submit an own, please contact us for details.