A Complete Guide to Tax Registration in Dubai
Dubai has been known as a tax-free haven as there are no taxes imposed on entrepreneurs and businesses. To diversify its revenue sources and keep up with the global trends, the government of UAE has recently brought in several taxes. As a result, it should come as no surprise that taxes play an integral part in Dubai’s financial system and the economy of the rest of the UAE. Below, I have explained the taxes in Dubai, how they work, tax registration in Dubai, and the types of taxes you must pay when conducting business in Dubai.
Types of TAX in the UAE:
Broadly speaking, there are two types of taxes in Dubai:– Direct Tax and Indirect Tax.
- Direct tax: Direct taxes include individual income tax, corporate tax for companies, capital gains tax, and property transfer fees.
- Indirect tax: VAT, excise duty, customs duty, tourism fees, real-estate registration, etc. all come under the indirect tax.
Tax for Residents:
As of now, UAE citizens do not have to pay any kind of tax on their salaries, wages, or other income sources. But they are not exempt from indirect taxes like VAT, excise duty, and customs duties when purchasing goods, and services or availing specific products.
Tax for Non-Residents:-
Suppose you are a tourist or a non-resident in Dubai, who stays in hotels, tourist attractions, restaurants, and other lodging facilities. You may have to pay particular tourism and property rental taxes in that case. The accommodation type and duration of your stay will greatly influence the tax you must pay. Dubai’s tourism tariffs include:-
- Rent on hotel rooms and lodging facilities:- Upto 10%. The tax dramatically depends on the facility’s star rating. For instance, the tourist tax for low-cost, one-star hotels is AED 7 whereas for the high-end five-star ones, it is around AED 20.
- Service charges at restaurants and fine dining:- Up to 10%
- Municipal tax (depends on the region):- Up to 10%
- City tax (depending on the city or Emirate):- Up to 10%
- Tourism tax:- Up to 6%
Tax Registration in Dubai for Businesses
Till 2022, businesses were exempted from paying taxes in Dubai. However, for companies that came up from July 1st, 2023 onwards, the government has introduced 1% corporate taxes. From January 1st, 2024, companies that submit their fiscal report from that month are liable to the newly imposed corporate tax in UAE. However, all businesses will not be affected by the corporate tax as it is only applicable to those businesses that have a specific annual net profit. The tax rates are as follows:-
- Businesses with an annual net profit or income up to AED 375,000- 0% tax rate
- Businesses with an annual net profit or income over AED 375,000- 9% tax rate on the amount exceeding AED 375,000.
- Businesses that operate in Freezones will be exempted from paying taxes if they adhere to certain conditions
Large MNCs with revenues over EUR750 million are subjected to different taxation laws and rules for particular industries like banks, investment funds, natural resource extraction, etc.
Dubai and Its Tax Exemptions
With 0% tax, complete ownership, and lenient profit repatriate regulations, Dubai is an epicenter of opportunities for investors and entrepreneurs. To ensure that these businesses remain exempt from taxes and enjoy the perks of operating in Dubai’s Freezones, the Dubai government has now made an exception to the corporate tax rate. All FreeZone businesses are required to complete and submit accurate tax reports with 0% corporate tax rates. With the introduction of this new initiative, Dubai’s dedication to creating a business-friendly climate that encourages entrepreneurs to establish their firms in the emirate remains unwavering.
All free zone companies must submit complete and accurate taxation reports with 0% corporate tax rates. With this new implementation, Dubai continues to sustain a business-friendly environment that encourages entrepreneurs to set up their ventures in the emirate.
VAT in Dubai
All the goods and services within the UAE have an indirect tax called Value Added Tax or VAT imposed on them. Currently, the VAT rate in Dubai is 5%, which was implemented in 2018. With a few exceptions like essential food and medical items, all other products and services have a 5% VAT liability. When you sell a taxable good or service, your business should claim the VAT from your customers. Input taxes made on purchases by the company can also be claimed.
If your company’s annual turnover exceeds AED 375,000, then you need to register with the Federal Tax Authority or FTA. If your trade’s yearly supplies and imports exceed AED 375,000 then you are liable to pay 5% VAT. If a business’s annual income is below AED 187,500, then they are not required to register with the FTA or pay VAT. On the other hand, registration is mandatory for those businesses with an annual income between AED 187,500 and AED 375,000.
Once you are registered, you must keep an updated record of all the taxable goods and services you provide and any claimed input taxes. The frequency of submitting VAT returns also depends on the size and turnover of the business and is mandated by the FTA.
Dubai’s Real Estate Tax and Property Tax
The real estate industry in Dubai has seen tremendous growth in the past years and taxes form a crucial part of this sector.
- Property Rental Tax in Dubai:-
Depending on the annual rental value, residential and commercial spaces are imposed a 5% property tax in Dubai. Although it is the tenant’s responsibility to pay the taxes in specific regions in Dubai, the municipal authorities in the Dubai Emirate have a slightly different approach. Tax on residential properties is commonly referred to as housing tax and must be paid by the tenants. On the other hand, the tax imposed on a commercial property is called a market fee and is to be paid by the property owners.
- Property Registration Fees in Dubai:-
The Dubai Land Department (DLD) levies registration and administration fees which are as follows:-
- Registration Fees:-
-
- Properties valued less than AED 500,000- AED 2000
- Properties valued at least AED 500,00 or higher- AED 4000
- Mortgage Fees (if applicable)- AED 290 with an addition of 0.25% of the mortgage loan amount.
2. Administrative Fees:- AED 540
After the ownership transfer process and registration have been completed, the new owner must apply and obtain an ownership certificate for AED 250.
Business Setup Consultants from Best Solution help you navigate his process in a smooth and hassle-free way.
Tax Residency Certificate
If you have a company in Dubai, then you must get a Tax Residency Certificate or TRC. A TRC is a document that validates your trade as a tax resident of the emirate. Obtaining a TRC gives you many perks, like minimized tax rates, and helps you profit from the Double Tax Treaty, or DTT, made between the UAE and other countries, along with other incentives. Currently, the DTT has agreements with almost 147 countries and according to these, the income obtained from both nations is subject to tax in either one and can be exempted from tax in both places.
How to Obtain a Tax Residency Certificate?
To obtain your TRC, one condition that you must fulfill is that you should be a resident of the UAE or Dubai for six months or more. In addition to this, you must also possess a valid residency visa or a work permit. Once all these conditions are fulfilled, you can start your application process to obtain a valid tax residency certificate. Our professionals from Best Solution will help you acquire the necessary visa and work permits so that there are no obstacles in your registration process.
Along with your TRC application, there are some extra documents you will need to submit. These include:-
- Residency permit
- Valid ID proof
- Lease agreement copy
- Proof of income
- Bank statement
- Completed application form and tax forms
The tax registration procedures in Dubai are becoming more and more complex, thanks to the government’s initiative to diversify its income sources and reach global standards. Our team of experts from Best Solution will help you stay updated and ensure that you comply with the ever-changing norms.
How Can We Help?
We have a team of tax specialists and Business consultants in Dubai at Best Solution who have hands-on experience in tax-related matters. They will guide you and take on the entire process of registering your company as a taxpayer. At Best Solution, we aim to assist investors in maintaining compliance with UAE legal requirements and sustaining corporate growth. We provide expert and up-to-date assistance to companies on various matters related to trade and business assistance. Get in touch with the Best Solution today for a smooth tax registration in UAE!
