For foreign investors to save Tax in their home country the legal means is to set up a company in any of the low-tax-paying countries in the world. UAE is one of the world’s lowest tax-paying countries. Hence, it is a perfect destination for the investor to save tax by opening a company in UAE.
TAX Savings By Opening Company in UAE
Most Multi-National Companies and Investors are establishing their Company Head-Quarters in UAE. Investors see UAE as a favorable destination for setting up a business and settling down with family mainly due to the following reasons:
- Conducive Business Environment
- Incentives by the Government
- Safety and Security Guaranteed
- Favorable Diplomatic Policies and Business Laws
- Global Connectivity
Establishing a new company and opening a company bank account is an intelligent method of wealth management. Therefor, investors can save tax by opening a company in UAE. Above all, UAE is a tax haven for foreign investors as there is no corporate or personal income tax in the region presently.
UAE only levies 5% VAT as part of all sales transactions happening within the country. There are few exemptions to the VAT subject to certain guidelines. The company incorporation is tailor-made for investors to save tax by opening a company in UAE.
There are two business jurisdictions for the Company Setup – The Mainland and the Free Zone. It is governed by different business laws and levies certain taxes accordingly.
Type of Taxes Applicable for a Company based in UAE
There are only very few Taxes levied in the UAE, which is the Value-Added-Tax (5%), the Excise Tax for certain commodities (Tobacco, Energy Drinks, etc.), and the Tourism & Municipality Tax for Hotels. UAE also has a Corporate Tax only for Foreign Banks & Oil Companies.
UAE is free from Income Tax, Tax on Capital gains as well as Profits, Inheritance Tax, Tax on income from the property sale, etc. The tax-free environment for businesses is luring investors to start a company in the UAE.
Tax Applicable in UAE – Mainland and Free Zone
Based on business jurisdiction, the companies in the UAE are subject to certain taxes.
Taxation in UAE Mainland
The UAE mainland companies are mainly subject to two taxations i.e., Customs Tax and Municipality tax. Excise tax is levied on certain commodities in sale in the UAE, and also the Corporate Tax for Oil Companies and Foreign Banks operating in the UAE.
- Customs Taxes
There is a 5% import duty for mainland companies. However, there are exemptions for certain sectors like food supplies, building materials, medical products, items destined for the free zone, etc.
- Municipality Taxes
The restaurants, hotels, hotel apartments, resorts, etc., in the UAE, will be charging a 10% Municipality Fees along with certain tourism-related taxes such as Service Tax, Tax on room rate, city tax, and tourism fee.
- Corporate Tax
The UAE levies Corporate Tax on oil companies and foreign banks only. There is no Corporate Tax for service or trading companies in the UAE.
- Excise Tax in UAE
The Excise Tax is charged in the UAE for certain products considered to be unhealthy such as tobacco, alcohol, confectionery, soft drinks, and fast food. Excise Taxes for carbonated drinks are 50%, for tobacco products are 100%, and for energy drinks, it is 100%.
Business Benefits in Free Zones – Zero Corporate & Personal Income Tax
- 100% tax exemption on personal or corporate income or gains
- 100% ownership for investors regardless of their nationality and domicile
- 100% repatriation of capital and profits
- Exclusion from all import and export duties
- No capital deposit required
- Easy business setup, virtual business license, flexible office spaces
- World-class infrastructure – office space, technology, business
Other Key Factors Driving Investors to Set up Company in the UAE
1. Ease of Business Setup and World-Class Infrastructure
UAE has many prospective offers to attract investors and its one of the most established commercial and business hub of the Middle East
Government support, business & tech infrastructure, banking services, financial structure, innovation, access to the global market, etc. are various factors that are attracting investors to this region.
2. Free Trade & Tax Saving Agreements with Other Countries
UAE has a very low taxation rate, and the investors can enjoy the benefits of tax savings while conducting business operations locally as well as internationally due to the tax-saving agreements of UAE with other countries.
The Free Trade Agreements with multiple countries and waiver in Customs Duty fee for Free Zone companies are making UAE a perfect trading destination for international investors. Also, by virtue of the UAE’s location between the east and the west of the world, it acts as a perfect logistics hub to facilitate international trade.
3. Double Taxation Agreement Treaty
UAE has signed the Double Taxation Avoidance Agreement (DTAA) with 117 Countries and the business houses and residents are eligible to avail the benefits of DTAA.
The Double Taxation Agreement is to promote cross-border trade and investment flows. It also protects taxpayers from double taxation and invites more investors to choose UAE for setting up their business and enjoy the tax benefits.
The Companies that are one-year-old and Individuals who have resided in UAE for more than 180 days can apply for the Tax Residency Certificate from the Ministry of Finance.
Companies and High-net-worth individuals residing in the UAE can apply for the Tax Residency Certificate and claim the benefits of the Double Taxation Avoidance Agreement (DTAA).
To know more, Read: Tax Residency Certificate in UAE
4. Niche Market Trends
The liberal policies across the majority of industries will drive in more investors to the UAE. The Import export market significantly contributes to the income growth of the UAE.
UAE has many enterprise-friendly measures like 100% foreign ownership, 100% profit repatriation, world-class infrastructure, ease of business setup, Tax benefits, and so on.
As UAE is a tax haven, investors are looking at suitable company formation packages based on the specific requirements. Business Setup in Dubai is a straight forward process, although it involved some paperwork and approvals.
An experienced business consultant will be apt to guide you through the entire process and help you to get your business license at the earliest using a streamlined approach.
What are the options for Overseas investors?
Overseas investors have multiple options to set up their business here in the UAE
- Business Setup in UAE Free Zones
- Company Registration in UAE Mainland
- Company formation in UAE Offshore
Of the three options available for establishing a company in the region, the easiest and quickest way is to opt-in for a business license from one of the 40+ Free Trade Zones of UAE.
Free Zones of UAE – The Ideal Choice
Free Zones are designated areas within UAE having a separate jurisdiction and authority to govern the administrative operations and company registration process.
The companies registered in the Free Zones enjoy a number of incentives and tax cuts. Companies can be incorporated by an individual, or as a branch of a company, or a subsidiary of a foreign company in the Free Zones.
Setting up a Branch Office in UAE Free Zones
Setting up a branch office is a hassle-free process and it can be done in a week’s time. Attestation of parent company documents in the home country and in UAE is required for the registration of a branch. There is no requirement of capital for setting up a branch in UAE. Individual companies can be set up in two days’ time by providing the passport copy of the investor.
So in a nutshell, UAE is a perfect choice for company setup and enjoy the benefits of tax savings. The entrepreneur-friendly policies, business infrastructure, ease of doing business, availability of skilled labor, access to the international market, etc are the growth drivers for foreign investment
Looking for more assistance on choosing the right business license type, activities and business jurisdiction, to leverage the tax savings to the most
Interested in Company Formation in the UAE to increase tax savings, talk to our expert consultants right away!
