Tax ratios system for businesses in UAE comparison with other global business hubs

Tax ratios system for businesses in UAE comparison with other global business hubs

Tax ratios system for businesses in UAE comparison with other global business hubs


The basis of a strong economy is a strong and well-designed tax base. The UAE’s tax system is one example where business sector has been given tax incentives of all kinds to provide them with an environment where they can operate without the fear of progressive taxation that takes away a major chunk of profits. In fact, mainland and Dubai free zone companies have been given exemption from corporate and income taxes in order to attract more foreign direct investment.

The government of UAE has decided to take a different approach in order to develop the country. While the foreign direct investment is not being taxed like in other countries, this investment is allowing youth to be employed, infrastructure to be built, business activity to be stimulated and other industries to be active in the market. Even though tax revenue might be forgone, benefits of this tax system have been great.

The tax system in Dubai

While mainland and Dubai free zone companies might be paying charges for incorporation and other facilities such as acquiring trademarks and trade license Dubai, taxes have been low; however, some businesses in Dubai and companies in different areas have to pay duties on exports and imports.

Again, this depends entirely on the industry that the businesses operate in. Rules and regulations have also made it possible for the government to generate revenue through the charges levied at different steps of business registration and visa services.

The companies authorized to operate through a trade license Dubai are not completely exempted from taxes. Corporate taxes do exist and revenue is collected under this umbrella. Different industries are treated differently by the authorities in order to encourage certain sectors.

A 10% tax on the office rent has to be paid annually. Another 5% tax is paid by companies on payments made to the employees annually. For companies who earn less than AED 1 million annually, no taxes are levied. However, progressive taxation follows for every next AED 1 million that a company earns. Municipality taxes are, however, deducted in all areas of the UAE from all businesses.

Comparison with other countries

In Amsterdam, the capital of Netherlands, corporate taxes are levied on businesses. A 20% tax is levied on annual incomes of less than Euro 200,000. For annual incomes greater than that, the tax rate is increased to 25%.

When it comes to Toronto, the capital of Canada, the taxation differs according to the province the business is located in. However, 38% of the income earned by businesses is taken as tax. A 25% flat tax is levied on corporate entities in India while an additional 12% deduction is made if the profit of a company exceeds Rs.10 million annually.

So it can be seen that there is a huge difference between the ways authorities in the UAE treat businesses when it comes to taxation and how other countries treat businesses for the same. This is what makes Dubai and the whole of UAE the most attractive place for business investment.

If you are looking to have a business setup in Dubai, KWS Middle East can help you in learning more about the taxation in the UAE, particularly Dubai. The consultancy has great experience in providing company formation and business support services for investors willing to invest in Dubai. This allows the consultancy to gain knowledge and insights on the taxation system which it will provide to you so that you can have all the required information for your business setup in Dubai.

Learn more about the taxation system in the UAE. We provide all the information that you require, so reach us via phone, call or email.

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