The UAE is known for its business-friendly tax environment, but that doesn’t mean it’s completely tax-free. Here’s a quick breakdown of the key taxes you need to know about.
1. Value Added Tax (VAT) 📊
✅ Rate: 5% on most goods and services.
✅ Who Pays?: Businesses with annual revenue over AED 375K must register.
✅ Exemptions: Healthcare, education, some financial services, and residential properties.
✅ Registration: Voluntary at AED 187.5K, but Mandatory at AED 375K.
💡 Pro Tip: If your business is VAT-registered, you can reclaim VAT on eligible expenses.
2. Corporate Tax 💼
✅ Rate: 9% on taxable profits above AED 375K (effective from 2023).
✅ Who Pays?: Mainland and Free Zone companies (some Free Zones have exemptions), Natural Persons with Annual Turnover Above 1M AED
✅ Exemptions: Natural resource extraction, qualifying Free Zone entities, and smaller businesses below the threshold.
💡 Tip: Corporate tax doesn’t apply to salary income, making the UAE attractive for individuals.
3. Excise Tax 🚬
✅ Applies To: Tobacco, energy drinks, carbonated drinks, and sugary beverages.
✅ Rate:
- 100% on tobacco and energy drinks.
- 50% on carbonated and sugary drinks.
💡 Why? This tax is meant to reduce consumption of harmful products and promote healthier choices.
4. Customs Duty 📦
✅ Standard Rate: 5% on imported goods.
✅ Exemptions: Free Zone-to-Free Zone transfers, certain raw materials, and UAE-made products.
💡 Tip: Free Zones offer customs duty exemptions, making them great for trading businesses.
Final Thoughts
The UAE remains tax-friendly compared to other countries, with no personal income tax and competitive corporate tax rates. If you're setting up a business, understanding these taxes will help you stay compliant and optimize your financial planning. 🚀