United Arab Emirates Tax & Business Guide - Deloitte - United Arab Emirates Tax Resources

Basic facts
Population 5m Inflation 13.5% (2006)*
Main languages Arabic, English GDP per head US$32,880*
Currency Emirati dirham (AED) GDP growth 8.9% (2006)*
Economic communities WTO, Gulf Co-operation Council (GCC)
GDP sources 2.9% agriculture, 50.6% industry, 46.5% services
*Economist Intelligence Unit estimates.
Political environment

The United Arab Emirates is a federation with specified powers delegated to the UAE federal government and other powers reserved for the seven member emirates. A unicameral Federal National Council of 20 appointed and 20 elected members represents the separate emirates. The president, currently Sheikh Khalifa bin Zayed al-Nahyan, is head of state and is selected by the Supreme Council of Rulers, which is formed by the hereditary rulers of the seven states.
Foreign trade and investment
Exports US$132.9bn (2006)* Imports US$86.0bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Japan, Korea, Thailand and India.

Major exports: Crude petroleum products, natural gas and re-exports.

Oil accounts for nearly one-half of GDP.
Business and financing
Business forms Limited liability company, private joint stock company, public joint stock company, branch

Other forms of business organisation include a general partnership, commandite, commandite limited by shares and joint venture.

In general, foreigners may only own up to 49% of a UAE-registered company, although foreign investors may increase their shareholding to 100% in respect of companies set up in the free zones.
Labour environment
Unemployment rate N/a Minimum wage None

There is no minimum wage in the private sector, although the Ministry of Labour has announced that a new minimum wage will be introduced in the near future.

A work permit and an entry visa are required before the arrival of a foreign worker in the UAE, and upon arrival the worker must apply for a residence permit. Sponsorship is required for the work permit, and certain restrictions apply to the number of foreigners granted such permits. It is reported that quota levels have recently been established for foreign workers and that steps are being taken to enforce ÏemiratisationÓ, that is the employment of UAE nationals.

There are no special requirements for departure from the UAE. Registered immigration violations and police complaints are subject to clearance prior to departure from any UAE airport.

The UAE does not impose social security taxes on foreign workers. Employer pension contributions for national employees are mandatory at 12.5% of Ïcontribution calculation salaryÓ. In addition, national employee contributions are levied at 5% of the contribution calculation salary.

Employers are required to provide employees with end-of-service benefits in accordance with federal labour laws. Recent changes in legislation also require employer guarantee deposits of AED 3,000 for each sponsored employee.
Taxation
Corporate tax
Main rate Income tax of companies is not taxed, with the exception of oil and gas companies and branches of foreign banks

There is no corporate tax for most companies in the UAE, but income tax is levied on the profits of oil and gas exploration companies and certain petrochemical companies under specific government concession agreements, currently at 50%/55% (Dubai/Abu Dhabi).

Branches of foreign banks are taxed at rates agreed with the ruler of the emirate in which they operate, currently 20%.
Individual tax
Income of individuals is not taxed

There is no taxation on the income of individuals.
Capital gains
Gains are not taxed

There is no taxation on capital gains.
Indirect tax
No VAT or general sales tax

Currently there is no value-added tax (VAT) or general sales tax in the UAE, although it is expected that VAT will be introduced within the near future.
Tax administration and compliance
Tax year Corporations: calendar year; Individuals: not taxed

The tax year for companies that must pay tax is the calendar year.
Additional tax information
Withholding taxes There are no withholding taxes.
Tax treaties The UAE has concluded more than 30 tax treaties.
Dividends Dividends are not taxable.
Revenue protection There is no transfer-pricing or anti-haven (CFC) legislation.
Groups There is no provision for group taxation.
Incentives Free zones.
Other taxes Municipal taxes are imposed on hotel services and property rentals. Annual rental income of residential and commercial tenants is taxed at 5% and 10%, respectively. Customs duties (imposed by individual emirates, generally at a rate of 5%, with some exemptions); inheritance, in the absence of a will, is dealt with in accordance with Islamic Sharia principles.