What is Withholding Tax – Definition, Rates

What is withholding tax? Withholding tax, or as it is sometimes called a retention tax is a kind of tax, which is imposed on any income in the country, where this income was received. Withholding tax is charged when this money is transferred to another country. Typically withholding tax in different countries around the world is within the range of 15 to 25 % of the number of total funds withdrawn.

Withholding tax in the UAE

It is well known that the UAE is a country, favorable for doing business and that is not least because of low taxes, including withholding tax. The laws and decrees on taxation are very simple for understanding, and each Emirate has its own tax regulations so that one can choose the most favorable option for each particular case. In case your business is registered in one of the free-trading zones, and you are not aimed at the local UAE market, you are exempt from a number of taxes, among which the income tax, dividend tax, profit tax, taxes on import/export and withholding tax.

So, if your company is registered in one of the free trading zones of the UAE, withholding tax is not imposed at all, and that does not depend on the amount of profit, obtained in the country, In Dubai the withholding tax is not imposed both on the foreign companies and its branches and local legal bodies.

The authorities of the UAE do their best to make the country attractive for businesspeople by reducing the number of taxes, among which the withholding tax, royalties or income tax from real estate. The government of each Emirate tries not to interfere in the business affairs of foreign businesspeople, providing only minimal control in the free-trading zones and tax-free environment. This simplicity and low taxes stimulate corporations and companies from all over the world open its offices and branches, thus strengthening the economy of the UAE and making it one of the most rapidly growing economy in the world.

The absence of a number of taxes typical for other countries of the world, including withholding tax, the simplicity of legislation and the necessary legal procedures will provide your business with a significant competitive advantage if you register your company in one of the numerous free economic zones in the UAE. So do not hesitate, and consider registering a company in one of the Emirates.