Withholding tax in Dubai, UAE - description, rates

The UAE has the reputation of a tax-free country all over the globe. Tax laws are few and are very straightforward. It is one of the countries of the world that truly facilitates business with the help of taxes full or partial exemption both for the residents of the United Arab Emirates and foreign citizens. If you are an entrepreneur working under the UAE law in one of the UAE free trade zones you will be exempt of a number of taxes, including income tax, dividend tax, interest tax and taxes on import and export.

Simplified procedures related to registering a business, promoting investment environment and the government’s large-scale projects aimed at sustainable development of the UAE make this country the very welcoming place for entrepreneurs.

In this article we are going to discuss another tax levied in most countries of the world and how it is handled in the UAE – withholding tax.

What is withholding tax?

Withholding tax is a tax applied on any income and is charged at source means in the country where the income has been earned. It is collected at the time of income transfer to another country means withheld at source and for this reason is called withholding tax. Like any other tax, its rate and applicable regulations vary from country to country and can be collected by deferent methodology. The regular applicable tax worldwide is in the range between 15 to 25%. withholding

Withholding tax applies to corporate income as well as income received by private persons. The possible solution of decrease of the applicable withholding tax rate is only if there are double tax treaties available and being in force. For example, regular withholding tax on dividends, received by an individual in some county is 25%. However, the DBA between this country and the country of the residence of this person defines that the withholding tax is 10% or even 0%.

Regulations of the UAE on the withholding tax

If you are doing business in one of the UAE free trade zones you are fully exempt from the withholding tax as this tax is not applicable at all. All types of income – corporate and personal – received in the UAE – is free from any UAE withholding tax.

Withholding tax in Dubai is not an exception in the list of taxes both residents and non-residents are exempt of. It is not imposed on locals and foreign citizens. In the UAE there is no withholding tax on interest, royalties or income on real estate. Another important advantage of the tax-free environment in the UAE is that it makes no difference between foreign citizens and residents of the country regarding taxes, including the UAE withholding tax.

Thus, unlike many other countries of the world, the UAE is looking for the ways to truly boost businesses. The absence of the majority of taxes is clear evidence to the fact.

If you are looking for a place to start your business, consider the possibility of placing it in the UAE. Free Trade Zones, exemption of a number of taxes (including withholding tax) and the Emirates’ promising prospects to thrive guarantee that your business will have a serious head start in comparison to the same enterprises in other countries of the globe.