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Taxation – mainland and free zone
The UAE is a tax-free country where many international companies establish new or branch entities, taking advantage of these benefits. The UAE is characterised by an almost complete absence of taxation with just a few exceptions.
For companies in UAE mainland, the two key areas to be aware of are customs tax and municipality tax.
Customs tax: Import duties have been largely standardised at 5%, but there are many exemptions, including food, building materials, medical products and any item destined for a free zone. Cigarettes are the exception to the general rule with the federal government approving 100% tax. A 50% tax is levied on alcohol.
Municipality taxes: Municipality service charges are levied on individuals living and working in the UAE. Service charge percentages vary among the emirates.
For companies in UAE free zones, there are financial incentives to foreign companies which include:
- 100% foreign ownership with 100% repatriation of capital and profits
- No corporate taxes for 50 years
- No personal income taxes
- Exemptions from customs duties
- Absence of currency restrictions
In spite of the tax advantages, it is important to have a full understanding of your options before deciding how to establish your company’s presence in mainland or in a free zone.