Set up your company with zero to low tax!
Sifani Bahar
Business Setup Advisor (SPC Free Zone) | Business Development | Client Relations | Operations Management | UAE Driving License
Set up your company in the UAE to save on taxes
UAE has maintained its status in the global market as a ‘Tax Free’ nation, leading many investors to flock to the country to set up their businesses. Although it has a very insignificant VAT percentage imposed (5% VAT) along with excise tax on certain goods which are harmful to human health (50% on carbonated beverages, 100% on tobacco products) and corporate tax on oil companies and foreign banks (20% on branches of foreign banks) it is still viewed as a?tax haven?by many investors as it does not levy any corporate tax.
Why is UAE so great?
Apart from tax reasons, UAE in general has always been an excellent jurisdiction for business owners for the following reasons,
Business setup in UAE simplified
Even with these great reasons that make UAE so attractive to investors, many still presume that company registration in UAE can be a tedious and expensive process. I have published an article on?“how to set up a Freezone company in the UAE”?stating the steps involved in company formation in simple terms. Although this only covers Free Zone company formation, it is more or less the same as onshore/ mainland company formation with a little variation in the process.
UAE vs. Other Tax Havens
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It is no doubt that there are many other tax havens in the world apart from UAE like The Cayman Islands, The Bahamas, Singapore and Luxembourg but think about how much it may cost to set up your business operations from start to end from trade license registration to obtaining residency visa all the way to opening your bank account for business transactions. Aside from the cost involved, we should also look at the level of ease in completing these steps. In certain jurisdictions, setting up a business can be relatively easy but it may become difficult to keep up with regulatory compliance for many new businesses, particularly when they are not local. You can avoid all these hassles and do business and live in a vibrant economy by setting up a company in the UAE, which would cost you a minimum amount that you would not mind spending considering that the ROI would multiply when your business operations take off. For example, you can have your company formed with?Meydan Free Zone?for just AED 12,500 ($ 3,403) and gain eligibility for a residency visa (investor/partner visa) as well. You do not have to wait for months till your company is formed or to get your residency visa because you will not experience any lag as long as your documentations are proper and you meet all the prerequisite requirements. UAE has an integrated government system that gets enhanced periodically to improve the efficiency of government-related services. You can get your trade license issued in just 2 days and your UAE residency visa issued in just 2 weeks.?
Introduction of Corporate Tax in the UAE?
With that being said, we want to keep our readers informed that the Ministry of Finance has announced the implementation of corporate tax on the net income or profit of companies in the UAE starting from June 1, 2023. The purpose of introducing corporate tax in the UAE is to uplift businesses to international standards for tax transparency and prevent harmful tax practices. The proposed corporate tax rate will be 9% which will be levied on companies that generate a net profit of more than AED 375,000. Any company that reports a net profit of less than the threshold which is AED 375,000, will not be subject to corporate tax. A tax rate of 9% is still low compared to global standards as the global minimum tax rate is set at 15%. It is worth noting that dividends and capital gains earned by a UAE business from shareholdings will be exempt from corporate tax. This means, most income earned by holding companies will not be included in the corporate tax. Since Free Zones are an important aspect of the UAE economy that encourages foreign direct investment and ease of doing business, it will continue to honor the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland. Additionally, CT will not apply to individuals on their salary, interest earned on saving schemes, dividends and capital gains earned from owning shares or other securities in their personal capacity. Federal Tax Authority (FTA) (hyperlink) will be responsible for the administration, collection and enforcement of corporate tax and will soon provide more guidelines, rules and regulations concerning corporate tax on its website.
Conclusion
Entrepreneurs are not intimidated by corporate tax as UAE offers other great incentives and opportunities to business owners to offset the effect of corporate tax. It is also projected by the International Monetary Fund (IMF) that UAE will be the fastest economy in the Arabian Gulf in 2023 outpacing countries like Saudi Arabia, Bahrain and Qatar. What’s more, it is also a vibrant country to live in with exceptional quality of life whether you are living alone or with your family. The amazing weather and beaches, excellent healthcare, the abundance of leisure activities combined with safety and security, make it the perfect place to live in and once you get a taste of it, it is never easy to leave this charming country. UAE has produced many self-made millionaires and offers the playground to anyone looking to make their dreams a reality!
If you are looking to set up your next business in the UAE do contact?MW Mideast FZE?now!
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