UAE Law and Practice Contributed by: Ildar Yuvakaev, Ruslan Akhmetov, Olga Serova and Daiana Ubushaeva, Consigliere Group
1. Tax 1.1 Tax Regimes Personal Taxation Income tax
Freelancers Freelancers operating in the UAE are generally subject to the same corporate tax rules as other individuals carrying on a business. Holding a freelance permit or professional licence does not automatically cre - ate corporate tax liability. Tax applies where business activity exists and annual turnover exceeds AED1 mil - lion. Corporate Taxation Corporate tax also applies to legal entities established in the UAE. Resident entities are generally taxed on worldwide income, while non-resident entities may be taxed on income attributable to a permanent estab - lishment in the UAE and certain categories of UAE- source income or nexus. Generally corporate tax applies at: • 0% on taxable income up to AED375,000 for each Tax Period; and • 9% on taxable income exceeding AED375,000 for each Tax Period. Mainland and free zones The corporate tax regime applies both to the mainland and free zones. Free zone companies do not auto - matically benefit from preferential treatment. Only qualifying free zone persons (QFZPs) may apply a 0% corporate tax rate on qualifying income if statutory conditions are met. Value Added Tax (VAT) VAT is generally levied at the standard rate of 5% on the supply and import of goods and services. Businesses are required to register for VAT where the value of taxable supplies and imports exceeded AED375,000 during the previous 12 months or where it is expected to exceed that threshold within the fol - lowing 30 days. Voluntary registration is available where taxable supplies, taxable expenses or both exceed AED187,500. Individuals are generally not required to register for VAT unless they independently carry on a taxable business activity that exceeds the mandatory regis - tration threshold. Accordingly, most employees and
The UAE does not impose personal income tax, inher - itance tax or gift tax, which remains a key factor behind its appeal to high net worth individuals (HNWIs), family offices and international investors. Gifts and inheritance tax The UAE does not impose gift or inheritance tax. How - ever, transfers of real estate by way of gift remain sub - ject to applicable land registration and transfer fees imposed by the relevant emirate. Taxation of real estate While the UAE does not impose inheritance or gift taxes, property transfer fees apply to real estate trans - actions, with the specific rate depending on the emir - ate. For example, the standard transfer fee is generally 4% of the property value in Dubai, whereas Abu Dhabi applies a 2% property registration fee. In addition, VAT implications may arise depending on the nature of the property. The first supply of a newly constructed residential property is generally zero-rated for VAT purposes, while subsequent sales and leases of these residential properties are gener - ally exempt from VAT. By contrast, sales and leases of commercial properties are generally subject to VAT at the standard rate of 5%. Individuals carrying on a business activity Federal Decree-Law No 47 of 2022 (the “Corporate Tax Law”) introduced a federal corporate tax regime, effective for financial years commencing on or after 1 June 2023. An individual carrying on a business or business activ - ity becomes subject to corporate tax where annual turnover exceeds AED1 million. Cabinet Decision No 49 of 2023 excludes certain categories of income from business activities, including wages, personal investment income and certain real estate investment income where no commercial licence is required.
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