UNITED ARAB EMIRATES Law and Practice Contributed by: Yasser Omar and Laryssa Perkins, Hadef & Partners LLC
9.2 Withholding Taxes on Dividends, Interest, Etc At present UAE-sourced payments to non-residents are not subject to any withholding tax. Although the UAE Corporate Tax Law includes a provision for imposing withholding tax, at present no categories of source income have been specified on which the withholding tax will be imposed or the rate of the with - holding tax. The UAE has an extensive treaty network. In the event that a withholding tax were to be introduced in future, these treaties could be invoked to obtain a reduced rate. In this regard, the UAE Corporate Tax Law does not currently contain any specific ownership, holding period or “treaty shopping” provisions that would limit eligibility for such a reduced rate, provided that the applicable treaty itself might contain such conditions. 9.3 Tax Mitigation Strategies Given that the UAE corporate tax regime is still in its infancy, tax planning strategies are still developing. As qualifying free zone persons are eligible for a 0% tax rate on their qualifying income, the use of these vehicles for conducting qualifying activities and the associated structuring of these vehicles are particu - larly topical. Qualifying activities include commodity trading, manufacturing, processing, reinsurance, hold - ing of shares and securities for investment, shipping operations, logistics, distribution, aviation finance, related party financing, wealth management, fund management and headquarter services. Free zone relief is also available in respect of the exploitation of qualifying intellectual property assets under certain circumstances. The use of family foundations (a legally opaque but tax-transparent vehicle) is also commonly seen as part of personal wealth structuring in the UAE as this provides potential tax benefits particularly in relation to holding immovable property. The Corporate Tax Law also allows for the transfer of assessed losses and tax grouping of resident juridical persons under prescribed circumstances.
has also introduced a domestic minimum top-up tax of 15% in accordance with Pillar 2. A non-resident company will be subject to CT in the UAE to the extent that it has established a perma - nent establishment (PE) in the UAE, in which case the profits attributable to the PE will be subject to CT. A non-resident company will also be subject to CT on income derived from immovable property in the UAE, or where income is attributed to the company from a qualifying investment fund or real estate investment trust. A company incorporated in or operating through a branch in a free zone may be eligible for tax relief on its qualifying income (taxed at 0%) where it qualifies as a qualifying free zone person. Generally, an unincorporated partnership will be disre - garded for UAE tax purposes with the individual part - ners accounting for CT on their distributive share of the partnership profits. Foreign partnerships can also be treated as tax-transparent provided certain require - ments are met and an annual declaration is filed by the taxable partners. Certain persons can also be exempted from CT (whether automatically or upon application), such as government entities, extractive businesses, qualify - ing investment funds (QIFs), real estate investment trusts (REITs), qualifying limited partnerships (QLPs), pension funds, etc. It should be noted that a foreign investor in a QIF or REIT may still be subject to CT on its pro-rated share of the fund’s profits under certain circumstances. VAT is imposed at 5% (unless exempt or zero-rated) on taxable supplies of goods and services in the UAE and on the import of certain goods and services into the UAE. The responsibility for the payment of VAT will fall on either the taxable person making the supply in the UAE, or on the importer of the concerned goods or concerned services. The standard customs duty rate in the UAE is 5%, while excise taxes range from 50% to 100% and are imposed on certain goods such as sweetened drinks and tobacco products.
653 CHAMBERS.COM
Powered by FlippingBook