Shipping 2026

UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy

8. Ship-Owners’ Income Tax Relief 8.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies In the UAE, the tax treatment of income earned by vessels owned by companies depends on where the company is incorporated and the nature of its opera - tions. In addition, the introduction of Article 12 (3) in the ML could have implications for the future land - scape of UAE-based maritime operations. This Article might encourage more international shipping deals, mergers and joint ventures, potentially leading to new tax reliefs or more attractive conditions for shipping companies in the future. However, as of now, its exact impact on vessel tax exemptions remains to be seen. Free Zone Exemption Companies incorporated in UAE free zones typically enjoy corporate tax exemptions, provided they meet certain conditions. This often includes a 0% corporate tax rate on qualifying activities such as the ownership, management and operation of ships involved in inter - national transportation. Shipping companies based in these zones are not subject to corporate income tax, making free zones a popular choice for ship-owners looking for tax relief. Mainland UAE Companies Companies incorporated in mainland UAE do not cur - rently benefit from the same exemptions, as there is no tonnage tax or specific relief for shipping activi - ties under UAE’s mainland tax regime. As a result, shipping companies based on the mainland may face higher tax obligations and will likely continue to flag their vessels under other jurisdictions that offer more favourable maritime tax regimes, such as tonnage tax or accelerated depreciation. Tonnage Tax and Accelerated Depreciation The UAE does not currently have a tonnage tax sys - tem (which is a tax based on the vessel’s tonnage rather than its income). Additionally, there is no specif - ic accelerated depreciation system targeted at ships under the UAE tax law. As a result, companies seeking such benefits need to incorporate in jurisdictions that offer these specific maritime tax incentives.

7.5 Domestic Arbitration Institutes There is no specialised domestic arbitration institute exclusively for maritime claims in the UAE. However, parties to a maritime contract who wish to resolve disputes through arbitration can still appoint arbitra - tors with expertise in ML or related fields. The parties can choose to refer their dispute to arbi - tration under the general framework provided by the UAE’s arbitration laws. The UAE has established institutions, such as the Dubai International Arbitra - tion Centre (DIAC) and the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC), which can handle arbitration matters, including maritime disputes. While these institutions are not specifically dedicated to maritime claims, they can provide the necessary services for arbitration in such cases. 7.6 Remedies Where Proceedings Are Commenced in Breach of Foreign Jurisdiction or Arbitration Clauses If proceedings are commenced in breach of a for - eign jurisdiction or arbitration clause in the UAE, the defendant has several remedies. • Arbitration clause violation: If the dispute is sub - ject to an arbitration clause, the defendant must raise the issue of the arbitration agreement at the first hearing. This is crucial to prevent accidental waiver of the right to arbitration. If the defendant challenges jurisdiction based on the arbitration agreement at the initial hearing, the court is likely to dismiss the case without addressing the merits, and the matter will be referred to arbitration as per the agreement. • Foreign jurisdiction clause violation: If the proceed - ings are commenced in violation of a foreign juris - diction clause, the defendant should raise the issue of lack of jurisdiction as early as possible, ideally at the first available opportunity. The court will assess the challenge and, if it finds the foreign jurisdiction clause binding, may dismiss the case in favour of the agreed foreign jurisdiction. In both cases, the key is to act promptly in raising the issue of jurisdiction or arbitration to avoid waiving the right to challenge the venue or dispute resolution mechanism.

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