BASICS OF TAXES IN UAE 2025
Latest Updates on VAT and Corporate Tax in UAE

The UAE has a relatively simple tax system compared to many other countries. Here’s a breakdown of the main taxes:

1. Value Added Tax (VAT)

  • What it is: A 5% consumption tax on most goods and services.
  • Who pays: Consumers ultimately bear the cost, but businesses collect and remit it to the government.
  • Exemptions: Some essential items like basic food, healthcare, and education are exempt.

You’re smart to stay updated on VAT! The UAE has been actively refining its VAT system. Here’s a summary of the latest, combining the initial framework with the November 2024 amendments:

Key Updates (effective November 15, 2024):

  • Export of Goods: Documentation requirements for 0% VAT are simplified. You now need either a customs declaration with commercial evidence OR a transport document with a tax invoice and payment confirmation.
  • Export of Services: Stricter conditions for 0% VAT. Services must not be performed in the UAE or specified zones. Real estate, telecom, and electronic services have narrower definitions.
  • Financial Services: New exemptions, including management of investment funds and services related to virtual assets (cryptocurrencies). This applies retroactively from January 1, 2018.
  • Composite Supplies: Clearer rules for transactions involving a mix of goods and services. When there’s no dominant element, VAT is based on the overall nature of the supply.
  • Employee Medical Insurance: Businesses can now recover VAT on medical insurance for employees and their dependents (spouse and up to three children under 18).
  • Deemed Supplies: Updated thresholds: AED 500 for goods, AED 250,000 output tax for government entities/charities.
  • VAT Refund for Tourists: A new system allows tourists to claim VAT refunds on e-commerce purchases made during their stay.

Core Framework (still in place):

  • Standard Rate: 5%
  • Zero-Rated Supplies: Exports, certain education and healthcare services, etc.
  • Exempt Supplies: Residential properties, undeveloped land, etc.
  • Registration: Mandatory for businesses exceeding the threshold (AED 375,000).
  • Returns: Filed quarterly.
  • Penalties: For non-compliance.

Important Notes:

  • Businesses must adapt to these changes and ensure compliance.
  • The amendments aim to clarify certain aspects, support specific sectors, and improve efficiency.
  • It’s crucial to review the updated VAT legislation and seek professional advice if needed.

Where to Stay Updated:

By staying informed, businesses can navigate the UAE’s VAT system effectively and optimize their tax positions.

2. Corporate Tax

  • What it is: A tax on business profits.
  • Rate: 0% for taxable income up to AED 375,000, and 9% for income exceeding that threshold.
  • Who pays: Businesses with taxable income.
  • Exemptions: Some businesses, like those in free zones, might be exempt.

You’re right to ask for an update! The UAE’s corporate tax regime is still relatively new, and they’ve made some recent changes. Here’s a summary of the latest, combining the initial framework with the December 2024 amendments:

Key Updates:

  • Domestic Minimum Top-up Tax (DMTT): Effective for financial years starting on or after January 1, 2025. This aligns the UAE with the OECD’s global minimum tax rate of 15% for large multinational enterprises (MNEs). It applies to MNEs with consolidated global revenues of €750 million or more in at least two of the four preceding financial years.
  • Tax Incentives: The Ministry of Finance is considering introducing incentives to support growth and innovation:
    • Research and Development (R&D) Tax Incentive: Potentially effective for tax periods starting on or after January 1, 2026. This could provide a 30-50% tax credit (potentially refundable) for qualifying R&D activities conducted within the UAE.
    • Refundable Tax Credit for High-Value Employment: Potentially effective from January 1, 2025. This would offer a tax credit as a percentage of eligible salary costs for employees in high-value roles (e.g., C-suite executives) contributing significantly to the UAE economy.

Core Framework (still in place):

  • Standard Rates:
    • 0% for taxable income up to AED 375,000
    • 9% for taxable income above AED 375,000
  • Scope: Applies to businesses and individuals with a commercial license, including free zone businesses (with potential exemptions).
  • Exemptions: Extraction of natural resources, dividends from qualifying shareholdings, capital gains, qualifying intra-group transactions, and certain free zone businesses.
  • Administration: Handled by the Federal Tax Authority (FTA).

Important Notes:

  • The DMTT and incentives are subject to legislative approvals and further guidance from the Ministry of Finance.
  • Businesses should stay informed about the latest developments and assess how these changes impact their tax positions.

Where to Stay Updated:

It’s always recommended to consult with tax professionals for personalized advice. The UAE’s corporate tax landscape is evolving, so staying current is essential for businesses operating there.

3. Excise Tax

  • What it is: A tax on specific goods deemed harmful to health or the environment.
  • Items taxed: Carbonated drinks, energy drinks, tobacco products.
  • Rates: Vary depending on the product.

The UAE introduced excise tax in 2017 to discourage the consumption of goods deemed harmful to health or the environment.1 This tax applies to specific products and is levied at the point of production or import.2

Excise Tax Rates:

  • Carbonated drinks: 50%3
  • Energy drinks: 100%4
  • Tobacco products: 100%5
  • Electronic smoking devices and liquids: 100%6
  • Sweetened drinks: 50%7

Key points about excise tax in the UAE:

  • Purpose: To reduce consumption of harmful goods and generate government revenue.8
  • Scope: Limited to specific products.9
  • Tax point: Levied once at production or import.10
  • Registration: Businesses involved in the production, import, or stockpiling of excise goods must register with the Federal Tax Authority (FTA).11
  • Returns: Registered businesses must file monthly excise tax returns.12

Examples of excise goods:

  • Carbonated drinks: Sodas, fizzy drinks.13
  • Energy drinks: Red Bull, Monster.14
  • Tobacco products: Cigarettes, cigars, shisha.15
  • Electronic smoking devices: Vapes, e-cigarettes.16
  • Sweetened drinks: Juices with added sugar, flavored milk.

Excise tax vs. VAT:

While both are consumption taxes, excise tax differs from VAT in its scope and application.17 VAT is a broader tax applied to most goods and services at each stage of the supply chain, whereas excise tax is specific to certain harmful products and levied only once.18

For further information:

This information provides a general overview of excise tax in the UAE. For specific details and the latest regulations, it is always best to consult the official sources mentioned above.

4. Customs Duties

  • What it is: Taxes on goods imported into the UAE.
  • Rates: Vary depending on the type of goods.

The United Arab Emirates (UAE) imposes customs duties on most imported goods to protect its local industries and generate revenue.1 The general customs duty rate is 5% of the CIF (Cost, Insurance, and Freight) value of the goods.2 However, certain goods are subject to different duty rates, such as:

  • Alcohol: 50%3
  • Tobacco products: 100%4
  • Certain food items: 0% (e.g., livestock, meat, seafood, vegetables, fruits, coffee, tea, grains, and seeds)

Some goods are exempt from customs duties, including personal belongings, gifts, and certain types of machinery and equipment.5

You can find more information about customs duties in the UAE on the official websites of the customs authorities in each emirate, such as:

  • Federal Authority for Identity, Citizenship, Customs & Ports Security (ICP): [invalid URL removed]
  • Dubai Customs: https://www.dubaitrade.ae/
  • Sharjah Customs: [invalid URL removed]

It is important to note that customs regulations and duty rates can change, so it is always advisable to check with the relevant authorities for the latest information before importing goods into the UAE.

No Personal Income Tax

The UAE does not have a tax on personal income, making it an attractive destination for workers.om

Other Taxes

  • Some emirates may have local taxes like property or tourism taxes.
  • There is no inheritance tax at the federal level.

Important Notes:

  • Businesses must register for VAT if their turnover exceeds a certain threshold.
  • Tax laws and regulations can change, so it’s important to stay updated.
  • The Federal Tax Authority (FTA) is responsible for administering taxes in the UAE.

Where to Get More Information: