Taxation

UAE promulgated Corporate Tax w.e.f June 2023 with the following regimes:

Default regime (0% up to AED 375k in taxable profits and 9% beyond that),

Qualifying Free Zone Person regime (0% on Qualifying Income), and

Top-up Tax regime (15% ETR on taxable profits of MNEs under BEPS Pillar 2.0).

In addition to the mainland, UAE has around 50 Free Zones, out of which 24 are Tax Designated Zones where Customs Procedures apply. For certain types of Qualifying Activities giving rise to Qualifying Income, Free Zone Persons enjoy zero rating of Corporate Tax.

Three of the UAE Free Zones i.e. DIFC, ADGM and RAK ICC are famous for their expat friendly international laws and court systems. These 03 Free Zones are the only corporate registrars in UAE which offer Foundation structure, which combines the features of a company and a trust. Unlike other GCC countries, citizens of UAE do not enjoy preferential tax treatment.

There is no Zakat law in the UAE.

Small businesses can enjoy tax holidays until 2026.

Collective investment schemes, offshore companies complying with their legislative mandates, and resident (and qualifying foreign) dividends in most cases enjoy Corporate Tax exemption.

Investment managers in UAE do not constitute permanent establishment for non-resident investors, allowing those investors to stay out of the scope of UAE Corporate Tax law.

VAT is leviable on taxable supplies in UAE @ 5%. Companies set up in Designated Zones are treated as being outside of the territory of the UAE for VAT purposes for specific supplies of goods.

KSA has a well established Corporate Tax framework which levied 20% tax on the Taxable Profits pertaining to non-Saudi and non-GCC citizens’ shareholdings.

The Corporate Tax base of Saudi and GCC citizen-shareholders is exempt from Corporate Tax but subject to Zakat @ 2.5%.

KSA has recently launched a Regional Head Quarter (RHQ) regime that grants up to 30 years of tax exemption to RHQs set up in KSA.

In addition to the mainland, KSA has launched 04 Special Economic Zones in 2023 where expats can own 100% ownership of the company.

There’s a withholding tax return filing requirement in KSA.

VAT is levied @ 15% in KSA and has quite detailed procedural guidelines.

Other GCC countries (except Bahrain where there is no corporate tax) have corporate tax laws in place with preferential regimes to the favor of their citizens, a feature that can be utilized to the benefit of FDIs with the help of parallel trust deed arrangements.

Bahrain will likely introduce Corporate Tax in 2024. 

Except Oman all GCC countries are signatories to the Inclusive Framework of OECD and have Double Tax Agreements.

Except Kuwait and Qatar all GCC countries have VAT laws in place. Other than KSA and UAE, VAT is levied on taxable supplies in Bahrain (10%) and Oman (5%).

UAE, Qatar and Bahrain have ESR compliance requirements.