Dubai's
enormous oil revenues mean that the government
has no need to raise income through direct taxation.
Accordingly Dubai is a "no tax" emirate
characterized by an almost complete absence
of taxation. There are no withholding or capital
taxes.
Speaking
in November 2005, the late Sheikh Mohammed bin
Rashid Al Maktoum, then Crown Prince of Dubai
and the Defence Minister of the United Arab
Emirates sought to quash speculation regarding
the possible introduction of an UAE sales tax.
It
had been suggested in August of that year that
the United Arab Emirates was mulling the introduction
of a national sales tax, and reports suggested
that the International Monetary Fund had been
asked by the UAE authorities to help develop
a value added tax system in an attempt to widen
the country's tax base.
The
IMF also reportedly urged the UAE to introduce
a property tax and widen the corporate tax net
across all sectors, warning that state budget
surpluses, which have been dependent on high
oil prices in recent times, are unsustainable
without longer-term sources of tax revenues.
The reports were seemingly confirmed when Sheikh
Hamdan bin Rashid Al Maktoum, then-Deputy Ruler
(now Ruler) of Dubai and UAE Minister of Finance
and Industry stated that: “We are (still)
under discussion (and) we have not decided yet.
They are just bringing the idea (of levying
tax).”
Moreover,
the revelation by Shaikha Lubna Al Qasimi, the
UAE's Minister of Economy and Planning that
the government was studying a plan to introduce
sales tax on tobacco and alcohol from 2006 fuelled
the speculation still further, with many observers
interpreting the decision as a first step towards
more general forms of taxation.
However,
the former Dubai ruler's words were taken to
suggest that the emirate will at least remain
free from income taxes for non-oil firms and
individuals for the foreseeable future.
The
introduction of a value added tax system in
the United Arab Emirates (UAE) looks set to
go ahead but later than planned. The UAE has
been studying the possible introduction of VAT
for some time, and a recent report by Dubai
Customs suggested that the levy could have been
introduced as early as 2009. However, it is
becoming more apparent that the GCC member states
want to roll out VAT simultaneously to replace
revenues derived from trade taxes, which are
due to be phased out as a number of free trade
agreements signed by the GCC, including one
with the EU, become effective. It is thought
that this won't happen until 2012 at the earliest.
One expert
advising the UAE government told a tax conference
in April 20101 that the countries of the GCC
could have a regional value-added tax (VAT)
in place as early as 2012, although this target
date is looking increasingly unlikely to be
achieved with some member states making faster
progress than others in preparing for the tax.
Ehtisham
Ahmad, an adviser in the Office of the Prime
Minister of the UAE, and a senior fellow at
the Centre of Economic Research at the University
of Bonn, told a tax conference in Dubai that
should the GCC governments back the adoption
of a harmonized VAT at their October 2010 meeting,
a 2012 deadline would be achievable, although
he admitted it would be "very tight."
An implementation date in 2013 would be more
feasible, he said, but still difficult to achieve.
With
the exception of banks and oil companies no
corporate income tax is payable by businesses
in Dubai. Oil companies pay up to 55% tax on
UAE sourced taxable income whereas banks pay
20% tax on taxable income. The taxable income
of banks is as per the audited financial statements
whereas that of oil companies is as per the
concession agreement. Oil companies also pay
royalties on production.
Dubai
Customs Duties
Imports into Dubai can only be undertaken by
those importers who have the appropriate trade
licence. Import duties have been largely standardised
at 4%, but there are many exemptions, including
food, building materials, medical products and
any item destined for the three free zones:
Jebel Ali Free Zone,
Dubai Internet City
and the Dubai International
Financial Centre. Food products must carry
dates of manufacture and expiry and meat for
the local market must have a certificate to
prove compliance with Islamic law.
Dubai
(as part of the UAE) and under an agreement
with the GCC (Gulf Cooperation Council) is required
to levy 10% duty on all luxury goods.
By
law 70 goods have been exempted from tariffs
(at the time of writing), including medicines,
agricultural machinery, pesticides, fertilizers,
periodicals, wood, unstrung pearls, un-worked
silver and gold, iron and steel for use in construction,
and raw or partially worked materials for use
by local manufacturers. Goods produced within
the GCC are also exempt from duties as are goods
destined for the Jebel Ali Free Zone.
Cigarettes
are the exception to the general rule with the
federal government approving a 100% tax. A 50%
tax is levied on alcohol.
On January 1, 2003, the unified customs area
of the Gulf Co-operation Council came into effect,
covering Kuwait, Qatar, Oman, Saudi Arabia,
Bahrain, and the United Arab Emirates (including
Dubai).
In
April 2005, the 15th Joint Council and Ministerial
Meeting between the European Union and the six
member states of the Gulf Cooperation Council
in Bahrain took place, focusing on the state
of the free trade agreement negotiations between
the European Union and the Gulf Cooperation
Council.
The
two parties agreed that rapid progress was needed
on a number of outstanding trade issues, particularly
on services, industrial tariffs and public procurement,
and noted the importance of a rapid conclusion
of the negotiations on human rights, terrorism,
weapons of mass destruction and migration issues.
A
further round of talks on the matter took place
in June 2005. The talks dragged on into 2009
without agreement.
An
appeals desk has been established at the federal
customs directorate to hear claims from customs
importers for goods to be classified as duty
free. The Dubai port authority offers long-term
storage at concessionary rates. Temporary imports
are allowed with duty payable only on goods
which remain in the UAE after 6 months.
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Dubai Business
Properties Tax
Business properties pay a municipal tax set
at 10% of annual rental value.
LOWTAX.NET
13/07 
