UAE legal and accounting and tax considerations in 2024

Since 2003, Healy Consultants Group assists our Clients with timely compliance of their annual legal, accounting and tax obligations in the UAE.

  • UAE taxation

    • Companies in the UAE pay no corporate or capital gains tax on worldwide-sourced income till 31 May 2022. From 1 June 2023, there will be 9% federal corporate tax which will apply to businesses across all Emirates, with an exception for the extraction of natural resources, which will remain subject to Emirate level corporate taxation. .
    • There are no withholding taxes in the UAE.
    • Value Added Tax (VAT) is levied at a standard rate of 5%. Food items, health, education, petroleum products, social services and bicycles are VAT exempt. The financial services and (residential) real estate sectors are also exempt from VAT (with certain exceptions).
    • A mandatory 5% tax on imports to mainland UAE is applicable to all trading companies, irrespective of their business activities; However, companies in free zones are exempted from import duty on goods coming into the free zone.
    • Excise tax is payable on the importation, manufacture and stockpiling of excisable goods, which include carbonated beverages, energy drinks and tobacco.
    • There is no personal tax levied on residents and non-residents.
    • Municipal fees of 10% are charged on commercial properties and 5% on residential properties. There is also 10% municipal tax on certain hotel revenues and entertainment.
    • In 2020, the UAE implemented the eDirham system to facilitate the collection of state fees and revenues and provide further options for paying government fees using the latest technology.
  • Tax reporting, accounting, and auditing considerations

    • VAT returns generally are filed on monthly or quarterly basis depending on the business turnover. However, they must be filed online by the 28th day of the month following end of the reporting quarter.
    • In accordance with the UAE VAT law, a UAE company is required to impose 5% VAT on all invoices issued to i) UAE based Clients that are VAT registered or ii) multi-national Clients’ requiring services in the UAE. Sales invoices are zero VAT rated for multi-national Clients’ requiring business set up outside of UAE.
    • All UAE companies except offshore entities must annually audit their financial statements and submit them to the relevant Government authorities.
    Penalty type Penalty amount
    Failure to keep the required records and other information specified in the tax laws AED 10,000 for each violation, or AED 20,000 in each case of a repeated violation
    Failure to submit data, records and documents related to Tax in Arabic to the Federal Tax Authority (FTA) AED 5,000 for each violation
    Failure to file a Tax Return within the specified timeframes AED 500 for each month (or part thereof) for the first 12 months, and AED 1,000 for each month (or part thereof) from the 13th month onwards.
    Failure to settle the Payable Tax Monthly penalty of 14% per year
    Submitting an incorrect Tax Return AED 500 unless the Tax Return is corrected before the deadline for submission

  • UAE company tax exemption package

    • All supplies of goods and services made in the UAE are taxable supplies. However, the UAE’s Cabinet lists 20 free zones across the country as designated free zones under special treatment under VAT law. In order for an area located within one of the Designated Zones to qualify as being outside the UAE (for VAT purposes), it must also meet the criteria of Article 51 of the Executive Regulations.
      • It is a specific fenced geographic area; and
      • It has security measures and Customs controls in place to monitor the entry and exit of individuals and movement of goods to and from the area; and
      • It has internal procedures regarding the method of keeping, storing and processing of goods within the area; and
      • The operator of the Designated Zone must comply with the procedures set out by the FTA.
      • It is only when the area within the Designated Zone meets all the requirements of Article 51 of the Executive Regulations should it be treated as outside the UAE territory for VAT purposes (applicable to specific supplies of goods only).

      Otherwise businesses established within a designated zone have the same VAT compliance obligations and rights as non-Designated Zone businesses.

    • UAE has Double Taxation Avoidance Agreements (DTAA) with more than 90 countries including Canada, China, France, Germany, India and Singapore.
  • Healy Consultants Group fees for accounting and tax support

    • Healy Consultants will assist our Clients with company registration and maintenance i) preparing forecasts, budgets, and sensitivity analysis for UAE business set up; ii) documenting and implementing accounting procedures; iii) implementing financial accounting software; iv) preparation of financial accounting records.
    • The UAE incorporation process mandates that all companies must apply for appropriate government licenses before commencing operations. Examples includes trade license, industrial license or professional license for skills-based businesses.
    • It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fullfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
  • Company regulations

    1. There are various categories of business organization defined by the Commercial Companies Law, such as;
      • Limited Liability Company (LLC);
      • Free Zone Company;
      • Offshore Company;
      • Branch / Representative Offices of foreign companies;
      • Partnership and joint venture company;
      • Public and private shareholding company;

      Amongst above, the most appropriate method of establishing a business in the UAE by foreign investors is to form a Limited Liability Company (LLC) or the branch/representative offices;

    2. A company is deemed to be UAE-resident under the following conditions:
      • It was formed in the UAE;
      • The company’s central management and administration is in the UAE, even if it was formed in another jurisdiction;
      • The company conducts business in the UAE and its voting control is in the hands of resident UAE shareholders, even though it was incorporated in another jurisdiction or its central management is in another jurisdiction;
    3. Under UAE corporate law, directors control the daily operations of the UAE business. Directors are appointed by the company’s shareholders who have the power to remove them as and when required;
    4. The UAE incorporation process mandates that all companies must apply for appropriate government licenses before commencing operations. Examples includes trade license, industrial license or professional license for skills-based businesses;
    5. A UAE LLC is mandated to reserve 10% of annual profits until the reserve reaches 50% of the initial share capital;
    6. All UAE companies must submit a declaration of Ultimate Beneficial Owners (UBOs), shareholders and nominee directors. Refer to this webpage for detailed information. Only the director’s information will be publicly available;
    7. All companies engaged in relevant activities must meet Economic Substance Requirements including i) file an ESR notification within 6 months of the financial year-end and ii) filing a ESR report within 12 months of the financial year-end. Refer to this webpage for detailed information.
    8. Should your entity fail to submit the ESR Notification in a timely manner, late submission penalties of Dhs20,000 may apply.
  • Other considerations

    1. UAE participates in many organisations and conventions such as WIPO, WTO, PCT and WIPO Copyright Treaty which deals with intellectual property rights of foreign companies;;
    2. UAE business laws provide for de-registration of a resident company. This process takes approximately 3 months on average. Healy Consultants can assist our Clients with de-registering their UAE business for a fee of US$1,450;
    3. UAE recently approved measures to increase the Emiratisation rate for private sector.
      • Mainland registered private sector employers with more than 49 skilled employees are required to hire UAE nationals and will be required to increase Emirati employees by a minimum of 2% annually until 2026. Refer to the table below for clarify. A skilled employee is defined here;
      • Number of skilled workers Number of UAE nationals be hired each year
        0-49 exempted
        50 One UAE national
        51-100 Two UAE nationals
        101-150 Three UAE nationals
        151 and above One UAE nationals for every 50 skilled workers

      • The deadline for compliance with this new targeted increase is 1 January 2023. Non-compliant companies will be subject to fines of AED 6,000 per month. Other sanctions will additionally apply.

Contact us

For additional information on our accounting and legal services in UAE, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi