Dubai and its interesting tax system
Invest in Dubai for 10 % rental return, for a pied à terre or for numerous fiscal advantages:
Double taxation agreements
United Arab Emirates do not levy taxes; this is why the country is very attractive due to the reduction of taxes in the foreign jurisdiction on profits transferred abroad by companies operating in the UAE.
Normally, dividends paid by a company of the UAE for another company that signed the double taxation agreement can’t impose the foreign company. Also, when a foreigner creates a new company or subsidiary, he or she depends on the imposition of the UAE and, therefore, doesn’t pay taxes, either in Dubai or in the company’s country.
The UAE federation was established in 1971 by the consolidation of seven emirats, including Dubai. The constitution provides that individuals don’t pay income taxes but that companies do. However, companies part of a Free Zone in Dubai can be exempted and avoid paying income taxes by indicating the free zone they are established in.
In 1985, the Emir of Dubai wanted to diversify the country’s regional economy, largely based on oil, by attracting foreign companies. He then created the first free zone “Jebel Ali Free Zone” in which foreign companies can benefit from very interesting tax advantages. In this free zone, companies can also avoid corporate taxes for 15 years and low tariffs (4%) or even avoid them. Because the free zone was very successful, several other “specialized” free zone were created. These specialized, or “theme” zones, aim to regroup companies by business activity.
Advantages of the free zones:
– Foreign company had 100% control
– Total repatriation of capital and profits
– No limitation of work permits
– Investors have no obligation to work with a local partner
Other reasons for free zones economic success
Dubai’s success is not only based of fiscal advantages. Other advantages incite companies to settle in Dubai:
– Dubai is a front door to the Middle East
– Dubai benefits from an interesting geographical situation: halfway between Asia and Europe
– Cheap labor cost
– Political stability very appreciated by residents, investors and tourists.
– Modern infrastructures that help establishment and expansion of foreign companies.