The United Arab Emirates has been known for its tax-free environment. However, in recent years, the government has introduced a number of tax-related changes. In this article, we will discuss the trends and changes to watch out for in the future of taxation in the UAE.
What Changed?
One of the biggest changes in the UAE taxation system is the introduction of Value Added Tax (VAT) in January 2018. Federal Decree-Law No. (18) of 2022 on Value Added Tax states that VAT is a form of indirect tax levied on goods and services at each stage of production and distribution. The current VAT rate in the UAE is 5%, which is relatively low compared to other countries.
In addition to VAT, the UAE government had introduced Excise Tax. UAE Federal Decree Law No. 7 of 2017 on Excise Tax states that excise tax Indirect tax levied on specific goods which are typically harmful to human health or the environment. Goods such as tobacco, energy drinks, and carbonated beverages. The tax rate for these goods is 100% of the retail price, making them significantly more expensive for consumers.
Another trend to watch out for is the introduction of Corporate Tax. The UAE Federal Decree Law No. 47 of 2022 levying a 9% corporate tax for certain businesses. This decision has been viewed as a strategic move to diversify the UAE's income sources beyond oil while allowing the country to maintain its status as a regional commercial hub.
Changes in the Future
As the UAE continues to grow and diversify its economy, we can expect to see further changes and updates to the taxation system. It is important for businesses and individuals to stay informed and up-to-date on these changes to ensure compliance with the law.
The UAE has been rapidly evolving its taxation system to keep up with the pace of its economic growth. The government has been focusing on diversifying its revenue streams and reducing its dependence on oil. As a result, we can expect to see further changes and updates to the taxation system in the coming years.
The UAE government may introduce a Globe minimum tax of 15% for multinational companies that have a turnover of over AED 3.15Billion. Transfer Pricing is an important area that will affect the multinational companies who have transactions between associated enterprises.
The government has also been considering the introduction of a digital tax. This tax would be levied on digital services provided by foreign companies to residents of the UAE. With the introduction of new taxes, the government will increase its scrutiny on tax evasion. Businesses and individuals must ensure that they comply with all tax regulations to avoid penalties and fines.
Tax Professionals Can Help
It is important for businesses and individuals to stay informed and up-to-date on these changes to ensure compliance with the law. Additionally, it is recommended to seek the guidance of tax professionals to better understand the implications of these changes for their finances.
