Tag: Taxes

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Tax Incentives and Exemptions in the UAE

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If you’re looking to establish a business in the UAE, then understand all the necessary tax laws. Make sure that you follow all of them to avoid any hefty penalties or worse situations. In this aspect, there are certain tax incentives and exemptions in the UAE that you need to know that encourage business growth and foreign investment. 

Overview of Tax Incentives and Exemptions in the UAE

  • No Corporate Income Tax

An attractive feature for a business owner in the UAE is that there is no compulsion of corporate income tax. Most of the businesses can enjoy 100%  of the profits they generate without any burden of paying income tax. Furthermore, this provides an opportunity for the business to reap full benefits by making UAE a highly tax-efficient destination.  

  • VAT Refund Scheme

A 5% VAT is a standard rate that many businesses need to pay. Besides that, there are also certain industries that can benefit from a VAT refund scheme. It majorly includes the industries of tourism, healthcare and education etc. By recovering the VAT you’ve paid on expenses, your business can effectively reduce its operating costs. 

  • Investment Incentives

The UAE government aims to encourage businesses to invest in key industries leading to an increase in economic growth. For this purpose, they provide various incentives to different businesses working in strategic sectors. Therefore, if you’re a business owner working in such a domain, you can avail of reductions in fees, support for research exemptions from customs duties, etc. 

  • Innovation and Entrepreneurship

Different seminars and webinars held all across the UAE help entrepreneurs make use of exciting opportunities. Not only that, it will let your business explore many new aspects and build partnerships all across the globe. Moreover, this element actively promotes innovation and can open up a way of getting many incentives. 

Conclusion

From no corporate tax income to VAT refund schemes, businesses can avail of many incentives and exemptions in the UAE. This makes the UAE an attractive destination where many business owners can invest and initiate expansion. Hence, make use of the opportunities and avail of these tax advantages to thrive in the economic hub of UAE.  

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Excise Tax and VAT: Major Differences

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The introduction of excise tax and VAT in UAE was almost made at the same time between 2017-2018. Although both of these taxes are forms of indirect tax they do have some major differences. Note that these taxes are a source of additional revenues for the UAE government. 

4 Differences Between Excise Tax and VAT

  1. Purpose of Taxation 

In the case of excise tax, the purpose mainly focuses on reducing the consumption of unhealthy goods. Furthermore, it increases the government revenue as well which they can use for public welfare. 

The value-added tax focuses on providing the government with a new source of income. The government can further use this income to provide the public with high-quality services. 

2. Applicable Goods and Services 

Excise tax normally applies to certain products and services which include carbonated, energy drinks, and tobacco. Moreover, it also applies to any drink that provides mental or physical stimulation such as caffeine, ginseng, etc. 

VAT charges are applicable on most of the products and services in UAE. Financial services, residential buildings, and bare land are some of the services which are not liable to value-added tax. 

3. Imposition of Various Rates

The rates of excise rate can vary depending upon the product or the service you’re purchasing. For example, the rate is 50% for carbonated drinks and 100% for energy drinks and tobacco. 

There is a fixed standard rate for VAT in the UAE which is 5%. In a different scenario, zero-rated supplies (0% VAT) are liable to certain products which can be the export of goods, international transportation services, etc. 

4. Liable Business Registration

All those businesses dealing with the import or manufacturing of goods levied excise tax are applicable to register for excise tax. Any business that owns taxable goods but is unable to prove it will also register for excise tax. 

All tax-registered businesses in UAE whether it’s from Mainland or Freezone are liable for the standard VAT charges. If the UAE Cabinet declares any freezone area as a designated zone, then that freezone area shall be tax-free.

Conclusion 

Excise tax and VAT are two different tax systems in the UAE that bring additional responsibilities to businesses. Sometimes people find it difficult to adjust to these different tax systems. Therefore, it is advisable to understand its differences to assist you in dealing with it.