Taxation and Accounting in the UAE
There is no federal tax legislation in the United Arab Emirates, and the UAE is a ‘no tax’ country. There is no income tax, no corporate tax, no withholding or capital gain tax and no sales or value-added tax (VAT). The government has considered introducing VAT, but there are no plans to do so in the near future.
While there is no personal income tax to be paid by the residents of the UAE, there is a system of compulsory pension contributions for employees who are UAE nationals (around 5 per cent of their salaries), and authorities are reportedly studying a proposal to create similar compulsory pensions systems for expatriates too.
A service charge of 5-10 per cent is charged on food purchased in some restaurants, and hotels charge a 10-15 per cent service charge, per night, on room rates. Owners of business properties, who are renting them out, are required to pay a municipal tax set at 10 per cent of annual rental value.
Accounting Principles
The UAE does not have its own accounting standards. International Accounting Standards are widely used for the preparation of financial statements for distribution to shareholders, government bodies, and banks. The Commercial Companies Law and the Commercial Transaction Law require all companies to maintain accounting reports and original copies of all correspondences and invoices issued or received. All accounting information and documents must be kept for a period of five years.
Companies have to file their financial statements within 120 days of the end of the financial year with the Federal Ministry of the Economy and Commerce and with the local licensing authority (the Economic Department or Municipality). Some licensing authorities, such as free trade zones, request audited financial statements as a part of the annual licence renewal process, and the time period may be even shorter, usually 90 days within the year-end.
Certain businesses may be required to file their annual financial statements with additional government bodies. Banks and financial institutions have to submit their statements to the UAE Central Bank.
RAK Free Trade Zone requires that its clients submit an auditing report (from a UAE registered auditor) on an annual basis, for business licence renewal.
Related Links
www.zu.ac.ae/UAETaxationLaw
www.government.ae/taxes
