No "pressing need" for direct taxes in UAE, says BMI

The UAE is not in a pressing need to raise income through direct taxes due to its substantial hydrocarbons resource revenues, according to Business Monitor International (BMI).
 
“The UAE's substantial hydrocarbons resource revenues means government has no pressing need to raise income through direct taxes,” the London-based research company said in its Q1 2011 report on the UAE.
 
Only banks and oil companies pay corporate tax, at a rate of 50 per cent (55 per cent in Dubai) for oil companies. Oil companies also pay royalties on oil and gas they produce. Net taxable income of foreign banks is subject to tax at a flat rate of 20 per cent, implemented in Abu Dhabi and Dubai. Alongside all the other benefits enjoyed by companies operating in the free trade zones, there is no corporate tax for 15 years, renewable for an additional 15 years.
 
There is no income tax on individuals resident in the UAE or value-added tax in the UAE. The federal government, under the advice of the International Monetary Fund, is discussing the introduction of a VAT system. 

This is unlikely to be introduced in the near term, however,” BMI said.

In November, this website reported that the Dubai government was not considering imposing any taxes on residents as that is an issue that is outside its ambit.

“We’re not talking about taxes,” Ahmed Humaid Al Tayer, Governor of the Dubai International Financial Centre and part of the three-member Dubai Supreme Fiscal Committee (DSFC), said.

“The local government doesn’t have the authority to impose taxes,” he said, adding that that was a decision to be taken by the federal government.

BMI report says there is no withholding or capital taxes with the country having double taxation agreements with France, Pakistan, Poland, Turkey, China, Romania, Italy, Egypt, Germany, Singapore, Malaysia, Indonesia and India. 

Earlier, a study from PricewaterhouseCoopers, the World Bank and the International Finance Corporation ranked the UAE among the top fivenations in the world on the ease of paying taxes.

Overall, the Gulf countries feature prominently in the rankings, with five of the six GCC countries among the global Top 10.

Regionally, the UAE ranks second, after Qatar, which is ranked No 2 globally. The country has a total tax rate of just 14.1 per cent, lower than 176 countries in the world.

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