Earn 0 tax within 750000 dirhams per year? Dubai Company's Latest "Tax Free" Bonus and 5% VAT Details

Many people tell you that Dubai is a "tax-free paradise", but few dare to tell the whole truth under the new tax system. From 2023, Dubai's corporate profits will indeed be taxed! Don't worry, this is still one of the friendliest tax environments in the world for SME owners who want to make their mark in Dubai.

we will use the most straightforward words to help you sort out the latest tax rules for 2025.

01 The company has made money, how much tax should it pay? Where is the 9% tax rate threshold?

this is the boss's main concern. Dubai will start taxing the net profits of companies in 2023.

The core rules are:

annual net profit ≤ 375000 dirhams:

0% Corporate Income Tax

completely tax-free

annual net profit> 375000 dirhams:

the excess is taxed at 9%

for example:

your company makes a net profit of 500000 dirhams a year.

Front 375000 Dirham: Tax-free

exceeding 125000 dirhams:

pay tax at 9%, or 11.250 dirhams.

The effective tax rate equivalent to total profits is only 2.25 per cent, a very light burden.

Free Zone Company Special Offer

companies registered in Dubai's eligible free zones (such as JAFZA, DMCC, etc.) are eligible for a 0% income tax rate on their eligible income if certain conditions are met. Core conditions:

the business is mainly aimed at overseas customers or transactions in the free zone.

Sufficient substance must be maintained (real office, staff and operational activities), not just a shell.

Non-qualified income: If your income is considered non-qualified income and exceeds 5% of total income or 5 million dirhams (whichever is lower), you are subject to 9% corporate income tax.

02 VAT on buying and selling goods and services 5%

VAT has been introduced since 2018 with a standard rate of 5%.

Who must register for VAT?

If the company's sales (total value of taxable supplies and imports) in the past 12 months exceed 375.000 dirhams, registration is mandatory.

VAT operating mechanism:

you charge 5% (output tax) for selling goods and 5% (input tax) for buying goods.

Key:

you can use your input tax to offset your output tax and end up just giving the difference to the Inland Revenue Department.

What is 0% tax or tax exemption?

Zero tax rate:

export of goods abroad, international transport, specific educational services and medical services. Input tax can be deducted.

Tax Exemption:

local residential leasing, financial services, undeveloped land. No input tax can be deducted.

03 Several other taxes you may encounter

1. Special commodity tax

for producers or importers of cigarettes, e-cigarettes (100 per cent tax rate), energy drinks (100 per cent tax rate) and carbonated/high-sugar drinks (50 per cent tax rate).

2. Import tariff

most goods are imported into Dubai from abroad with a tariff of only 5% of the delivery value.

3. Municipal expenses

tenants may have to pay a council fee of 5% of the annual rent and an additional 5%-10% on the bill when staying at the hotel.

04 Dubai does not levy what tax?

this is a "huge" dividend for individuals!

Dubai retains the following great attractions for individuals and wealth:

there is no personal income tax: your salary and bonus income belong to you.

No shareholder dividend tax: the company's profits are distributed to shareholders, 0 dividend tax.

No capital gains tax: The value-added portion of the purchase and sale of company equity and real estate is not currently taxed. No inheritance tax

05 to the bosses of three practical advice

1. Select the right place to open the business. Customers are mainly in the Middle East and Mainland. Customers are all overseas, giving priority to qualified free areas to use the 0% income tax policy.

2, financial rules to establish even if the tax rate is low or zero, must also keep accounts, maintain clear transaction records, and as required to issue invoices with tax numbers.

3, pay attention to the future small changes pay attention to the optimization of tax declaration and tax refund process, make a good plan in advance.

Zhuoxin Enterprise provides agency services such as domestic and foreign company registration, bank account opening, annual tax return, agency bookkeeping, trademark registration, ODI Overseas Investment Filing, etc. If you have any business needs in this area, please feel free to consult our online customer service!