Although the main reasons for taxation in Dubai are not explicitly stated, a significant factor is Dubai’s removal from the grey list of the global banking system.
In Dubai, there is a 9% Corporate Tax. However, this should not create negative thoughts. The 9% tax is not applied directly. For annual net profits up to 375,000 AED (approximately $100,000), the tax rate is 0%. This rate is the same for mainland and free zone companies. If annual net profits exceed $100,000, the portion above this amount is subject to a 9% corporate tax.
For example:
If your company’s annual revenue is $600,000, and expenses are $470,000, the remaining net profit is $130,000. The first $100,000 is tax-exempt. The remaining $30,000 is subject to the 9% corporate tax. The tax payable would be $30,000 x 9% = $2,700. Thus, in this example, the annual income tax on a $130,000 net profit is only $2,700.
As seen in the example above, as long as your accounting system in Dubai is handled by the right person and with the right system, it is very affordable and manageable. However, severe penalties and financial fines for late declarations and unpaid taxes are published in detail on the Dubai Tax Authority’s website.
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