There are many things you ought to consider before setting up your company in the UAE and Saudi Arabia. Tax is an important area to research and fully understand the implications on your business. Taxes and regulations will vary from country to country. Therefore, it is important to seek the correct advice from a tax consultant in the UAE to safeguard your company and to have the best tax structure in place in compliance with the authorities. Our tax team has detailed a list of the applicable taxes and how this may apply to your company in the UAE and Saudi Arabia. See the below table for your quick reference.
UNITED ARAB EMIRATES
|CORPORATE INCOME TAX (CIT)|
|HEADLINE CIT RATE (%)||HEADLINE CIT RATE (%)|
|Corporate tax is a direct tax imposed on the income of companies.||Up to 55% for upstream oil and gas activities,|
20% for branches of foreign banks, and (in practice) 0% for most other companies and branches.
With effect from 1 June 2023, corporate rate at standard tax rate of 9% will be applied to all business and commercial activities on taxable profits above AED 375,000 (approximately USD 100,000). Extractive industries will remain subject to the Emirates level corporate taxation.
|Corporate income tax at 20% is applied to non-Saudi/non-GCC share of the tax base (gross income less tax-deductible expenses) in a resident company.|
|CORPORATE INCOME TAX (CIT) DUE DATES|
|CIT RETURN DUE DATE||CIT RETURN DUE DATE|
|Not applicable for most industries/companies (except upstream oil and gas and branches of foreign banks).||Within 120 days after the taxpayer’s year-end.|
|CIT ESTIMATED PAYMENT DUE DATES||CIT ESTIMATED PAYMENT DUE DATES|
|Not applicable for most industries/companies (except upstream oil and gas and branches of foreign banks).||Three equal advance tax payments are to be made on the last day of the 6th, 9th, and 12th months of the current tax year (based on last year income tax due and specific formula).|
|Zakat is applicable to ownership in a KSA company by KSA nationals or other GCC country nationals.||Not applicable.||Zakat is a religious levy and is assessed at 2.57% on the Saudi/GCC shareholders’-|
|PERSONAL INCOME TAX RATES|
|Not applicable.||Not applicable.|
|VALUE-ADDED TAX (VAT)|
|STANDARD VAT RATE (%)||STANDARD VAT RATE (%)|
|VAT is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer.||5%.||15% (5% prior to 1 July 2020).|
|WITHHOLDING TAX (WHT) RATES|
|WHT RATES (%) (DIVIDENDS/INTEREST/ROYALTIES)||WHT RATES (%) (DIVIDENDS/INTEREST/ROYALTIES)|
|WHT is a tax deducted at source levied on payments made to a non-resident.||Not applicable.||Resident: Not applicable.|
The applicable WHT rate may be reduced where a relevant double tax treaty is in force.
|CAPITAL GAINS TAX (CGT)|
|HEADLINE CORPORATE CAPITAL GAINS TAX RATE (%)||HEADLINE CORPORATE CAPITAL GAINS TAX RATE (%)|
|A non-resident shareholder selling shares in a KSA resident company will be subject to tax at the rate of 20% on the capital gains realised from the sale of shares.||Not applicable.||Capital gains are subject to the normal income tax rate applicable to the taxpayer. Non-resident capital gains tax rate is 20%.|
|RATE (%)||RATE (%)|
|Customs duty is a tariff or tax imposed on goods when transported across international borders.||Standard rate is 5%. Other rates (0%, 50%, and 100%) apply depending on the nature of the goods imported.||Standard rate is 5%. Other rates (0%, 50%, and 100%) apply depending on the nature of the goods imported.|
|RATE (%)||RATE (%)|
|An excise tax is a legislated tax on specific goods such as tobacco and energy drinks.||Tobacco products and liquids used in electronic smoking devices (100%), soft drinks (50%), and energy drinks (100%) are subject to excise tax in the UAE.||Tobacco products (100%), soft drinks (50%), and energy drinks (100%) are subject to excise tax in KSA.|
|REAL ESTATE TRANSACTION TAX (RETT)|
|RATE (%)||RATE (%)|
|RETT was introduced in KSA on 4 October 2020. It applies to all land and property sales, assignments, transfers and similar that take place in KSA unless specifically exempted.||Most Emirates impose a fee on the transfer of freehold and long-term leasehold interests in real estate located within that Emirate. A land registration fee is levied in Dubai at a rate of 4% of the sale value of the property (shared between the buyer and seller).||RETT is imposed at a rate of 5% of the total real estate value.|
This table has been prepared for general guidance and does not constitute professional advice. You should not act upon the information contained in this table without obtaining specific professional advice from an expert.
It is crucial for an organisation to understand the tax structure of the country they are looking to expand to or currently operating in. It is recommended for organisation to holistically look at their company and review the company group to ensure their tax structure is optimal. Not seeking the correct advice and designing a tax structure can be detrimental to your business. Re-designing tax structures can save an organisation thousands of dollars.
Creation Business Consultants helps clients solve their tax challenges allowing companies to focus on what matters to them. Our experienced tax consultants deliver bespoke tax solutions dedicated to your business. For more information regarding how Creation can guide you in your tax requirements, email [email protected] or call the UAE office +971 4 878 6240 KSA office +966 54 995 2676 today.