Until now, only foreign banks and insurance companies have paid income tax in the UAE: a rate of 20% applies to them. Oil and gas producing companies pay corporate tax on a progressive scale of up to 55%.
From the beginning of the 2023 fiscal year which is June 1st, medium and large companies will be subject to the income tax. Small businesses and start-ups are exempt from paying the tax.
The corporate tax rate depending on the company income
If a company is registered in a free zone and does not conduct business onshore the UAE, it is also exempt from the new corporate tax.
The new taxation regime provides benefits for business:
- If an international company with a representative office in the UAE pays taxes in another country, it will be able to credit the amount paid against the corporate tax in the Emirates.
Whether double taxation agreements will be taken into account in this case is not specified. In 2022, the UAE has agreements with 94 states and territories. - If a business is represented by a holding or a group of companies, such a business will pay tax once as a single legal entity. Holdings will also be able to receive tax benefits in case of losses, intra-corporate transactions and restructuring.
- Companies will be able to recover part of the income tax paid in the form of tax deductions.
Companies will pay the corporate tax once a year: there will be no advance tax payments or provisional taxes. Transfer pricing requirements and the list of documents are established in accordance with the guidelines of the Organization for Economic Cooperation and Development.
There are still no taxes on capital gains and dividends on shares of international companies. There are also no plans to tax personal income in the UAE, for example on wages or rental of real estate.
The introduction of a corporate tax will bring additional income to the country's budget, which will be used to further develop the economy. It will also make the business environment in the Emirates more transparent.
But international credit agencies do not share the optimism. For example, Moody's has already expressed conce that the tax will negatively affect the credit rating of companies headquartered in the UAE.
Which countries have lower corporate tax rates than the UAE
The UAE Ministry of Finance stresses that the new income tax rate is one of the most competitive in the world. For example, in the UK, companies pay twice as much at a rate of 19%.
But some countries charge corporate tax at a lower rate than in the UAE, or do not charge it at all. For example, new companies in the Caribbean country of Antigua and Barbuda and Vanuatu, the island nation of Oceania, are exempt from the tax.
Maltese companies recover up to 100% of the paid income tax in the form of deductions. Montenegro has the same corporate tax rate as the UAE, one of the lowest in Europe.
Comparison of rates and conditions for corporate income tax
| Country | Corporate income tax rate |
| UAE | 0 or 9% |
| Antigua and Barbuda | 0% first 50 years for IBCs |
| Vanuatu | 0% first 20 years for IBCs, an annual fee of $300 is paid instead of the tax |
| Montenegro | 9% |
| Malta | 35% a standard rate, but a company can recover up to 100% of the tax paid in the form of deductions |
How to get a residence permit and second citizenship in countries with low tax rates
Company owners optimize the taxation of a business when they register it in a suitable jurisdiction.
As individuals, they can also start paying less taxes if they change their tax residence. To do this, they need to live in another country for at least 183 days a year on the basis of a residence permit or citizenship.
The UAE only issues “golden visas” to entrepreneurs for a period of 5 or 10 years. A visa is an analogue of a residence permit: it gives the right to live, work and do business in the country.
A 5-year visa is issued for the implementation of business projects worth at least 500,000 dirhams, or about $136,000. Another option is to get approval from an accredited business incubator in the UAE.
A 10-year visa is issued to investors who open a new company or invest in an existing business in the UAE. The minimum investment amount is from 2,000,000 dirhams, or about $545,000.
Antigua and Barbuda allows to get a passport for investing in a local business:
- $400,000 is paid by each investor in case of collective investments for a total amount of $5 million or more;
- $1.5 million if the investor invests on their own.
An investor can reduce the cost of obtaining an Antigua and Barbuda passport by 15 times if he makes a contribution to the National Transformation Fund. The contribution amount is $100,000.
Antigua and Barbuda does not impose taxes on personal income, capital gains, inheritances, dividends, interest or royalties. Registration of a company in the country takes place remotely in two to ten days.
Citizens of Antigua and Barbuda freely visit the Schengen countries with the right to stay in the arearnfor up to 90 days in half a year. Traveling to the UK without a visa is allowed for 180 days a year. And for trips to the United States, a passport holder can get a tourist visa for 10 years.
Vanuatu does not grant a residence permit or citizenship by business investment. But the country’s passport can be obtained for a one-time contribution to the National Development Fund. The amount of the contribution is from $130,000.
Vanuatu tax residents do not pay taxes on income, capital gains and inheritance. Business in the country can be registered remotely.
The Vanuatu passport also gives its holders visa-free entry to 135 countries, including the Schengen area, the UK, Singapore and Hong Kong.
Montenegro grants citizenship upon fulfillment of two investment conditions:
An income tax in Montenegro is levied on a progressive scale from 0 to 23%. Dividends are taxed at a rate of 15%, interest — at a rate of 5%. Inheritance is taxed at a rate of 3%.
Montenegro is not yet a member of the European Union: the country is one of the first candidates for joining it in 2025. But now Montenegrin citizens travel freely to the Schengen countries and 97 other states, including Singapore and Hong Kong.
Citizens of Montenegro are eligible to obtain an E-2 business visa to the United States. The visa allows its holders to do business, live and study in the USA.
Maltese citizenship can only be obtained by naturalization. One of the naturalization ways is for special services by direct investment. It assumes that a foreigner first obtains a residence permit in the country, then passes a strict Due Diligence check. And only after a year or three years he gets the right to apply for citizenship.
If the investor has passed Due Diligence, they fulfill three investment conditions:
- Renting or buying housing in Malta for five years. The rental price must be at least €16,000 per year, a purchase shall start from €700,000.
- A contribution to the National Development Fund: €600,000 if applying for citizenship three years after the residence permit; €750,000 if applying a year later.
- A donation in the amount of €10,000.
Tax residents of Malta pay income tax on a progressive scale from 0 to 35%. After paying taxes, they can get deductions: the amount depends on the annual income and marital status of the payer. The maximum deduction amount is €9,905.
Malta is a member of the European Union, so its citizens have the right to live, work, do business and study in any country in the region. They also travel visa-free to 185 countries including the UK, the UAE, Japan, Singapore and Hong Kong. It is enough for Maltese citizens to obtain an electronic entry permit to travel to the USA, Australia and Canada.
Immigrant Invest is a licensed agent that helps investors become citizens of the Caribbean and European countries. If you want to get a second passport and optimize taxation, seek advice from investment program experts.
