Tax & Estate Planning

The UAE introduced a federal Corporate Tax effective for financial years starting on or after June 1, 2023, under Federal Decree-Law No. 47 of 2022. The standard rate is 9% on taxable income exceeding AED 375,000. Corporate Tax applies to UAE companies and other juridical persons, foreign entities with a permanent establishment in the UAE, and individuals conducting business activities in the UAE. Certain entities, such as government bodies and qualifying public benefit organisations, are exempt.

Free zone companies can benefit from a 0% Corporate Tax rate on “Qualifying Income” if they meet certain conditions, including maintaining adequate substance in the UAE, deriving qualifying income, and not electing to be subject to the standard rate. Non-qualifying income is subject to the standard 9% rate. The definition of qualifying income and the specific conditions are detailed in the law and related guidance.

Transfer pricing refers to the prices charged for transactions between related parties, such as companies within the same corporate group. The UAE Corporate Tax law includes transfer pricing rules requiring that related party transactions be conducted at arm’s length (i.e., at prices that would be charged between independent parties). Businesses must maintain documentation to support their transfer pricing policies. Non-compliance can result in adjustments to taxable income and penalties.

If you disagree with a tax assessment or decision by the Federal Tax Authority (FTA), you can first request a reconsideration from the FTA within 20 business days. If the dispute is not resolved, you can appeal to the Tax Disputes Resolution Committee within 20 business days of the reconsideration decision. Further appeals can be made to the Federal Court of Appeal. It is advisable to seek legal assistance to navigate the dispute resolution process effectively.

Estate planning is the process of arranging for the management and distribution of your assets during your lifetime and after death. In the UAE, estate planning is particularly important for expatriates because, without proper planning, their assets may be distributed according to UAE Sharia law, which may not align with their wishes. Effective estate planning can include wills, trusts, powers of attorney, and corporate structures to ensure assets pass to intended beneficiaries efficiently.

Succession planning for family businesses involves preparing for the transfer of ownership and management to the next generation. This includes identifying and developing successors, establishing governance structures, creating mechanisms for fair treatment of family members (whether or not involved in the business), and planning for tax-efficient transfers. Given the prevalence of family businesses in the UAE, succession planning is a critical issue for many business owners.

The UAE does not currently impose inheritance tax or estate tax. However, the distribution of assets upon death can still have tax implications, particularly if assets are located in jurisdictions that do impose such taxes. Additionally, the new UAE Corporate Tax may have implications for the transfer of business interests. Proper estate planning can help minimise any tax exposure and ensure efficient transfer of assets.

A family office is a private organisation that manages the financial and personal affairs of a wealthy family. Services can include investment management, tax planning, estate planning, philanthropy coordination, and family governance. The UAE, particularly Dubai and Abu Dhabi, has become a popular location for family offices due to its favourable tax environment, strategic location, and quality of life. Establishing a family office can provide comprehensive, coordinated management of family wealth.

Value Added Tax (VAT) was introduced in the UAE on January 1, 2018, at a standard rate of 5%. VAT applies to most goods and services, with some exceptions for essential items, healthcare, and education. Businesses with taxable supplies exceeding AED 375,000 must register for VAT. VAT-registered businesses charge VAT on their sales and can recover VAT on their purchases. Compliance with VAT requirements, including accurate record-keeping and timely filing, is essential.

A tax and estate planning lawyer in Dubai can advise on UAE Corporate Tax compliance and planning, assist with VAT registration and compliance, represent you in tax disputes with the FTA, prepare wills and other estate planning documents, advise on succession planning for family businesses, help establish trusts and family office structures, and provide ongoing advice on tax-efficient wealth management. Professional guidance is essential for navigating the evolving UAE tax landscape.