Applicability of Withholding Taxes Under the UAE Corporate Tax

Ever since the government announced the introduction of the UAE corporate tax, business owners were concerned about the applicability of withholding tax. Since the Withholding Tax is deducted at source for certain types of payments, the business owners are curious about how it will be applicable in the UAE corporate tax regime. Corporate tax consultants in Dubai can guide you on the applicability and the rate of withholding tax under the proposed corporate tax regime.

Since the government is yet to release the final UAE corporate tax law, our withholding tax guidance is based on the Public Tax Consultation Document. Corporate tax advisors in Dubai advise you to base your tax decisions on the final corporate tax law, which may be released soon. Now, let’s move on to discuss the withholding tax and its applicability under the UAE corporate tax:

Withholding Tax: What is it?

Withholding tax is a tax imposed at the source, which means tax will be deducted at the source for certain kinds of payments and that amount will be remitted to the government. Withholding taxes are implemented in nearly all tax systems and are widely applied with respect to dividends, interest, royalties and similar tax payments. Countries reduce the rates of withholding tax using tax treaties. Consult with corporate tax consultants in Dubai to understand in detail the withholding tax and its potential impact on your business.

Is There Any Withholding Tax in the UAE?

The countries that impose taxes on business income or profits have varied rates of corporate tax. However, the UAE will impose a 0% withholding tax on domestic and cross-border payments made by UAE businesses. Corporate tax consultants in Dubai can guide you on the types of income that are subject to the 0% withholding taxes.

What Are the Types of Income Subject to 0% Withholding Tax in the UAE?

The UAE government has proposed various types of income on which the 0% withholding tax will be applicable. You can talk to corporate tax advisors in Dubai to know more about such types of income. Listed below are the types of income subject to 0% withholding tax in the UAE:

• UAE sourced income earned by a foreign company that cannot be attributed to a Permanent Establishment (PE) in the UAE of that foreign company;
• Mainland UAE sourced income earned by a Free Zone Person that benefits from the 0% corporate tax regime unless the income is attributable to a mainland branch of that Free Zone Person; and
• Dividends and other profit distributions made by a Free Zone Person that benefits from the 0% corporate tax regime to a mainland UAE shareholder in the Free Zone Person

Compliance With Withholding Under the UAE Corporate Tax

Since the rate of withholding tax will be at 0%, UAE businesses are not required to make any deductions from payments made. They are also not required to file any withholding tax returns under the UAE corporate tax. Corporate tax consultants in Dubai can keep businesses updated on corporate tax compliance requirements.

Learn About Withholding Tax from Corporate Tax Consultants in Dubai

The UAE corporate tax regime proposes a 0% withholding tax, which is advantageous for businesses. Corporate tax consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help businesses to comply with the upcoming corporate tax. Our corporate tax services in Dubai include CT Assessment & Advisory Services (one-time or retainer basis), CT Compliance Services & CT Agent Services to Represent the Federal Tax Authority (FTA) of UAE in case of any notices served by FTA. Ensure corporate tax compliance and avoid relevant penalties by availing of JCA’s corporate tax services in Dubai, UAE. JCA offers customised tax solutions to allow businesses to comply with the UAE corporate tax hassle-free.