United Arab Emirates: account opening and taxation

” A thriving banking system, a developed economy, a stable currency, no exchange controls, reliable financial institutions and convenient online management from any corner of the world - a combination of these factors make the Emirates an attractive place to register current accounts and conduct economic activity around the world.

UAE company registration implies mandatory opening of a corporate account and constant interaction with the bank. What kind of accounts are there and what is necessary for this? Employees of the licensed agency GARANT.in have prepared expert advice that will help in conducting business.

Corporate account in the UAE and its advantages

1. Stable economic situation and excellent reputation of the Emirates.
2. International settlements without currency control. UAE banks work according to the international IBAN system, so the client can make settlements with European clients. Due to the absence of currency control, it is possible to withdraw unlimited amounts abroad. High reliability of banks.
3. High ratings are confirmed by the assessments of international agencies: AA- with a stable outlook according to Fitch. The Central Bank of the Emirates issues licenses to new banks only after scrupulous inspection, so the market is not oversaturated with offers and real opportunities.
4. Free account maintenance. Subject to regular use, replenishment and maintaining a minimum positive balance, the bank can service the account free of charge. In banks in Europe, most often the service is paid.
5. Return on deposits is higher than the rise in inflation. Despite the unusually low percentage of deposits - no more than 3%, it is still profitable, as inflation in the UAE has been predominantly negative for the last 5 years.
6. No need to pay income tax. UAE residents are exempt from most tax obligations.

Foreign nationals with a resident visa (analogous to a residence permit) can open any account in the UAE. They just need to fill in an application form at the bank or on the website.

Non-residents need to visit a bank branch in person, bring identity documents and confirm sources of income, due to the requirement of local legislation on counteracting activities related to the illegal receipt of funds.

Clients who are 18 or 21 years old can open an account (it all depends on the bank's requirements and what product the applicant wants to use). The account can be opened in the local currency or use the currency of another country.

Privileges of resident accounts:

• The owner is given access to a full package of banking services, a credit line can be opened.
• Minimum requirements must be met to open an account, no deposit required.
• It is necessary to declare the intention to cooperate with Emirati business partners. It is important that the person with the right to sign is a holder of a resident visa.
• Prompt due diligence procedure, as the immigration service has previously carried out the check.
• Account holder data is strictly confidential and may not be disclosed to third parties.
• The account can be used at your discretion (deposit/transfer/withdrawal of money).

Fuctionality of non-resident accounts:

• The client can use the minimum package of the bank's services.
• It is necessary to replenish the account immediately after opening it for the amount of 1 million dollars or confirm the account turnover for such amount.
• Availability of real estate in possession and current partners in the UAE (active contracts) will be a significant advantage.
• Full-fledged due diligence procedure for the signatory: verification of sources of funds, search for similar business projects in other countries.
• Within the framework of international exchange on non-resident accounts, information on the account holder can be provided to officials at first request.
• For many procedures, the account is blocked, used as a virtual wallet for rare transactions. 

Opening a Dubai account implies fulfillment of certain requirements of banks:

1. Having a real office space or residence. The bank needs to have information about the location of the business control or management center.
2. The account holder needs to show proof of residency status. The bank needs to know the tax status, which eliminates the automatic exchange of information between banks for transactions.
3. Providing a full package of supporting documentation for KYC procedures.

What documents will be required to register a corporate current account with a UAE bank:

• Original passports of the account holder, signatory and shareholders.
• Resident visa of the account holder.
• Emirates ID card of the account holder.
• Original constituent documents with additions, an order securing the account holder's authority.
• Cash flow on the owner's personal account for the last six months - statement.
• Confirmation of the real address of the legal entity.
• Full information on the company's activities.
• Information on three counterparty companies with which the company is currently doing business.
• If the company was registered more than 6 months ago, several active contracts and invoices must be provided. In some cases, the bank may request the balance sheet of the company.

If you turn to GARANT.in for help, you will be able to open the right type of account in the Emirates for unimpeded economic activity without any effort or hiccups. Our employees understand the intricacies of the UAE banking system. We provide comprehensive assistance with documents for registration of current accounts and help in working with the bank. With us you save time and effort. We will help to settle any issue in a short period of time - to choose real estate, issue a visa, submit documents for residency.

Taxes in the UAE for individuals and legal entities

” State and regional taxes in the UAE for non-residents and citizens of the country. Optimization of taxation for business. How to get tax residency in the Emirates and why it is beneficial?

The loyalty of the tax system towards different categories of individuals and legal entities is one of the main reasons that attract foreigners to the Arab Emirates. The absence of income tax in the UAE and levies on almost all business segments, except for the oil industry and foreign banks, favorably distinguishes the country from many countries of the world.

But from June 2023, the authorities are preparing to update the tax regime for small and medium-sized businesses. They will be charged fees that will go to the budget for the development of the economy. Despite this innovation, in terms of interest rates, taxes in the UAE for citizens and entrepreneurs in comparison with other countries remain at a competitive level.

At the same time, immigrants strive to obtain the status of tax resident in order to be free from double taxation in their home country. In addition to corporate taxes, the legislation of the Arab Emirates provides for tourist tax, excise taxes on alcohol, tobacco products, energy and carbonated drinks, as well as VAT.

Taxes in the UAE for individuals

National and regional taxes in the UAE for non-residents and citizens of the country are regulated by the Federal Tax Authority, or FAT. A distinctive feature of the tax system model is the absence of a single tax code that determines the amount of fees for each individual emirate. Therefore, the interest rates on regional taxes, as well as the number of levies, can vary from city to city. On average, they do not exceed 5%.

On the positive side, there is no income tax in the UAE for all individuals, including freelancers and the self-employed. This rule applies to both citizens and expats. For comparison, in the Russian Federation the income tax rate is 13%. However, this does not mean that all salaried employees are completely exempt from payments.

Depending on the place of employment, individuals who are citizens of the country make contributions to the insurance system. The amount of contribution for private companies and public sector employees is 20% of the salary. The only difference is the amount of contributions: 5% is paid by people themselves, the rest is paid by the employer and partly by the state.

Since foreigners cannot yet claim to accrue pensions, this rule does not apply to them. In the future, it is planned that residents of the country who have a working record in the budgetary sphere, corresponding to the legislation, will take part in the accumulation program, guaranteeing them a monthly payment when they reach retirement age.

In other cases, there are only 3 types of taxes for all physical persons in the country:

• 5% VAT on the value of purchased goods and services (except for tax-exempt goods and services);
• on the transfer of immovable property with a floating rate set by each particular emirate (from 2% to 4%);
• on the rental of real estate - approximately 5% of the value for residential properties and 10% for commercial properties.

In addition, since 2014, municipal and tourist fees on room rates, service charges, and UAE city tax have been introduced at resort properties for travelers.

What taxes do legal entities pay?

Until mid-2023, small and medium-sized businesses are exempt from paying corporate levies with the exception of natural resources companies and foreign banks. For them, a rate of up to 55% applies.

From June 1, corporate tax in the UAE will be imposed on all companies except startups and companies that do not do business domestically and are registered in FEZs (free economic zones). The interest rate will be set individually, taking into account the amount of profit. On average, it will be 9% for companies with annual revenues of $102,000 or more.

Taxes on UAE dividends and capital gains will still not be levied. The new tax regime also provides benefits for international companies with representative offices in the Emirates. Whether they will fall under double taxation is not yet known. Most likely, it will depend on the agreements previously concluded by the Arab Emirates with other countries.

Benefits of obtaining tax residency

The tax residency certificate cannot be obtained automatically when applying for an Arab Emirates residence permit. For this purpose, foreigners must meet the following requirements:

• be in the country for at least 180 days a year, have an open resident visa and housing - for individuals;
• own a company in the UAE for at least 1 year - for legal entities.

Residency allows immigrants to avoid double taxation at home and in the country of actual residence. Both entrepreneurs and employees can take advantage of this advantage.

Analyzing the taxation system in the UAE, we can conclude that the country provides attractive from the economic point of view of working conditions not only for its citizens, but also for immigrants. Every year the emirates are becoming more and more liberal in order to attract foreign capital.

The absence of income taxes, corporate levies, inheritance and luxury taxes, as well as the possibility to operate in the FEZ without additional payments, certainly creates a favorable environment for business.

The only thing is that the procedure of applying for a tax residency certificate has its own nuances for individuals and legal entities. GARANT.in's specialized experts provide consulting and legal assistance in any matters related to moving abroad.