Introduction

Umm Al Quwain Free Trade Zone (UAQFTZ) is a free zone in the United Arab Emirates that offers a number of benefits to businesses, including 100% foreign ownership, no income tax, and low import and export duties. However, there are some taxes that businesses in UAQFTZ do need to pay.

The following are the taxes that businesses need to pay in UAQFTZ:

  • Value Added Tax (VAT): VAT is a consumption tax that is applied to the supply of goods and services in the UAE. The standard VAT rate in the UAE is 5%. However, there are a number of goods and services that are exempt from VAT, such as healthcare, education, and basic food items.
  • Corporate Tax: Corporate tax is a tax on the profits of companies. The corporate tax rate in the UAE is 9%. However, companies in UAQFTZ are exempt from corporate tax, provided that they meet certain conditions.
  • Withholding Tax: Withholding tax is a tax that is deducted at source from certain payments, such as dividends, interest, and royalties. The withholding tax rate in the UAE varies depending on the type of payment. However, companies in UAQFTZ are exempt from withholding tax on payments made to non-residents.

Here is a more detailed explanation of each tax:

Value Added Tax (VAT):

VAT is a consumption tax that is applied to the supply of goods and services in the UAE. The standard VAT rate in the UAE is 5%. However, there are a number of goods and services that are exempt from VAT, such as healthcare, education, and basic food items.

Companies in UAQFTZ are required to register for VAT if their taxable turnover exceeds AED 375,000 per annum. Once a company is registered for VAT, it must charge VAT on all of its taxable supplies. The company must then file quarterly VAT returns and pay the VAT collected to the Federal Tax Authority (FTA).

Corporate Tax:

Corporate tax is a tax on the profits of companies. The corporate tax rate in the UAE is 9%. However, companies in UAQFTZ are exempt from corporate tax, provided that they meet certain conditions.

To be exempt from corporate tax, a company in UAQFTZ must:

  • Be registered in UAQFTZ and have a valid business license.
  • Generate at least 90% of its income from within UAQFTZ.
  • Not engage in any prohibited activities, such as banking, insurance, or real estate development.

Withholding Tax:

Withholding tax is a tax that is deducted at source from certain payments, such as dividends, interest, and royalties. The withholding tax rate in the UAE varies depending on the type of payment. However, companies in UAQFTZ are exempt from withholding tax on payments made to non-residents.

Which are the tax benefits in Free Zone Sharjah?

Conclusion

Companies in UAQFTZ are exempt from corporate tax, provided that they meet certain conditions. However, companies in UAQFTZ are still required to register for VAT and charge VAT on their taxable supplies. Companies in UAQFTZ are also exempt from withholding tax on payments made to non-residents.

Recommendation: BizDaddy

BizDaddy is a leading business setup consultant that can help you understand the tax implications of setting up a business in UAQFTZ. BizDaddy’s team of experienced professionals can help you register for VAT, file VAT returns, and pay VAT to the FTA. BizDaddy can also help you to ensure that your company meets the conditions for exemption from corporate tax.

If you are serious about setting up a business in UAQFTZ, I highly recommend contacting BizDaddy. BizDaddy can help you to make sure that you are in compliance with all of the tax regulations in the UAE.