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27 February 2024

World's lowest tax rates make UAE, Qatar go easy on your pocket


By Waheed Abbas

The UAE’s status as a tax heaven has been strengthened further as the country has the least demanding framework and the lowest average total tax and time to comply in the world, according to a global consultancy.

GCC peer Qatar shares the honour with the UAE, with the region continuing to remain as one with lowest taxes and easiest tax compliance regulations.

“The Middle East continues to have the least demanding tax framework, with the lowest average total tax rate and time to comply; Qatar and UAE share equal first place globally, with Saudi Arabia in third position,”  according to a PricewaterhouseCoopers report titled “Paying Taxes 2015 Middle East.”

The 6-page report said it takes 12 hours and four payments in the UAE to file taxes with a total tax rate of 14. 8 per cent while in Qatar it takes 41 hours and four payments with total tax rate of 11.3 per cent. Saudi Arabia – with its third ranking – has total tax rate of 15.5 per cent, time of 64 hours and three payments.

There are no direct taxes on their personal income in the UAE and the officials have time and again refuted reports about any plans to impose personal income tax. Also, there are no capital gains tax, value-added tax, withholding tax or corporate tax.

However, foreign banks are taxed at 20 per cent of their taxable income while oil companies are also taxed on their income in addition to royalties. Municipal taxes are levied on annual rental paid at 5 per cent for residential premises and 10 per cent for commercial premises. Other local taxes include a 5 per cent tax on hotel services and entertainment.

UAE’s Ministry of Finance Undersecretary Younis Hajj Al Khoori recently said: “We are considering introducing corporate taxes. We have asked finance ministry officials to study the socio-economic effects of the tax.”

Khoori told Emarat Al Youm that the proposal is still in the study stage and that it has not been yet presented to the federal cabinet.

VAT – the most serious and efficient choice

In the Middle East, countries looking at enhancing their existing tax systems and explore alternative sources of revenue recognise value added tax (VAT) is one of the most serious and efficient choices for them. The GCC countries have been considering introducing VAT since 2007 to expand their revenue base.

In the Middle East, there is an average total tax rate of 24 per cent and it takes 160 hours to comply with its tax affairs with 16.8 payments, making the region the least demanding tax system for PricewaterhouseCoopers case study.

Nevertheless, the study said one of the key areas the Middle East region could consider improving is the use of electronic filing and payment mechanisms.

Only 15 per cent of economies in the region have implemented electronic systems for filing and payment of taxes for at least one type of tax that are used by the majority of companies.

Globally, the highest total tax rate is in South America at 55.4 per cent followed by Africa (46.6 per cent), Central America and the Caribbean (42.9 per cent), EU and EFTA (41 per cent), North America (38.9 per cent), Asia-Pacific (36.3 per cent), Central Asia and Eastern Europe (34.7 per cent) and Middle East (24 per cent).

The highest time required for tax filing is in South America at 620 hours, followed by Africa (317hrs), Central Asia and Eastern Europe (245hrs), Asia-Pacific (229hrs), North America (213hrs), Central America and the Caribbean (211hrs), EU and EFTA (176hrs) and Middle East (160hrs).

In terms of payments, the worst region is Africa (36.2 payments) followed by Central America and the Caribbean (33.8 payments), Asia-Pacific (25.4 payments), South America (23.7 payments), Central Asia and Eastern Europe (23.3 payments), Middle East (16.8 payments), EU & EFTA (12.3 payments) and North America (8.2 payments).