UAE Has World’s Most Attractive Tax Framework

The UAE has the most attractive tax framework in the world and the least demanding, according to a report by the World Bank Group and PwC.

The report found that tax regimes in Middle East countries continue to have one of the most attractive rates in the world. The UAE, Qatar and Saudi Arabia retained the top three positions as having the most attractive tax rates in the world.

On average, a medium-sized company in the Middle East has a total tax obligation of 23.7 per cent, making 17.6 payments and needing 159 hours to comply with its tax requirements. The report also highlights a nine-year trend of all these indicators in the Middle East.

“The Middle East tax environment is evolving,” said Dean Kern, partner, PwC’s Middle East markets, tax and legal services leader.

“In desire to become simple and an efficient place to do business, the governments here are looking to strengthen their fiscal frameworks by introducing measures to reduce complexity, such as, electronic filing and e-payments.”

“There is also a shift towards a more territorial approach to taxation along with an expansion of the tax treaty network in a number of regional economies such as the UAE and Saudi Arabia.

“With GCC governments considering introducing value added tax (VAT), the biggest challenge in order to drive voluntary compliance will be to ensure that the VAT systems are simple, efficient and cost effective for companies,” he said.

UAE businesses have traditionally enjoyed low taxation policies with many operating in tax-free trade zones.

Last year, the UAE government announced a study to examine the effects of imposing a uniform corporate tax across all the emirates in a bid to reduce its dependence on oil revenues.

However Younis al-Khouri, undersecretary and director general at the UAE federal finance ministry, told Reuters that the study was just a regular exercise with no new taxes planned for now: “It is only an impact study, nothing more than that. We have announced earlier that 2012, 2013 won’t have any taxes.”

Presently, corporate tax is only enforced on oil companies and banks with the former paying 55 per cent and the latter paying 20 per cent in corporate tax. Individuals are not required to pay income tax.

The study found that 14 economies increased their total tax obligations while 14 others lowered their tax rates.

However, a tax rate decline has shown signs of slowing down globally, the report said.