Ivanna Pylypyuk, the founder of Parus Corporate Services, shared her insights on how recent legislative changes, including the introduction of corporate tax, have impacted business in the UAE. Why this has only increased the attractiveness of doing business, the advantages of this step, and much more are covered in this article.

The UAE is no longer a tax-free jurisdiction for businesses. How has this changed doing business in the country?

The introduction of corporate tax has undoubtedly changed the business environment. Companies are now required to pay a 9% corporate tax on profits, which has necessitated the adaptation of business processes and improvements in financial management. Of course, this represents an increased burden for businesses and demands greater attention. However, the tax introduction also has its positive sides: the business environment has become more transparent and predictable, increasing the UAE’s attractiveness in the eyes of international investors. Among large corporations, the UAE’s reputation has become more stable and raises fewer questions.

Additionally, the extra tax revenues will help the government diversify the economy and reduce its dependence on oil revenues, contributing to sustainable economic growth. Another significant achievement is that the Financial Action Task Force (FATF) has added the UAE to its whitelist of countries. This is largely thanks to the introduction of corporate tax and the completion of standardization processes related to anti-money laundering (AML) screening. As a result, doing business in the UAE is safe from every perspective and fully aligned with international standards.

How critical is the current tax burden in the UAE for businesses?

The current tax burden in the UAE remains one of the lowest in the world. The corporate tax rate is just 9%, which is significantly lower than in many other countries, and this factor does not put substantial pressure on companies. The UAE offers special tax regimes for small businesses (Small Business Relief) and incentives for certain free zones. Offshore entities are still exempt from taxation, allowing them to be used for specific transactions.

For most businesses, the tax rate is not critical and allows companies to maintain high competitiveness. Of course, attention must be paid to company administration, as it is necessary to hire accountants and resolve outstanding compliance issues from previous periods.

Who will find the UAE an optimal choice for building a corporate structure? What types of activities will thrive in the UAE in 2024?

The UAE is particularly attractive now for international companies in sectors such as technology, finance, logistics, and e-commerce. For tech companies, the UAE offers advanced infrastructure and government support for innovation. Logistics companies can benefit from the country’s strategic location, while financial and fintech companies find a favorable ecosystem for growth.

Additionally, companies involved in international trade will also benefit from advantageous conditions. The jurisdiction is appealing for conducting real business and relocation, as there is no personal income tax in the UAE, which makes it possible to attract top talent from around the world.

However, the UAE is not a jurisdiction for everyone. Success here is achieved by companies with strong business models, whether they are large corporations or startups.

You have been living in Dubai for several years, during a time of significant legislative changes, especially regarding corporate taxes. Do you feel these changes? How has the UAE’s business climate evolved compared to, say, 2021?

Since the introduction of corporate tax in the UAE, the business climate has become more structured and transparent. Companies are paying more attention to tax planning and compliance with legislative requirements. This has improved corporate governance and enhanced the UAE’s reputation as a stable and predictable place for doing business.

Compared to 2021, the current business environment is more organized and open to international investors. The UAE remains a perpetual transit hub for capital, talent, and business. It is a highly competitive environment that attracts international companies.

What trends do you observe in the UAE? Where is the non-resident business sector headed?

The UAE continues to diversify its economy and actively develop sectors unrelated to oil. Particular attention is being paid to technology, fintech, sustainability, and renewable energy. Non-resident businesses are actively being attracted to the country thanks to low tax rates and favorable conditions for international operations.

At the same time, regulation and transparency are increasing, making the UAE attractive for sustainable, long-term business growth. The UAE aims to attract top talent and startups, as evidenced by its extensive long-term visa programs, including the well-known Golden Visas (10 years), Green Visas (5 years), and Blue Visas.

The government and each emirate have development plans offering excellent conditions for business relocation and family living. These include high levels of safety, exceptional service, cleanliness, comfortable living conditions, and the opportunity to earn a good income. This makes the UAE unique on the global stage.

As reported by the Federal Authority for Identity, Citizenship, Customs, and Port Security (ICP), over 236,000 foreign nationals took advantage of the opportunity to regularize their status. The visa amnesty program, which began on September 1, concluded on December 31, 2024.

Under the amnesty, individuals who violated UAE immigration laws were allowed to legalize their status in the country or leave without incurring penalties. As a result of the amnesty, more than 55,000 people received permission to exit the country.

Following the amnesty’s conclusion, authorities will resume inspections to identify visa violators, who will face deportation and inclusion in “blacklists.” Employers hiring individuals with invalid visas will be subject to fines ranging from 100,000 to 1 million dirhams.

The United Arab Emirates has introduced a system for VAT refunds for tourists who make purchases in online stores during their stay in the country.

The system is fully electronic, operating through a digital platform where tourists can scan their passports, make purchases, and automatically upload receipts (which can then be used to claim a VAT refund).

Notably, the system allows VAT refunds for all purchases, including those made online.

How it works:

The VAT refund process takes place after identity verification, either during delivery or upon completing the online order. A tourist who made a purchase in the UAE can apply for a VAT refund within 90 days of the purchase.

The maximum amount for a single cash refund is AED 7,000, while there is no upper limit for refunds processed to a card.

A tourist (or simply a non-resident of the UAE) must be of legal age and leave the UAE within three months of the purchase, taking the goods with them.

The VAT refund rules do not apply to aircraft crew members and do not cover VAT on yachts, cars, motorcycles, or airplanes. Additionally, VAT cannot be refunded if the goods were partially or fully consumed (used) within the UAE.

The Federal Authority for Identity, Citizenship, Customs, and Port Security (ICP) has announced the extension of the visa amnesty program for two months, until December 31, 2024.

The visa amnesty program allows those who are staying in the UAE illegally to legalize their status or leave the country without penalties.

According to the ICP, those who continue to violate the rules after the program’s extension will face fines and additional measures, such as deportation and inclusion on “blacklists.” Companies that employ violators risk fines ranging from 100,000 to 1 million dirhams.

Starting from October 18, 2024, to access the services of the Ministry of Human Resources and Emiratisation (MOHRE), a UAE Pass will be required instead of a username and password. All other login methods will no longer work, and usernames and passwords will be deleted.
UAE Pass is the official digital identifier for residents and citizens of the country, providing users access to all government services.

Educators will now be eligible for long-term residency under the “golden” visa, as announced by Sheikh Hamdan bin Mohammed Al Maktoum, Deputy Prime Minister and Minister of Defense of the UAE, as well as Chairman of the Executive Council and Crown Prince of Dubai.

The new visas will be granted to teachers who have demonstrated outstanding results and made significant contributions to the development of the private education sector.

Educators from private preschools, schools, and higher education institutions in Dubai will be eligible to apply for 10-year visas.

By Cabinet Decision No. 100 of 2024, changes were introduced to the UAE’s VAT collection system, as reported by the Federal Tax Authority. The amendments affect areas such as crypto-assets and investment fund management.

In particular, VAT exemptions apply to services provided by fund managers to licensed funds. These services include:

• fund operations management;

• investment management for the fund or on its behalf;

• monitoring and improving the fund’s performance.

In the field of cryptocurrencies, “the transfer and conversion of virtual assets, such as digital currencies” will be exempt from VAT.

The VAT changes regulated by Decision No. 100 also include a revision of export rules for goods and services and clearer definitions of supply-related terms. Charitable and government organizations will also receive VAT exemptions on certain donations worth up to 5 million dirhams.

The changes will come into effect on October 15.