Wednesday, December 7, 2022
HomeUAE BusinessTaxation or non-taxation, the UAE aims to attract investors

Taxation or non-taxation, the UAE aims to attract investors

Taxation or non-taxation, the UAE aims to attract investors


Tax advantages and luxury living have long attracted foreigners and multinational companies to the UAE. The UAE’s goal is to remain attractive regardless of whether it signs a global tax initiative.

The Group of Seven nations this month approved an “unprecedented” global minimum corporate tax agreement, targeting major companies that are considered underpaid, especially technology giants.

The goal is to have a minimum tax rate of at least 15%.

Although the agreement is the first step in a long process before it becomes a reality, what is caught in the crosshairs is a tax haven that attracts companies like this Amazon, apple, Google And Facebook.

According to data from the Tax Justice Network, the United Arab Emirates entered the world’s top ten tax havens for the first time in March.

Modestly called by the Organization for Economic Cooperation and Development as “jurisdictions with no or trivial taxation” (OECD), safe havens include the Bahamas, British Virgin Islands, Guernsey, Jersey, UAE, etc.

Abu Dhabi, the capital of the UAE, and Dubai, where you want to go, are the most attractive places for investors among the seven emirates of the UAE. Thousands of companies have set up regional offices there.

UAE officials have not issued a statement on the G7 agreement, nor did they respond to AFP’s request for comment.

But this week Dubai announced plans to reduce government procedures in the coming months as “part of efforts to reduce the cost of doing business and further promote the emirate’s economic growth.”

-“Integration and Simplification”-Severely hit by the coronavirus pandemic, the UAE has initiated a series of reforms, including allowing foreigners to fully own businesses. Previously, unless located in certain free trade zones, the upper limit was 49 %.

Economy Minister Abdullah bin Touk Almari said that these changes are aimed at improving the country’s “competitive advantage”, which is currently ranked 16th in the World Bank’s ease of doing business ranking.

Scott Livermore of Oxford Economics Middle East stated that the UAE relies on its image as an international hub and “will aspire to be seen as part of the global system, not a tax haven.”

“The benefits of staying outside the agreement are limited, especially if approved G20 And OECD countries,” the economist based in Dubai told AFP.

According to Livermore, even if the country’s businesses see an increase in tax burdens, the government may “consolidate and simplify costs,” as in the case of Luxembourg and Malta, where multiple exemptions greatly reduce the final bill.

“The authorities have realized the importance of the broader business and social environment for attracting and retaining foreign investment and talent,” he said.

“The numerous visa and business reforms announced in the past year are proof of this.”

-“Be creative”-Many foreign executives are attracted by the way of life in Abu Dhabi, especially Dubai.

The two emirates are aviation hubs, providing a variety of luxurious services that rely on immigrant labor mainly from South Asian countries.

Robert Mogielnicki, a senior resident scholar at the Institute of Arab Gulf States in Washington, said that the UAE’s low tax system has always been the “main unresolved carrot” for foreign investors.

He told AFP: “The UAE policy makers must be creative and consider restructuring various business-related expenses.”

“But even considering the expected impact of the lowest global corporate tax, the UAE will still be a relatively low tax environment.”

Although the Gulf countries have imposed new taxes in the past few years due to the economic downturn caused by the decline in oil prices, Mogilniki believes that Emirates will remain competitive.

He said: “The UAE’s business environment has good connectivity with major global markets, a high standard of living, and a vibrant labor market. The labor market is cost-effective and skilled foreign labor.”

“I think the UAE government or its citizens will not really miss any company or investor who only cares about long-term tax incentives-even if missing some business opportunities will be painful in the short term.”



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