Tax Shelter Strategies

There is a clear distinction between tax avoidance and tax evasion, the former being a legal means to reduce the overall tax burden, while the latter is illegal.  UAE being almost a tax free haven with a business friendly environment, has always attracted foreign capital inflows from all over the world. The UAE levies corporate tax on oil companies and foreign banks only. It has not yet applied corporate tax on other industries. Businesses registered in the free zones are exempt from corporate tax for a certain time and such time can be extended. Rules and regulations of independent free zones apply. Recently, Value added Tax at 5% has been introduced in UAE by federal authorities.

Legitimate Tax Shelters give global companies willing to establish their footprint in UAE the necessary tax shelter from total tax burden by reducing taxable income and still being compliant with applicable laws of the business jurisdiction.  It is therefore of paramount importance that your UAE taxation partner firm is very well versed in local taxation regime and can guide you on appropriate strategies depending upon the nature and complexity of your business.  Some of commonly used global tax shelter strategies include:

  •         Accelerated deduction of cost of capital purchase rather than deducting such costs over time.
  •         Contribution towards a retirement plan
  •         Utilize workplace benefits e.g. health and disability insurance, the cost of which is normally deducted from paycheck before taxes.
  •         Invest in Real Estate for individuals and businesses, as portion of this cost can be deducted
  •         For Home and business, portion of your mortgage, utility bills, office supplies and portion of home repairs can be deduced from taxable income.
  •         Family Business – adding a member of family also increases the deduction of taxable income while real income of the household does not change.
  •         For self-employed, your income up to a threshold can also be deducted from taxable income.
  •         Investing in long term assets and avoiding capital gains tax.
  •         Gifting wealth to a family member in the lower income bracket can also save overall taxes.
  •         For UAE Value added Tax Regime, any input vat on cost of goods, services, banking charges etc can be deducted from output VAT to calculate final tax amount.

When a UAE based company is exploring tax shelter strategies, it is critical to seek advice from a locally based reputable tax firm, which has thorough experience of the local taxation laws and can provide the right tax shelter services as required by your firm. Quantum Auditing is a UAE based firm serving a broad spectrum of clients, helping them save on tax expenses while ensuring full compliance to all local laws and regulations.

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