UAE Withholding Tax

1. Definition

Withholding tax is a tax that is deducted from the payment made by the payer to the payee and paid to the tax authorities on his behalf. In the UAE, it is a form of corporate tax.

2. Relevant regulations and implementation time

On December 9, 2022, the UAE Ministry of Finance adopted Federal Decree No. 47, which clarified the rules on corporate tax and withholding tax. From June 1, 2023, the relevant provisions of the decree will apply to all financial years.

3. Tax rates and applicable circumstances

• 0% Withholding Tax Situations
• •General rules for non-tax exemption situations: There is a view that fees paid to non-resident service providers and contractors are subject to 10% withholding tax, and fees paid to resident service providers and contractors are subject to 5% withholding tax, but this statement may vary depending on the specific situation and regional regulations.

4. Differences from other taxes

Withholding tax is different from VAT. VAT, which has been implemented in the UAE since 2018 and has a standard rate of 5%, is a tax on the sale of goods and services that businesses collect from consumers and remit to the tax authorities, while withholding tax is withheld at source on certain income payments.