Janet Gooi, Senior Associate of Al Tamimi & Company's Tax practice answers the question:
You have secured funding for your start-up. Your minimum viable product and marketing strategy is in place. Your newly hired team looks promising. With so many aspects of establishing a start-up to consider, do you really need to worry about taxes for your start-up?
In short, the answer is ‘yes’.
The Gulf Co-operation Council (‘‘GCC’’) region remains an attractive region for starting a business due to the favourable tax regimes in most GCC countries.
However, there is a general misconception that there are few or no issues with taxes in the GCC. In line with the GCC’s diversification strategy and its attempt to reduce its dependence on revenue from hydrocarbons, individual countries have committed to introducing new indirect taxes and other tax reforms.
The evolving tax regimes of the region pose a challenge to entrepreneurs who are seeking to establish a presence in the GCC, or investors looking to sell, divest or acquire a business in the GCC.
Some of the key taxes in the GCC that start-ups should consider as part of their business planning include:
1. Corporate tax: A form of direct tax levied on the taxable profits of entities. Non-residents of a GCC country may be subject to corporate income tax or withholding tax depending on the domestic rules in the specific GCC country in question.
2. Withholding tax: A tax that is deducted at the source on payments made by a resident in a GCC country to non-residents.
3. Zakat: Zakat is a form of Islamic tax that is currently only enforced in certain GCC countries such as the KSA and Kuwait.
4. Value added tax (‘‘VAT’’): A form of consumption tax imposed on the supply of goods and services and is charged on the value added at each stage of the supply chain. The unified GCC VAT Agreement sets out broad principles that should be followed by all the GCC countries in their VAT laws whilst also providing flexibility in certain matters.
5. Excise tax: Dubbed the ‘sin tax’, excise tax is a form of indirect tax levied on specific goods which are typically harmful to human health or the environment.
6. Customs duty: The GCC has a unified customs duty regime. Customs duty is imposed at the first point of entry of goods into the GCC.
7. Real estate transfer taxes/ stamp duty: In the UAE, a registration fee is levied on the transfer of ownership of land and the transfer of shares in companies holding real estate.
8. Payroll taxes: Generally, the GCC countries do not impose payroll taxes. However, it is important to note that employers are subject to social contribution obligations in all GCC countries.
To learn more about each key tax, and to understand whether these might be applicable to your company, download the full report below and read the article starting page 50: