The Middle East is an increasingly more attractive investment destination because the taxation policies in many jurisdictions are attractive, with low or non-existent taxes for businesses in selected fields. The taxation regime for setting up a business in the Middle East is one of the main issues taken into consideration by investors. In this article, we highlight some of the tax policies in different locations.
Investors who open a limited liability company in Qatar are subject to a 10% corporate tax rate to all activities apart from petroleum-related ones. For these companies, the tax is 35%. There is no surtax and no alternative minimum tax. Dividends are not subject to tax in Qatar. Companies fully owned by Qataris as well as nationals from the countries in the Gulf Cooperation Council (GCC) are exempt from corporate taxation.
In Bahrain, companies are not subject to corporate income tax if they activate in business fields that do not include the exploration, production and refining of oil, gas and petroleum. For these sectors, the taxation rate is 46%. First-grade restaurants and hotels are subject to a 10% levy on their gross turnover.
There is no withholding tax on dividends, interest, royalties, no technical service fee, no payroll tax, no real property tax, and no capital duty. Companies are subject to social security and stamp duty.
United Arab Emirates
Only oil and gas companies are taxed in the UAE at a progressive rate of up to 55%. Branches of foreign banks are also subject to tax and the general rate is a flat one – 20%. There are no withholding taxes in the UAE, no payroll tax, no capital duty or real property tax. Companies are required to pay capital duty, but only in respect to certain nationals.
A 20% corporate income tax rate applies to incomes derived by non-residents from a permanent establishment. The tax rate for companies in the natural gas exploitation field is 30%. A different rate applies to companies engaged in the production of oil. Received dividends are taxed in the same manner as income.
As seen from these examples of taxation policies, in many Middle East countries the corporate income tax rate is low for companies involved in business fields other than the oil and gas industries.
Other attractive investment locations in the Middle East include Egypt, Jordan, Oman, Jordan, Kuwait and others. Investors can search the most suitable location for investment based on the taxation regime as well as other criteria, such as incentives or the ease of doing business.