So, you’re thinking of moving your business to one of the Arab states to capitalise on all those tax benefits you have been hearing about?
However, you don’t know which one would offer your business the best chance for success and give your personal tax a bit of a break.
That is why we have put together this conclusive list, highlighting the positives and negatives of a few of the Middle Eastern states in terms of what they offer for potential business enterprises.
United Arab Emirates (UAE)
The UAE offers a range of tax treaties to avoid double taxation and has agreements with many countries to protect investments.
This is often the nation that most entrepreneurs associate with reduced tax liabilities and the lifestyle in the country reflects its drive towards success.
Positives
- Corporate Tax: The UAE does not levy Corporate Tax on businesses earning less than £83,000, making it an attractive destination for entrepreneurs who are just starting out. Even above this threshold, the tax rate remains at only nine per cent which is highly competitive.
- No Personal Income Tax: Individuals are not subject to Income Tax, allowing for greater personal wealth accumulation.
- Free zones: Numerous free zones offer additional tax benefits, including 100 per cent foreign ownership and zero import/export duties.
Negatives
- VAT: A five per cent Value Added Tax (VAT) is applicable on goods and services across the country.
- Selective taxation: Some sectors, like oil and gas, are subject to Corporate Tax which significantly increases the costs of operating in these sectors.
Saudi Arabia
Saudi Arabia offers tax incentives for businesses in sectors like technology, renewable energy, and healthcare and is quickly becoming a popular destination for entrepreneurs from around the world.
Positives
- Low Corporate Tax rate: Businesses not involved in the oil or gas industries enjoy a reduced Corporate Tax rate of just 20 per cent.
- Tax holidays: Certain industries may qualify for tax holidays, reducing or eliminating tax liabilities for a set period.
Negatives
- Oil and gas Corporation Tax: Businesses operating in the oil and gas industries can be subject to Corporation Tax of between 50 and 85 per cent.
- Zakat: A religious tax (Zakat) of 2.5 per cent is applicable to Saudi companies and Saudi nationals – something to consider when hiring internally.
Qatar
Qatar has various double taxation treaties and offers tax exemptions for specific industries, including agriculture and manufacturing.
In addition, its geographic location in the Gulf of Oman, with great access to the rest of the Middle Eastern Economic Area (MEEA), makes it a popular destination for entrepreneurs looking to expand their business to an international audience.
Positives
- Low Corporate Tax: A flat corporate tax rate of 10 per cent is applicable to all companies which is highly competitive in comparison to the rest of the world.
- No Personal Income Tax: Like the UAE, Qatar does not impose personal income tax which means you are likely to be better off in terms of personal wealth than in other locations.
Negatives
- Limited scope for foreign ownership: In most sectors, foreign investors can own up to only 49 per cent of a Qatari company. This is to ensure that Qatari citizens are not adversely affected by the growing number of foreign investors.
Kuwait
Although rarely discussed as a potential business hub, Kuwait offers tax holidays for new industrial entities and grants for research and development which can be highly beneficial to certain business start-ups and future expansion.
In addition, this small nation is right on the border of Saudi Arabia and Iran as well as having good access to the Gulf of Oman, providing numerous cross-border business opportunities.
Positives
- Flat Corporate Tax: Kuwait imposes a flat 15 per cent corporate tax, which is relatively low compared to global standards.
- No Personal Income Tax: Individuals are not subject to income tax in Kuwait.
Negatives
- Limited foreign ownership: Like Qatar, foreign ownership is restricted in most sectors, reducing the number of opportunities you will have for growth.
Need more advice on moving to the Arab states?
The Arab states offer a myriad of tax incentives that can significantly benefit businesses looking to expand or relocate.
While each state has its unique set of advantages and disadvantages, the overall tax environment is highly favourable.
It is always crucial to consult with tax professionals to tailor your business strategy to the specific tax landscape of your chosen state.
As an international tax adviser, SMCO is uniquely placed to advise your business on the various opportunities that are on offer in the Middle East and beyond.
For personalised advice and a detailed tax strategy, please contact one of our expert tax advisers.
