Ajman

💰

Taxation

Sections

1. Overview of Taxation in the UAE and Ajman

The UAE, including Ajman, is known for its tax-friendly environment. Historically, the country has had no personal income tax, making it an attractive destination for expatriates, businesses, and investors. However, in recent years, the UAE has introduced certain taxes to diversify its revenue sources and align with international standards.

Key taxes applicable in Ajman include:

  • Value-Added Tax (VAT)
  • Corporate Tax (effective from June 2023)
  • Excise Tax
  • Customs Duties

There are no taxes on personal income, capital gains, or inheritance in Ajman or the UAE.

2. Tax Categories in Ajman

A. Value-Added Tax (VAT)

  • Rate: 5%
  • Scope: VAT applies to most goods and services, with some exemptions and zero-rated categories (e.g., healthcare, education, and certain financial services).
  • Who Pays: Businesses registered for VAT must collect VAT from customers and remit it to the Federal Tax Authority (FTA). Consumers indirectly pay VAT when purchasing taxable goods and services.
  • Registration Threshold:
    • Mandatory registration: Businesses with annual taxable supplies exceeding AED 375,000.
    • Voluntary registration: Businesses with taxable supplies or expenses exceeding AED 187,500.

Compliance Procedures:

  1. Businesses must register for VAT with the FTA through their online portal.
  2. VAT returns must be filed quarterly or monthly (depending on the business size) via the FTA portal.
  3. Businesses must maintain proper records of VAT invoices, purchases, and sales for at least five years.

Local Considerations:

  • Ajman businesses operating in free zones (e.g., Ajman Free Zone) may have specific VAT rules, especially for transactions within the free zone or with mainland entities.

B. Corporate Tax

  • Rate: 9% (effective from June 1, 2023).
  • Scope: Corporate tax applies to businesses with annual profits exceeding AED 375,000. Profits below this threshold are exempt.
  • Exemptions:
    • Income from employment, real estate investments (for individuals), and dividends or capital gains earned by individuals.
    • Businesses operating in free zones (e.g., Ajman Free Zone) may continue to enjoy tax exemptions, provided they comply with specific regulatory requirements and do not conduct business with the UAE mainland.

Compliance Procedures:

  1. Businesses must register for corporate tax with the FTA.
  2. Annual corporate tax returns must be filed electronically.
  3. Businesses must maintain proper financial records and supporting documents.

Local Considerations:

  • Ajman Free Zone companies may benefit from tax incentives, but they must ensure compliance with the UAE’s economic substance regulations (ESR) and transfer pricing rules.

C. Excise Tax

  • Rate:
    • 50% on carbonated drinks (excluding sparkling water).
    • 100% on tobacco products, energy drinks, and electronic smoking devices.
  • Scope: Excise tax is levied on specific goods harmful to health or the environment.
  • Who Pays: Importers, manufacturers, and stockpilers of excise goods must register for excise tax and pay the applicable tax.

Compliance Procedures:

  1. Businesses dealing in excise goods must register with the FTA.
  2. Excise tax returns must be filed monthly.
  3. Proper records of excise goods must be maintained.

D. Customs Duties

  • Rate: 5% on most imported goods.
  • Exemptions: Certain goods, such as those imported into free zones or for re-export, may be exempt from customs duties.
  • Who Pays: Importers of goods into Ajman or the UAE mainland.

Compliance Procedures:

  1. Importers must declare goods to the customs authority and pay the applicable duties.
  2. Businesses in Ajman Free Zone may benefit from customs duty exemptions for goods imported into the free zone.

Local Considerations:

  • Ajman Free Zone businesses enjoy duty-free imports and exports, provided goods remain within the free zone or are re-exported.

3. Taxation for Residents and Visitors

  • Residents: There is no personal income tax in Ajman or the UAE. Residents are not taxed on their salaries, investments, or savings. However, residents may indirectly pay VAT on goods and services.
  • Visitors: Visitors are not subject to any direct taxes. However, they pay VAT on purchases. Tourists can claim VAT refunds on eligible purchases when leaving the UAE through designated refund counters at airports.

4. Tax Incentives in Ajman

Ajman offers several tax incentives, particularly for businesses operating in the Ajman Free Zone:

  • No corporate tax: Free zone companies are exempt from corporate tax, provided they meet regulatory requirements.
  • No customs duties: Duty-free import and export of goods within the free zone.
  • No personal income tax: Employees and business owners in the free zone are not subject to income tax.
  • 100% repatriation of profits: Businesses can repatriate all profits and capital without restrictions.

5. Compliance and Regulatory Considerations

  • Economic Substance Regulations (ESR): Businesses in Ajman, especially those in free zones, must comply with ESR to demonstrate substantial economic activity in the UAE.
  • Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF): Businesses must adhere to AML/CTF regulations, including maintaining proper records and reporting suspicious transactions.
  • Transfer Pricing: Businesses must comply with transfer pricing rules and maintain documentation for related-party transactions.

6. Practical Tips for Tax Compliance in Ajman

  1. Register Early: Ensure timely registration for VAT, corporate tax, or excise tax to avoid penalties.
  2. Maintain Records: Keep detailed financial records, invoices, and supporting documents for at least five years.
  3. Hire a Tax Consultant: Consider engaging a tax consultant or accountant familiar with UAE tax laws to ensure compliance.
  4. Stay Updated: Regularly check the FTA website (www.tax.gov.ae) for updates on tax laws and regulations.
  5. Understand Free Zone Rules: If operating in Ajman Free Zone, understand the specific tax benefits and compliance requirements.

7. Penalties for Non-Compliance

The UAE imposes strict penalties for non-compliance with tax laws, including:

  • Late registration or filing: AED 20,000.
  • Failure to maintain proper records: AED 10,000 to AED 50,000.
  • Incorrect tax returns: Penalties based on the percentage of unpaid tax.

8. Conclusion

Ajman, like the rest of the UAE, offers a highly favorable tax environment with no personal income tax and minimal corporate tax rates. Businesses and residents benefit from a transparent and straightforward tax system. However, compliance with VAT, corporate tax, and other regulations is essential to avoid penalties. Ajman Free Zone provides additional tax incentives, making it an attractive option for businesses.

For further assistance, you can consult the Federal Tax Authority (FTA) or a local tax advisor in Ajman to ensure compliance with all applicable regulations.