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What Is Tax?

Tax is the means by which governments raise revenue to pay for public services. Government revenues from taxation are generally used for public spending such as infrastructure development, roads, ports, defence public hospitals, schools and universities.

There are mainly two types of taxes:

  • Direct Tax: Direct Taxes are charged on income,  property or on wealth. It is collected by the government from the person on whom it is imposed (e.g., income tax, corporate tax). In UAE Direct Taxes are payable only by banking and financial institutions.  For other corporates and individuals Direct Taxes are not levied in the UAE.
  • Indirect Tax: Indirect Taxes are levied on goods and services.  They are charged on  consumption and or  expenditure. Examples of Direct Taxes are Sales Tax, Value Added Tax (VAT) also called as Goods & Service Tax in some countries, Indirect Taxes are paid, ultimately by consumers.  UAE and two other members of GCC are introducing the VAT with effect from 1st January 2018.