Income Tax in Yemen Arab Republic
The two main tax laws in Yemen are the Income Tax Law 17 of 2010 and the General Sales Tax Law 19 of 2001.
Yemen applies a worldwide basis of taxation for resident companies. A company is resident in Yemen if:
· It is incorporated under the Yemeni law;
· It has its head office, or is effectively managed, in Yemen; and,
· The participation of the Yemeni state or any other state-owned legal person in the company exceeds 50% of the share capital.
The standard corporate tax rate is 20%. Other rates are applicable to specific categories:
· 50% for telecommunication;
· 35% for oil, gas and mining activities and international telecommunication;
· 15% for investment projects
CAPITAL GAINS TAX
Capital gains are taxed as part of ordinary business income. For non-resident companies, capital gains on the sale of shares in resident companies and immovable property are taxed at 20%.
Profit tax is applied to the net income of business enterprises (which includes all companies i.e. limited responsibility companies, stock holder companies, etc.). Under Yemeni law ‘net income’ is defined as ‘income achieved by a business (company) during the year after deducting acceptable expenses’ where acceptable expenses are expense incurred in the creation of income, either directly or indirectly. The applicable tax rate is 25%.
Zakat is collected under the Islamic rules of the Zakat Authority from all commercial enterprises and professional firms at a rate of 2.5% of their net income.
Businesses in Yemen prepare audited, financial statements under the International Financial Reporting Standards (IFRS). Tax returns are submitted with supporting documentation including the audited financial statements. The profit before tax is taken from the audited financial statements and adjusted for tax purposes to arrive at a taxable profit or loss.
Tax depreciation can be claimed on qualifying assets at various rates.
Tax losses may be carried forward and set off against taxable profits arising in the subsequent five years. If after five years an amount of tax losses remain, these are lost. It is not possible to carry tax losses back.
Several incentives are available in Yemen including an Aden Free Zone and tax incentivized investment projects and tax benefits for the mining, export and agriculture industries. In addition there are benefits and incentives for small enterprises and for the creation of employment.
With Holding Tax
Withholding tax is levied on certain income as follows:
· Dividends = 0%
· Interest = 10%
· Royalties = 10%
· Fees (technical) = 10%
· Fees (management) = 10%
No withholding tax is levied on branch profits.
Personal Income Tax
Yemen taxes the income of individuals (employment, pensions, interest and dividend income) on a territorial basis.
An individual is a resident of Yemen if:
· They reside in Yemen;
· They are present in Yemen for a period or periods amounting in aggregate to at least 183 days in a tax year; or,
· They are employees of the Yemeni government posted abroad.
Wages and Salaries Tax
Wages and salaries tax are subject to tax at a rate of 15% (residents) and 20% (non-residents). An employer deducts the tax from the salaries/wages of each employee and remits it to the Yemen Tax Authority.
Income tax rates
Income tax is levied on income at a top tax rate of 15%.
Social Security Contributions
Social security contributions at levied at 6%. The SSC’s are paid towards old age, disability and death allowances.
Non-resident individuals are subject to income tax at a rate of 20%. Capital gains on sale of shares in resident companies are taxed at 20%.
Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.