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Business Taxation in Yemen
 
 
 

General

At the time of writing, the standard rate of corporate tax in Yemen is 35%. Concession companies engaged in the exploitation of oil and gas are required to pay a fixed tax, normally 3% on their expenditure during the exploration phase as per the relevant Production Sharing Agreement (PSA).

A corporation is resident if it is registered in accordance with the Regulations for Companies in the Republic of Yemen, headquartered in Yemen, an economic sector unit (public and mixed) in Yemen or a concession company operating in Yemen.

Resident companies are liable to tax on profits earned within or outside Yemen resulting from the activities of their head office in Yemen; nonresident companies pay tax on profits derived from Yemen and arising from the carrying out of an activity or profession or from an individual transaction, irrespective of the period in which it was transacted.

Taxable Income

Corporation tax is imposed on taxable income, which consists of income from manufacturing, services and trading activities, less allowable deductions.

Dividends

There is no special treatment for dividends.

Capital Gains

Capital gains are taxed as normal business income.

Losses

Losses may be carried forward up to 4 years. Loss carryback is not permitted.

Foreign Tax Credit

No.

Holding Company Regime

No, but limited rules exist for companies wholly subject to zakat.

Tax Incentives

Projects established under Investment Law No. 22/2002 and Free Zone Law No. 4/1993 enjoy an exemption from corporate income tax for seven years and the specified term of the project, respectively. The Oil and Minerals Ministry must pay corporate tax, from its own share, on behalf of concession companies engaged in the exploitation of oil and gas, during their development phase, as per their relevant PSA.


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