Although Dubai has long been hailed as a tax haven, minimal taxes exist in Dubai. Undoubtedly, its bustling economies beckon entrepreneurs and investors from around the globe. However, before you dive into the business world of the United Arab Emirates (UAE), it’s crucial to understand the tax landscape. While the UAE boasts no federal income tax, there are still various taxes individuals and businesses need to be aware of.
This blog lists all forms of taxes in Dubai and other emirates in the UAE. So, let’s delve into the details:
1. Income Tax
The UAE does not impose income tax on individuals. To clarify, this also includes freelancers and self-employed residents. Hence, as long as you’re employed by a company or your own company, your salary is not subject to income tax.
2. Corporate Tax
Corporate Taxes (CT) selectively apply to businesses whose profit surpasses the annual profit threshold. The Corporate Tax law came into effect in June 2023, introducing a flat rate of 9% for eligible businesses. To clarify, Corporate Tax (CT) only applies if annual profit exceeds the threshold of AED 375,000. In short, this means that all taxable yearly profits that fall under AED 375,000 shall be subject to a zero rate. Additionally, the UAE is expanding its network of Double Taxation Agreements (DTAs) and Bilateral Investment Treaties (BITs) to encourage global partnerships and reduce taxes on investments and profits.
3. Tourism Tax
By and large, all hotels and resorts may charge various taxes, including municipality and tourism fees. They may apply a 10 per cent tax on the room rate, a 10 per cent service charge, a 10 per cent municipality fee, a city tax ranging from 6 to 10 per cent, and a 6 per cent tourism fee. In Dubai, hotels apply a ‘Tourism Dirham Fee’ per room per night of occupancy (for a maximum of 30 consecutive nights), varying from AED 7 to 20 based on the hotel’s category/grade. For example, in Ras Al Khaimah, hotels impose a tourism fee of AED 15 per room per night.
4. Social Security IndividualTax
Social Security taxes are mandatory in all GCC countries. Notably, this only applies to GCC nationals, not expats and non-GCC nationals. In the UAE, GCC nationals are subject to contribute, while non-GCC nationals are exempt. UAE national employees must calculate social security contributions at 20% of their gross remuneration, as specified in their local employment contract. Social security obligations extend to employees of companies and branches registered in a free zone.
5. Rental Tax: Overall, rental taxes differ by Emirate and tenant type. The municipality tax is 5% of your rental contract’s value for all premises, with a minimum amount to pay of AED 450 per annum. Although the total fee applies from the first day of the rental contract, the annual fees are broken down into monthly instalments to make payments.
6. Property Transfer Tax
A transfer charge applies to property transfers, varying by Emirate. In Dubai, the property transfer fee is 4%, typically split equally between the buyer and the seller. The Dubai Land Department imposes administrative fees for properties in Dubai, including a DLD fee of 4% of the property value (AED 430 for land or AED 40 for off-plan and AED 580 administrative fee for apartments and offices).
7. Inheritance Tax
There is no such thing as an inheritance tax in the UAE. In actuality, inheritance is managed according to Islamic Shari’a principles.
8. Importation Taxes in the UAE
The rate of customs duty is 5% of the value of goods plus the Cost of Freight Insurance. Free zones offer special tax benefits, including exemptions from corporate tax and import/export taxes.
1. VAT: The UAE imposes a 5% VAT, with specific exemptions and zero-rated items.
2. Excise Tax: Levied on goods deemed harmful to health or the environment.
Specifically, the UAE levies excise taxes on certain products; the excise tax rates are:
Some emirates also charge higher taxes on the sale of alcohol. Abu Dhabi charges a 30% sales tax on alcohol. However, Dubai ceased the 30% alcohol tax last January 2023. Like many countries, UAE tourists can request VAT refunds on eligible purchases. Take note of existing VAT refund kiosks and counters throughout the city.
Corporate Tax: All annual taxable profits above AED 375,000 shall be subject to a minimal 9% rate.
Excise Tax for Businesses: Businesses involved in excisable goods must register for excise tax.
VAT for Businesses: VAT registration is mandatory for businesses meeting specified thresholds.
Customs Duties: Customs duties vary, with exemptions for specific categories.
In conclusion, while the UAE offers a tax-friendly environment for individuals and businesses, understanding and complying with relevant tax regulations is essential for navigating this vibrant country’s dynamic landscape. While income tax may not be a concern, seeking financial advice on business tax obligations remains crucial, especially for larger enterprises. Failure to settle taxes can result in penalties, including fines and potential imprisonment. Moreover, tax inspections have increased, highlighting the importance of compliance.
So, whether you’re a resident, entrepreneur, or investor, staying informed about UAE taxes ensures smooth operations and legal compliance in this thriving business hub. Our tax consultants will gladly assist you in your tax endeavours, from planning to filing and reporting. For more information about our tax services, contact us at +971 4 2221327 or [email protected].
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