If we compare the tax system in Dubai with most traditional taxation schemes abroad, we cannot but notice a major difference: Dubai does not impose many taxes that are mandatory for businesses and individuals in other countries.
Where does the state get its money from then? And how has Dubai become so rich if it levies low taxes? Zero income tax in the UAE is one of the factors in favor of moving to Dubai (with expats making up 88% of its population), but how does the country live without it?
Well, the main profit of the state is formed not only at the expense of the oil industry (as most foreigners believe) but from other sources, and we will try to look at them in more detail in this article.
Since 2019, the UAE has launched a new immigration program that allows foreign citizens to get a residence permit in Dubai for buying real estate for a period of 2, 5 or 10 years. You can get more information about the resident visa from the experts of our portal, and they can also provide a range of services for those who wish to obtain a Golden Visa in other countries.
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UAE Tax System in 2023: Is Dubai Really Tax-Free?
The main thing to pay attention to when you study the laws of the Arab Emirates is that there are actually no taxes in Dubai: only a certain category of payers in particular areas is subject to taxation. However, it is impossible to say with 100% certainty that taxes in Dubai and other emirates are completely non-existent.
A major change is also expected in 2023: an income tax for companies, which has not been paid until the present day, will be introduced in June. The rate approved by the UAE government will be 9%, but it is a floating value that can be reduced or increased, depending on the company’s income and field of activity.
UAE Individual Taxes
What taxes are levied on individuals in Dubai in 2023 and is there a chance to get a legal exemption from them? If you are a foreigner planning to move to Dubai, it should immediately be noted that the application of UAE tax benefits requires obtaining the status of a tax resident. And we will talk about how to do this further in the article.
Income Tax in Dubai
Dubai income tax is not levied on individuals – in the same way as taxes on wealth, inheritance, capital gains, or gifts. Also, foreigners with a UAE visa do not pay the pension tax that exists in other countries. In Portugal, for example, the pension tax rate is progressive and reaches 48% if the pension comes from abroad.
Mind that if you earn money in Dubai while being a tax resident of another country, you may still be liable for taxes.
Interested to know Dubai tax on salary rate? Well, the income tax rate in the UAE (Dubai) in 2023 is 0%.
Dubai and UAE Tourist Tax
The state has a service tax that varies from emirate to emirate. For example, tourists may find that they will have to pay a tax of 10% of the cost of a hotel room, 10% of the service charge, and up to 10% in the form of municipal fees.
An interesting fact is that the service charge is not distributed among the restaurant staff as is the case in other countries: the total amount goes to the government.
Some tourist attractions may also charge a city tax (from 6% to 10%) and 6% in the form of a tourist fee.
Tourist taxes in different emirates:
- The municipal tax in Ajman and Sharjah is 10%, with 7% levied in Dubai, and 0% payable in Ras Al Khaimah.
- Dubai hotels charge an additional tourist dirham fee of between AED 7 and AED 20 per night, but payment is taken only for 30 days of stay at the hotel.
Reference: In the UAE, you can open a bank account without a resident visa or pre-arrange a prepaid anonymous card for foreigners by contacting our experts. The most common payment option in different currencies is the China UnionPay card.
Property Taxes in the UAE
This category of taxes in Dubai and other Emirates has several directions and may include the following mandatory fees:
- Rental tax in the UAE is levied in most emirates and is included in the payment for utilities by the tenant:
- In Dubai, it equals 5% of the annual rent.
- In Abu Dhabi, the capital of the UAE, the rental tax is 3%. However, it is collected only from foreigners, while local residents are exempted from this tax.
- In Sharjah, both foreigners and locals pay 2% of the annual rent as rental tax.
- Commercial real estate rentals are subject to the municipal tax of 10%.
- The real estate purchase tax in the UAE is divided into the transfer fee and the registration fee.
- The transfer fee equals 4% in Dubai and 2% in Abu Dhabi. The buyer and the seller are supposed to pay in equal shares, but it often happens that the buyer pays the amount. The transfer tax rate is very low compared to other countries.
- The registration fee is paid by the buyer of real estate in Dubai. The amount depends on the value of the property and is AED 2,000 for properties under AED 500,000 or AED 4,000 for properties over AED 500,000.
- The transfer tax in Dubai is paid together with the transfer fee and equals AED 540.
- When buying commercial property in Dubai, the owner is required to pay 5% VAT.
The mandatory payments for real estate in the UAE include the fee for the Certificate of Title which costs 250 dirhams in 2023.
If you are looking for real estate abroad for investment, immigration and citizenship, please study our offers or contact our experienced consultants to help you with the choice.
How Can an Individual Obtain a Dubai Tax Residency Certificate?
To become a full taxpayer in the UAE, foreigners can obtain a resident visa that automatically grants them tax resident status. In 2023, a Dubai investor visa can be granted to an individual that purchases real estate which costs at least 750,000 dirhams.
If you want to benefit from the DTTs (Double Taxation Agreements) that the UAE has concluded with 138 countries, you will need to confirm your tax status in Dubai. You will need to have a residence permit in Dubai, live in the country for at least 180 days, and then apply to the Federal Tax Service by submitting the following documents:
- Copy of passport
- Copy of a UAE Resident Visa
- Copy of a long-term lease or real estate sale agreement
- Proof of income
- UAE bank account statement for the last 6 months
- Proof of residence in the UAE for at least 180 days (issued by the General Directorate of Residency and Foreigners Affairs or the Federal Authority for Identity and Citizenship).
You will also need to pay the fee for the Certificate of Tax Residence in the FTA in the amount of 1,000 dirhams and provide additional information in the application form. The certificate will be issued within 3 days.
UAE Corporate Taxes
As mentioned earlier, Dubai’s corporate tax will be introduced in June 2023 at a rate of 9%. The condition for income tax payment applicable to companies in the UAE is simple: the amount of profit per year exceeds AED 375,000. Other entrepreneurs will continue to be exempted from corporate tax in Dubai, which will cover most businesses and private investors.
If the company operates in a free zone, it is expected to preserve all the incentives on the condition that its activities are conducted outside the UAE.
The Dubai tax rate imposed on companies in certain sectors of the economy will amount to the following:
- Foreign companies in the oil and gas sector – 55%
- Branches of foreign banks – 20%
As you see, the country selected two sectors that generate the lion’s share of taxes while exempting all the others, and its economy successfully rests on these pillars.
Dubai tax rates on dividends amount to zero in the UAE, capital gains of a legal entity, as well as intra-group transactions and company reorganization in Dubai.
VAT amounts to 5% in the Emirate of Dubai (as in all others), and it will be imposed as a mandatory payment if the annual profit equals or exceeds AED 375,000. VAT registration with the FTA is voluntary for companies with revenues ranging from AED 187,500 to AED 375,000.
Excise tax in Dubai is only levied on selected products and is calculated at the following rates:
- 50% on carbonated beverages and products containing sugar or sweeteners
- 100% on tobacco products and energy drinks
- 100% on electronic smoking devices
Excise tax is paid by the companies that manufacture or import these products, or provide storage services for excisable goods.
Import and export taxes in Dubai
The import tax is levied depending on the type of imported product. According to general criteria, it amounts to 5% of the cost, insurance and freight (CIF). As in the case of excise duty, some groups of goods are subject to an import tax in the amount of 50% to 100% (tobacco and alcohol), which is in line with the fundamental principles of Islam. Failure to comply with Islamic principles is a costly affair, as you see.
Export tax in the UAE amounts to 0%.
The goods of the Greater Arab Free Trade Area are imported without taxes, and so are the goods imported into the UAE Free Zones. In the latter case, tax liabilities arise at the time of import transfer to the local market of the emirates.
UAE Company Tax Credits
Foreign investors choose UAE Free Zones for business registration in order to receive tax benefits in Dubai or another emirate. The advantages of such free zones in 2023 include:
- tax exemption for 15-50 years
- no VAT
- no customs duties
- income from foreign sources is not subject to Dubai taxation and is available for free circulation on the bank accounts of the legal entity
- the foreign investor may be the sole owner of the company in the Dubai Free Zone
Our experts can help you establish a company in Dubai without much hassle involved. Please contact them personally using the information provided on the website.
Why is Tax So Low in Dubai Then?
And here we get back to the main question that many foreigners ask: how did it happen that Dubai is such a rich country while its tax rates are so low? We will give a brief answer based on statistics, the economy of the UAE, and the research conducted:
- The United Arab Emirates (and, in particular, Dubai) generate revenue and increase the state’s GDP not only at the expense of the oil sector.
- In 2022, the share of profits from the oil and gas industry in the UAE increased, but is not the basis of the economy and the wealth of the jurisdiction.
- Most of Dubai’s profits come from industries such as real estate, airlines, tourism, seaports, trade, and attracting foreign investors.
Is Dubai still tax-free? If you have any doubts about it, you can check it in person by visiting the UAE or by contacting the experts of our portal to get advice and order services!
Dubai offers considerable tax benefits that numerous expats come to enjoy. It’s a truly exhilarating experience to live in a country where you don’t have to worry about annual tax returns or hiring an accountant. Contact us to make the first step.