In this article, we will discuss a number of taxation issues in the UAE, such as applicable customs duties, UAE tax residency for individuals, and the UAE taxes related to social security.
Customs Duties in the UAE
The UAE is a member of the World Trade Organization (WTO) and a contracting party to the Revised Kyoto Convention of the World Trade Organization, the main agreement regarding global customs administration and procedures. At the regional level, the UAE and other GCC countries share common customs laws, implementation procedures and a common customs tariff (although it must be noted that there may be differences in implementation between member states).
In addition to the agreements between GCC member states, the UAE is part of the Greater Arab Free Trade Area, and a number of bilateral and multilateral free trade agreements currently exist or are under discussion.
There are a number of free economic zones in the UAE that allow you to suspend the collection of customs duties.
Customs duty is usually calculated on the basis of the Cost, Insurance and Freight (CIF) value of the imported goods when the goods are sold for export. The duty is payable at the time of import.
Customs duty rates in the UAE are generally either 0% or 5%, but in the UAE they may be higher for some goods.
Usually, the importer and/or declarant is the person who declares the goods for import or export purposes when the goods are declared at the UAE border for movement into or out of the country.
Even if there is a customs broker, under contractual arrangements, the owner of the goods and/or the consignee may have obligations to pay duties, as well as other import-related obligations. Thus, the choice of a broker and the process of concluding a contract should be carefully considered.
The following documents are generally required for all commercial shipments in the UAE, regardless of cost and mode of transport:
- Commercial invoice;
- Certificate of origin of goods;
- Bill of lading (or air bill of lading);
- Certificate of the shipping (air) company;
- Insurance certificate (if the goods are insured by the exporter);
- Packing list;
- Supplier or bank guarantee
Depending on the nature of the goods being shipped, and whether the goods are restricted or require special import authorization, it may be required to get a special approval, separate notification, or pass a relevant approval procedure from the relevant ministry.
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Main Customs Factors
In addition to knowing and following the customs reporting and notification requirements, it is important to understand the following three factors:
- Classification of goods: how goods are classified and whether the Harmonized System (HS) codes used for customs declaration are in order;
- Origin of goods: where the goods are imported from, and whether any benefits of a free trade agreement can be enjoyed;
- Evaluation of goods: what is the value of imported goods? This will serve as the basis for calculating the fee.
Some attention should also be paid to the operational and regulatory issues arising from non-fiscal customs issues, in particular in relation to export control and trade embargoes, which affect, in particular, the ability to move goods. In the UAE, particular attention is being paid to reviewing the regulatory framework for implementing such non-fiscal trade control measures.
Customs Trends and Activities in the UAE
In recent years, the UAE customs authorities have initiated a significant number of post-clearance inspections to verify compliance with customs and global trade regulations by economic operators.
The focus of these audits tends to be, among other things, on the accuracy of the documentation supporting the requested duty relief, the conformity of the valuation methodologies and customs values used for customs declaration purposes, the identification of classification codes and the identified sources of origin.
Particular attention has been paid to operators and businesses in the Free Zones / “Designated” Zones regarding the consistency of documentation and inventory within the Free Zones.
The UAE customs authorities (both in Dubai and in Abu Dhabi) are promoting Authorized Economic Operator (AEO) certification. This is a trade securitization program aimed at strengthening the relationship between customs authorities and business. AEO-certified companies enjoy a number of benefits, including but not limited to faster clearance and reduced collateral.
Many businesses continue to apply for the “industrial exemption” program, which allows goods to be imported duty-free when the importer has an “industrial exemption”. Obtaining this sort of “exemption” and complying with the requirements in this regard continues to be the focus of both the business community and UAE customs authorities.
Taxation of Personal Income in the UAE
There is currently no tax on the income of individuals working in the UAE, and no tax returns are required in the country.
UAE Tax Residency for Individuals
The UAE does not have tax laws covering individuals and as a result, there is no internal concept of tax residency for individuals.
However, the Ministry of Finance issues a certificate of UAE tax resident to individuals who meet the requirements of the Ministry of Finance (including holding a UAE resident visa for more than 183 days).
When applying, copies of the following documents are required:
- UAE resident visa;
- The Emirates ID;
- Certified bank statements for the last 6 months (certified by the seal of the bank);
- A letter from the company indicating the position and the size of the employee’s remuneration, or a certified statement of salary;
- A copy of the lease agreement for any personal premises rented by an individual (or a company on behalf of an individual) in the UAE.
Taxes in the UAE Related to Social Security
Social security contributions are only required for citizens of GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE).
For UAE national employees, employer and employee contribution rates are 12.5% and 5% respectively, based on monthly contractual wages, including basic benefits stipulated in the employment contract.
Contribution rates and bases for citizens of other GCC countries vary, but are generally in line with those for UAE citizens.
Under UAE labor law, non-GCC nationals are eligible for severance pay (EOSB) if their employment contract terminates after completing at least one year of service.
EOSB is paid by the employer and is calculated as 21 days per year of the base salary for the first five years of service, plus 30 days per year of base salary for each additional year of service, provided the maximum EOSB payment is not to exceed the sum total of two years of salary payments.
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What customs duties apply in the UAE?
Customs duty rates in the UAE are generally either 0% or 5%, but may be higher for some goods.
Can an individual obtain a UAE tax resident certificate?
Yes, in the UAE, an individual can obtain a UAE tax resident certificate.
Are there income taxes for individuals in the UAE?
No, personal income is not taxed in the UAE.