A country that attracts the world’s wealthiest, the United Arab Emirates is known for luxury and extravagance. With that said, any discussion about wealth, business, and lifestyle must – by default – include the subject of taxes. And in the case of the United Arab Emirates, the tax system is not as straightforward as content creators would like people to believe.
Situated in the southeast region of the Arabian Peninsula, the United Arab Emirates [UAE] is a federation of seven emirates [or microstates]:
- Abu Dhabi
- Dubai [the most famous]
- Umm Al-Quwain
- Ras Al Khaimah
The unique nature of the UAE draws people from dozens of cultures and countries to experience a wonderful and exotic lifestyle that simply cannot be found elsewhere.
With stunning desert scenery, vibrant and sophisticated cities, and its important geographical position within the Middle East – neighboring Saudi Arabia – the region is famed for its status as a modern -and futuristic – trade, business and transportation hub.
Among its most famous attributes – no income tax – the UAE represents an opportunity for individuals, entrepreneurs, investors, and families to experience rewarding financial benefits and an enviable lifestyle.
When considering a move abroad, the potential tax situation one could face is among the most important considerations. It is essential to be fully aware of what the tax obligations and benefits will be in a new country – this information alone can be the single most important factor in influencing the choice of destination.
As Astons UAE Golden Visa is one of the most popular options for the Middle East, our experts are fully versed and seasoned in the rules and regulations for all types of taxation in the United Arab Emirates, both for individuals and for businesses.
Astons provides this brief explanation of taxes in the United Arab Emirates to help you understand the situation and properly prepare you for your consultation with our experts.
The UAE tax code
Due to the country’s historic wealth and sustainable revenue streams, the UAE – unlike most countries – does not need to rely upon taxation to fund the nation’s needs.
Thus, in many aspects, the UAE is a zero-tax sanctuary for sophisticated investors and the global HNWI community.
True to form as a world renown tax haven, the UAE has:
- No income tax: Unlike many countries the UAE does not impose income tax on employees, freelancers and the self-employed who are residents of the UAE, making it a very attractive destination for high-income individuals
- No inheritance tax
- No social security tax for non-Gulf Cooperation Council nationals
- No capital gains tax – unless a company is taxable under another income tax
- No estate or gift tax
- No wealth tax
- No luxury tax
- No taxes on foreign pensions
- No stamp duty on property purchases/sales
- No crypto taxes [see “The Crypto City – Cryptocurrency and the UAE tax code” below]
What does the UAE tax?
Though a tax-haven, there are still some taxes that residents, citizens, and businesses need to be aware of.
Social security tax
Employees who are nationals of any of the six Gulf Cooperation Council (GCC) states are subject to a social security tax of 17.5% – 5% paid by the employee and the remainder paid by the employer.
Employees of companies and branches registered in a Free Trade Zone (FTZ) are also subject to the social security regime. Residents of other GCC nations may be subject to varying contributions according to their home country.
Non-GCC nationals are not subject to social security tax in the UAE.
Introduced in 2017, an excise tax is levied on certain goods and services – specifically those considered a threat to the environment or to human health. These goods are known as “excise goods”.
The government’s aim was to encourage a reduction in use and consumption of harmful products, along with funneling the revenue spent on such items into government services for the public benefit.
Excise goods are products or services as defined by law, including:
- Carbonated drinks including concentrations, powders, gel or extracts intended to be made into a carbonated beverage
- Energy drinks containing stimulating substances including caffeine, taurine, ginseng and guarana and other substances with a similar effect. Also included are any concentrations, powders, gel or extracts intended to be made into such beverages
- Sweetened drinks
- Tobacco and tobacco products including all items listed under Schedule 22 of the GCC Common Customs Tariff
- Electronic smoking devices and tools, together with the liquids used in such devices
Rates of UAE excise tax:
- Carbonated drinks – 50%
- Energy drinks – 100%
- Tobacco products – 100%
- Electronic smoking devices and liquids used in such devices – 100%
- Any product with added sugar or sweeteners – 50%
Business required to register for the UAE excise tax are:
- Those who import excise goods into the UAE
- Businesses engaged in the production of excise goods where they are released for consumption in the UAE
- Businesses which stockpile excise goods in the UAE in certain cases
- Those who are responsible for overseeing an excise warehouse or designated zone
Since January 2018, a Value Added Tax or VAT of 5% is levied on the majority of goods and services in the UAE, at the point of sale.
The income generated by the VAT is used to fund government public services. The UAE government also intends for the VAT to help reduce the country’s dependence on oil and other hydrocarbons as a source of revenue.
Businesses are required to register for VAT if their taxable supplies and imports exceed AED 375,000 [approx. $105,000 USD] per annum. It is optional to register for VAT if their payment for supplies and imports exceeds AED 187,500 [approx. $50,000 USD] per annum.
The VAT applies equally on tax-registered businesses across the entire UAE as well as in the Free Zones. However, if the UAE Cabinet defines a specific Free Zone as a ‘designated zone’, it must be treated as outside the UAE for tax purposes. The transfer of goods between designated zones is tax-free.
As with any sales tax, businesses add the VAT to the cost of goods and services at the time of purchase and then pass the money onto the government. Likewise, the government refunds businesses the VAT they have paid to their suppliers.
Foreign businesses, as well as tourists, can also get refunds of the VAT they pay when visiting the UAE. Tourists, like residents and citizens, pay VAT at the point of sale.
Businesses located in the UAE must file VAT returns annually – usually within 28 days of the end of the tax period as defined for each type of business.
The UAE standard tax period is quarterly for businesses with an annual turnover of less than AED 150 million [approx. $40 million USD], and monthly for business with incomes greater than AED 150 million. Returns are filed online through the Federal Tax Authority [FTA] portal.
VAT Refund For Tourists
Introduced in November 2018, the VAT program now enables visitors to the UAE to claim a refund on VAT paid for purchases they have made while in the UAE, subject to the following conditions:
- The goods must be purchased through a retailer taking part in the Tax Refund For Tourists program
- The goods must be eligible under the program
- The purchaser must depart the UAE with the purchased goods within 90 days of the purchase
- The process of purchase and export of goods must take place according to the requirements and procedures of the FTA
The VAT refund is done through an electronic system connecting retailers registered in the Tax Refund For Tourists program with all ports of entry and exit from the UAE.
The purchaser can claim their refund using a kiosk at the departure port – airport, seaport, or land border – by submitting the tax invoices from their purchases along with copies of their passport and credit card. The tourist can receive their VAT refund in cash (local currency only – UAE dirhams) or have it refunded to their credit card.
Import and export taxes in the UAE
UAE customs duty
For most items, customs duties are calculated at 5% of the Cost, Insurance and Freight (CIF) value. There are exemptions for some categories. Most notably, alcohol carries a 50% customs duty and tobacco products carry a 100% duty.
The UAE Ministry of Finance announced in January 2022 that it would be introducing federal corporate tax [CT] on the net profits of businesses. Previously, corporate taxes were only levied on oil companies and international banks.
The new CT code is schedule to go into effect on either 1 July 2023 or 1 January 2024 – depending on the financial year followed by the business. In either case, the tax becomes applicable from the beginning of the financial year starting on or after 1 June 2023.
According to the official portal of the UAE Government the aim of the new corporate tax is to:
- Cement its position as a leading global hub for business and investment
- Accelerate its development and transformation to achieve its strategic objectives
- Reaffirm its commitment to meeting international standards for tax transparency and preventing harmful tax practices
Corporate tax will apply to:
- Individuals and businesses which conduct business under a commercial licence in the UAE
- Free Zone businesses. The UAE Corporate Tax regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland
- Any foreign entities or individuals if they conduct regular or ongoing business in the UAE
- Businesses involved in real estate management, construction, development, agency and brokerage activities
Exemptions to the UAE CT are available for:
- Businesses engaged in the extraction of natural resources as they are subject to the current Emirate level corporation taxation
- Any dividends and capital gains earned by a UAE business from its qualifying shareholdings
- Qualifying intra-group transactions and reorganizations – subject to compliance with the necessary conditions
- An individual earnings salary and other employment income whether received from the private or public sector
- Interest and other income earned by an individual from bank deposits or savings programs
- Income earned by a foreign investor from dividends, capital gains, interest, royalties, and other investment returns
- Income earned by individuals in their personal capacity (rather than as a business) from investment in real estate
- Dividends, capital gains, and other income earned by individuals from owning shares or other securities in their personal capacity (rather than as a business)
Rates of UAE corporation tax will be as follows:
- For taxable income up to AED 375,000 [approx. $100,000 USD] – 0%
- For taxable income over AED 375,000 – 9%
A separate tax rate (yet to be published) will apply to large multinational companies meeting specific criteria set within Pillar 2 of the OECD Base Erosion And Profit Shifting Project – the international program of collaboration aimed at ending tax avoidance.
Taxation in the UAE tourist sector
As with most destinations, the tourist sector provides an incredible financial influx for the UAE. So, the UAE tax code provides for specific taxes to be charged by restaurants, hotels, vacation rental apartments, and resorts in the UAE:
- 10% tax on the room rate
- 10% service charge
- 10% municipality fees
- 6%-10% city tax
- 6% tourism fee
In Dubai, hotels charge a “Tourism Dirham Fee” between AED 7 to 20 [$2-5.50 USD] per room per night [to a maximum of 30 consecutive nights], depending on the category or grade of the hotel.
Hotels in Abu Dhabi charge an extra amount of 4% of the hotel charge plus an addition AED 15 [$4 USD] per night per room.
Hotels in Ras Al Khaimah charge AED 15 [$4 USD] per room per night as a tourist fee.
Property transfer tax in the UAE
Transfer charges apply when a property is bought or sold in the UAE. This varies according to the specific emirate, for example 4% in Dubai while Abu Dhabi charges only 2%. The transfer fee is usually divided equally between the buyer and the seller.
There is also an Administration Fee of AED 540 [approx. $145 USD] along with the transfer fee.
In addition, there is a Registration Fee [paid by the buyer] which varies according to the cost of the property:
- For property valued up to AED 500,000 [approx. $135,000 USD] the fee is AED 2,000 [approx. $550 USD]
- For property valued over AED 500,000 the fee is AED 4,000 [approx. $1100 USD]
Once the purchase has been completed the new owner must obtain an ownership certificate which costs AED 250 [approx. $70 USD].
New owners of commercial property also pay 5% VAT on the purchase price.
There are no annual real estate taxes for residential real estate owners, however they do pay an annual fee for maintenance of the property – which is used for capital repair, common areas maintenance, children’s playgrounds, sports facilities, and similar infrastructure.
The annual maintenance fee is usually established by the developer and is typically between $15 – $60 USD per square meter. The fee is paid yearly in advance, and in the case of rental properties, the property owner, not the renter, is responsible for the maintenance fee.
Municipality taxes in the UAE
For tenants who rent a residential property, a municipality tax is automatically added to the utilities bill. The percentage of municipality tax varies according to the specific emirate – for example:
- Dubai renters pay 5% of the monthly rental price
- Abu Dhabi residents pay 0%
- Non-resident expats in Abu Dhabi pay 3% of the monthly rental price
- Sharjah charges 2% of the monthly rental price
Commercial rental properties across the UAE pay 10% of the rental/lease price.
The Crypto City – Cryptocurrency and the UAE tax code
Dubai has long been known as the City of Gold, and in the age of crypto, sophisticated investors, crypto entrepreneurs, and HNWI crypto enthusiasts know the UAE is a real El Dorado.
Ranked as the world’s top cryptocurrency hub, the UAE is one of the world’s best digital tax havens.
Pushing the Caribbean down the top 5, the UAE’s 0% tax on cryptocurrency and very favorable regulatory environment has already attracted over 800 crypto businesses to the region – making UAE residency by investment, Malta citizenship, and the Monaco Golden Visa the trinity of the world’s crypto elitists.
Free Trade Zones
Free Trade Zones in the UAE are special economic zones that offer tax concessions and customs duty benefiting foreign resident investors. There are 45 such zones in the UAE including:
Dubai South, International Free Zone Authority, Dubai Multi Commodities Centre, Sharjah Airport Intl Free Zone, Sharjah Media City, Ras Al Khaimah Economic Zone, Umm Al Quwain Free Trade Zone, Dubai Airport Free Zone, Dubai World Trade Centre, Dubai Silicon Oasis, Jebel Ali Free Zone, Abu Dhabi Airport Free Zone, Twofour54, Industrial City of Abu Dhabi, Dubai Internet City, Dubai Academic City, Dubai Biotech Research Park, Dubai Design District, Gold and Diamond Park, Dubai Healthcare City, Dubai Industrial City, Dubai International Financial Centre, Dubai Financial Village, Dubai Media City, Dubai Outsource Zone, Dubai Studio City, International Media Production Zone, Hamriyah Free Zone, Ajman Free Zone, Fujairah Free Zone and Fujairah Creative City
In Free Zones, expats and foreign investors can have full ownership of companies and are able to take advantage of efficient infrastructures and services that streamline and integrate workflows.
Benefits Of UAE Free Trade Zones:
- 100% foreign ownership
- 100% repatriation of capital and profits
- Efficient and fast business set-up procedures
- Well-developed business communities
- A variety of options at competitive rates
- 100% exemption from corporate tax for 15 to 50 years
- 100% exemption from income taxes
- 100% exemption from customs duty
- Exemption from VAT
- Separate and independent laws and regulations
- Easy access to regional and global markets
- Modern, sophisticated infrastructure
Double Taxation in the UAE
The UAE has nearly 200 Double Taxation Agreements and Bilateral Investments Treaties with other nations including:
Austria, Belgium, Canada, China, Czechia, Egypt, Estonia, Finland, France, Germany, India, Indonesia, Ireland, Italy, Republic of Korea, Latvia, Lebanon, Luxembourg, Malaysia, Malta, the Netherlands, New Zealand, Poland, Portugal, Romania, Serbia, Seychelles, Singapore, Spain, Switzerland, Thailand, Türkiye, and Ukraine, and the United Kingdom.
Double taxation treaties protect nationals, businesses, and residents of one country who are earning an income in another country – avoiding the issue of being taxed in two countries on the same income as well as encouraging strategic global partnerships.
The aim of the UAE government in participating in double taxation agreements is to:
- Promote the development goals of the UAE and increase the diversity of sources of national income
- Eliminate double taxation, additional indirect taxes, and tax evasion
- Eliminate barriers to cross-border trade and investment flows
- Help protect UAE Golden Visa investors from direct and indirect double taxation
- Promote the exchange of goods and services and the free movement of capital
Under these agreements, the individual or company pays taxes in the country where the income is made and submits a tax deduction in the country of residence.
Paying taxes in the UAE
The UAE provides an online resource for taxes, called Emara Tax.
Individuals and businesses in the UAE can access Emara Tax to complete tax registrations, filing tax returns, paying taxes, and enquiring about refunds. Emara Tax integrates with the UAE Central Bank and UAE PASS in order to streamline user experience and make it easier for taxpayers to comply with their tax obligations.
‘Raqeeb’ Whistleblower Program for reporting violations
The UAE Federal Tax Authority (FTA) has developed a program named Raqeeb to address the issue of tax violations and evasion and to raise levels of tax compliance in the country. Companies or individuals found to be fraudulently evading their tax obligation will be prosecuted and subject to penalties.
Under the program, anyone can report any irregularities or tax evasion to the FTA, which will conduct investigations and, in some cases, may grant monetary rewards for such reporting.
Tax Information Exchange
Since 2018 the UAE has signed up to the Common Reporting Standard (CRS), a unified system for exchanging tax information. Over 100 other countries are signed up to the CRS including Canada, several European and Asian countries and island states such as Antigua & Barbuda and St Kitts & Nevis.
Under the CRS, banks, investment institutions and insurance companies keep the local authorities informed of non-residents’ bank accounts. This information is exchanged between the countries, making it easier to identify irregularities, debts and non-payment of taxes.
The United Arab Emirates provides full access to all tax issues and information via the Federal Tax Authority and the Ministry of Finance website.
The United Arab Emirates prides itself on many things, but most notably:
- High standard of living
- Favorable conditions for foreign investment
- High earning potential
- Modern and sophisticated lifestyle
- Beneficial business environment
- One of the world’s best crypto climates
All these factors combine make the elite UAE Golden Visa one of the most attractive options in the world for individuals, investors, businesses, and HNWIs who desire taking every element of their life to the next level – and Astons expert advisors can help you do just that!
Schedule a free consultation now.