Dubai and the United Arab Emirates have low taxes. Everyone knows that.
However, it is not tax-free, and you will still have to pay some taxes when relocating your personal residence or business to the country, or even if you just invest.
In this article, we provide you with a complete overview of all tax rates in the UAE, from capital gains taxes to property taxes.
Let’s start with personal income taxes.
These are charged on salary incomes, whether they are derived from a source in the UAE or abroad.
There are no personal income taxes in the UAE, so no matter where you receive your salary from, it is completely tax-free, as long as you live in the UAE.
Be careful, in order to qualify, you must not have a residence in a country outside the UAE.
Your citizenship does not matter, except if you are US American. In that case Income above USD120K will still be taxable in the United States.
If you are US-American, we can assist you in getting around these restrictions. And you don’t necessarily need to renounce your citizenship. Contact us for more details.
As there is no personal income tax in the UAE, you won’t need to file a tax return if you live here.
Next up are corporate income taxes.
As a result of pressure from the US and European governments, the UAE introduced a 9% corporate income tax on June 1, 2023.
However, there are generous exemptions.
Free zone companies with qualifying income do not need to pay taxes.
Qualifying activities include manufacturing, and certain types of asset management, among others.
Whatever your business activity, corporate income below AED375K or about 100 thousand USD is always exempted.
And keep in mind, you can always pay higher salaries, to reduce your corporate profits, and avoid paying corporate income taxes.
In the UAE, there are no capital gains taxes.
That means if any of your investment assets appreciate in value, whether that be real estate or stocks, you won’t have to pay. taxes in the UAE on the gains.
However, keep in mind that if you hold real estate or stocks in countries outside the UAE, you may still be subject to capital gains taxes abroad.
For example, if you own real estate in the UK, and sell that real estate at at a profit, you may still need to pay capital gains taxes in the United Kingdom.
This is where we can help. We specialize in developing advanced tax optimization strategies that allow you to eliminate taxes even if you invest abroad.
Next up, inheritance taxes.
Again, the UAE doesn’t charge any taxes here. However, be careful if you own real estate or shares in other countries.
For example, if you own assets in the United States, you will need to pay up to 40% in US inheritance taxes, even if you reside in Dubai and are not a US citizen.
The same applies to real estate investments in many countries.
However, no need to worry, with our tax-optimization strategies you can continue to own assets abroad without paying inheritance taxes anywhere.
Aside from taxes, you need to keep in mind that without a proper will your assets will be divided up according to Sharia Law.
Let’s discuss payroll and social security taxes.
These are taxes on employee salaries to pay for welfare benefits such as unemployment insurance and health insurance.
The name for these taxes varies by country.
In the UAE, there are officially no such taxes.
However, all employees are required to pay into the National Unemployment Insurance Scheme.
Fees are minimal, and there are exemptions for certain self-employed individuals and company owners. Contact us for details.
Similarly, depending on the emirate and your visa, most UAE residents are required to have health insurance.
Health insurance for expats is mostly privatized, and plans start from less than a hundred USD per month.
Again, you can get around this requirement for health insurance using certain strategies.
Next up is stamp duty, or a tax on real estate purchases.
In Dubai, if you buy real estate you will need to pay a one-time 4% fee, also known as DLD fee.
In Abu Dhabi, stamp duty is known as Land fee and is charged at 2%.
This fee is always paid by the buyer. However, in some cases, if you buy directly from a developer, the developer may pay some or all of this fee.
Staying with real estate taxes, let’s talk about property taxes.
The UAE and Dubai do not have property taxes.
However, unbeknown to most real estate investors, there are so-called rental or municipality taxes.
These taxes are used to pay for local municipal services such as the sewage system.
This municipal tax is officially charged on the rental income, rather than the property value, thus the unofficial term “rental tax”.
In Dubai, this tax is 5% of the rent for residential properties and 10% for commercial properties.
Abu Dhabi charges 5%, and Sharjah 2%.
The tax is based on the rental value.
If the property is vacant, an estimate of the rental value is used to calculate the payable tax amount.
In Dubai, the tax is charged through the monthly DEWA utility bill.
As a result, if you rent out your unit, your tenant will pay the tax as part of their utility bill.
Let’s continue with the UAE’s Value Added Tax.
At 5%, it is among the lowest in the world.
Furthermore, there are exemptions for educational and certain financial services.
VAT also does not apply to real estate purchases or rents.
Non-residents can apply for VAT refunds on any products they purchase in the UAE and take out of the country.
Also, businesses with a turnover of less than AED375K or about 100 thousand USD per year are not required to register for VAT, and thus don’t have to charge VAT on their sales.
Excise Taxes are special taxes to discourage consumption.
In the UAE, there is a 50% excise duty on certain sugary beverages and foods.
Tobacco products and energy drinks are taxed at 100%.
Alcohol is taxed at 30% in Abu Dhabi.
Dubai, however, eliminated its 30% alcohol excise duty at the beginning of 2023.
Lastly, import taxes.
If you import goods into the UAE, you will need to pay a 5% import duty or tariff.
However, small shipments valued below AED300 are exempted from import taxes
The same is the case for household goods and personal belongings that you bring into the country as part of your relocation to the UAE.