Understanding Taxation in the UAE: A Comprehensive Guide

In the dynamic economic landscape of Dubai and the broader United Arab Emirates, understanding taxation is crucial for individuals and businesses considering relocation or investment. While the UAE is celebrated for its low tax environment, it's important to recognize that it's not entirely tax-free. This guide offers an in-depth overview of the various tax rates and implications in the UAE, from personal income to corporate taxes.

List of Taxes in the UAE

Personal Income Taxes:

UAE does not levy personal income taxes. This means that salaries, whether earned locally or internationally, are tax-exempt for residents. However, maintaining residency outside the UAE could affect this exemption. Notably, U.S. citizens may still face tax obligations on incomes over USD 120K, but at BELANS, we can offer strategies to navigate this.

Corporate Income Taxes:

Starting June 1, 2023, the UAE introduced a 9% corporate income tax due to global pressures. Nonetheless, there are substantial exemptions to consider, especially for free zone companies engaged in qualifying activities like manufacturing, certain asset management, shares and securities holding and more. Businesses with annual incomes below AED 375,000 (approximately USD 100K) are exempt, and strategic salary planning can further mitigate tax liabilities.

Capital Gains Taxes:

Investors in the UAE benefit from the absence of capital gains taxes on appreciating assets like real estate or stocks. However, it’s crucial to consider potential capital gains taxes in other countries where assets are held.

Inheritance Taxes:

The UAE does not impose inheritance taxes. Yet, owning assets in other countries, such as the United States, may attract substantial taxes. BELANS specialises in tax optimisation strategies to mitigate these international tax implications.

Payroll and Social Security Taxes:

The UAE does not traditionally have payroll or social security taxes. However, contributions to the National Unemployment Insurance Scheme are mandated, with some exemptions. Health insurance is also a requirement, with affordable plans for expatriates.

Stamp Duty and Real Estate Taxes:

Real estate transactions in Dubai incur a one-time 4% DLD fee, while Abu Dhabi charges a 2% Land fee. Additionally, although the UAE does not have property taxes, rental or municipality taxes are applied, which vary by emirate and are included in the DEWA utility bill in Dubai. In Dubai the tax is 5% for residential properties and 10% for commercial properties. If the property is rented out the municipality tax is paid by the tenant. If the property is not rented out, the government will use an estimated rental value and apply the tax accordingly and the tax is paid by the owner.

Value Added Tax (VAT):

The UAE's VAT rate is one of the world's lowest at 5%, with exemptions for specific services and thresholds for business registration.
Travellers to UAE who are not residents can claim VAT back on all of their product purchases that they take away with them.

Excise Taxes:

To discourage consumption of certain products, the UAE imposes excise duties of 50% to 100% on items like sugary beverages, tobacco, and energy drinks. Alcohol excise duty varies by emirate.

Import Taxes:

Imported goods are generally subject to a 5% import duty and 5% VAT, with exemptions for small shipments under AED 3000 and personal relocation items.
At BELANS, we understand the intricacies of the UAE’s tax system and offer tailored consultation to navigate these regulations effectively. Whether it’s establishing a business, managing investments, or personal tax planning, our expertise ensures compliance and optimisation in this vibrant economic hub.