Dubai is an island with literally no production of its own. Apart from oil, everything else in Dubai has been imported. Most of these imports are also exempt from taxation. Some imports that are at odds with the local Islamic laws are heavily taxed.
- Apart from the high quality of life, the foremost reason for such enthusiasm for Dubai is the fact that Dubai is a tax-free nation. There is no income tax on income generated in Dubai. Also, there is no sales tax on the majority of goods and services.
Is Dubai a tax free haven?
Dubai represents a tax haven with a zero tax rate for legal persons and natural persons. There are no such terms as income tax from natural persons and corporate tax on profit from legal persons. Exactly for that reason, Dubai is recognized as the most favorable tax jurisdictions in the world.
How is there no tax in UAE?
The United Arab Emirates does not have any federal income tax. An income tax decree has been enacted by each Emirate, but in practice, the enforcement of these decrees is restricted to foreign banks and to oil companies.
How does Dubai survive without tax?
Dubai is an island with literally no production of its own. Apart from oil, everything else in Dubai has been imported. Most of these imports are also exempt from taxation. Some imports that are at odds with the local Islamic laws are heavily taxed.
Is healthcare free in Dubai?
As stated earlier, the UAE has free public healthcare for Emirati nationals. Non-residents will have to pay significantly higher fees for treatment at a hospital or clinic. However, these costs are subsidized and the standard of care is high at both a public and private facility. 4
Why is Dubai so rich?
Its diverse economy makes Dubai one of the richest in the world. Unlike other states in the region, Dubai’s economy doesn’t rely on oil. The growth of its economy comes from business, transportation, tourism and finance. Free trade allowed Dubai to become a wealthy state.
Is it cheaper to live in Dubai or England?
Cost of living in Dubai (United Arab Emirates) is 30% cheaper than in London (United Kingdom)
Is Dubai expensive to live?
According to the Mercer Cost of Living, Dubai is an expensive city. It ranked as the 23rd most expensive out of 209 destinations. However, it is about 25% less expensive than New York City – and about 4% less expensive than nearby Abu Dhabi. As such, depending on where you live now, Dubai might look like a bargain.
What is a good salary in Dubai?
Dubai has a good average salary range, extending from a monthly salary of 4,810 AED (1,309.56 USD) to 99,000 AED (26,953.44 USD) per month. The average salary range only considers salaries that fall between the average minimum salary and the average maximum salary in Dubai.
Which country is tax free?
Monaco: The tiny European city-state imposes zero tax on citizens income. Qatar: Another oil-rich Arab kingdom on the list is the tiny nation located on the Persian Gulf. Saint Kitts and Nevis: The tropical island nation situated between the Atlantic Ocean and the Caribbean Sea is another nation with no income tax.
What language is mostly spoken in Dubai?
The official language of the United Arab Emirates is Arabic. Modern Standard Arabic is taught in schools, and most native Emiratis speak a dialect of Gulf Arabic that is generally similar to that spoken in surrounding countries.
Is education free in Dubai?
Education is free for UAE citizens at government institutes up to the university level. In Dubai, profit schools can increase their fees based on their individual school grade as per the results of Dubai School Inspection Bureau (DSIB) and the Education Cost Index (ECI) which is calculated on a regular basis.
Is emergency free in Dubai?
In case of emergency, treatment to stabilise the case is free. Other treatment must be paid for by cash, credit card or insurance. You can look for medical facilities on the websites of: Ministry of Health and Prevention.
Dubai Tax Haven – Myth or Reality?
Photograph courtesy of WN / Smita Dubai is one of the seven Emirates of the United Arab Emirates, and it is a prosperous one at that. Because to its tax-free structure, it is well-known for attracting shopaholics, tourists, and businesses alike to the area. Aside from Dubai, none of the other Emirates in Dubai levy a federal tax, despite the fact that they are legally permitted to do so. In Islamic nations, it is prohibited to collect money that has not been earned via labour or service, which are considered taxes.
The myth of zero percent taxation in Dubai, on the other hand, is far from the truth, since there are certain social security levies levied on people, and businesses are required to pay certain corporate taxes.
Dubai is on the verge of becoming a tax-free zone.
Certain taxes such as import charges on items from outside the nation, taxes on rental property and in the hotel business, as well as social security taxes all contribute to the relatively low percentage of taxes that are levied.
- Dubai does not impose a value-added tax (VAT), which is equivalent to a sales tax, on its goods, although the International Monetary Fund (IMF) has recommended that the Emirate begin establishing a similar system.
- Due to the absence of corporate income tax in the Emirate of Dubai, international corporations flock to the city.
- The Emirate of Dubai has also established special economic zones (SEZs) for firms, in which they have granted unique incentives in order to stimulate the economic growth of the area.
- Furthermore, there are no import or export taxes assessed against enterprises operating in free zones.
- At the present time, Dubai has 18 specialized free zones, which include the following names: Dubai International Financial Center (DIFC), Dubai Aid and Humanitarian City (DAHC), Dubai Airport Free Zone, Dubai Silicon Oasis, Dubai Media City (DMC), Jebel Air Free Zone (JAFZ), and others.
- Created in 1990 with a tax-free duration of 50 years, the Dubai Media City and Dubai Internet City, which cater to the media and communication business, are located in Dubai.
- How Does the United Arab Emirates Provide Tax-Free Status?
- Although oil earnings help it to maintain its tax-free status, the International Monetary Fund (IMF) believes that the country should go beyond oil to diversify its economic operations into other sectors.
Duty-free items are offered at rock-bottom costs in Dubai, making it an excellent destination for bargain hunters. Because summer is coming to a close, travellers should secure the cheapest flights to Dubai that are currently accessible.
Dubai Income Tax & Taxation Advantages For Expats
Since its inception, Dubai’s tax-free lifestyle has served as a magnet for highly skilled expats from all over the world. Indeed, the prospect of working in Dubai and having the potential to increase your own fortune without the benefit of tax breaks is incredibly enticing to many people. It is true that the UAE’s Dubai income tax rate is zero, which is one of the benefits of residing in the UAE’s capital. Dubai, like the rest of the UAE, derives the majority of its revenue from the oil sector and utilizes its tax-free status to recruit talented expats and multinational corporations in order to diversify and develop its economy even more.
That, on the other hand, appears to be way too wonderful to be true, doesn’t it?
UAE tax system – general overview
Are the taxes in the United Arab Emirates different from the taxes in Dubai? In the United Arab Emirates, there is no single federal tax legislation. As a result, while most UAE tax policies and international agreements are applicable throughout the Emirate, there are instances in which each emirate can establish its own tax standards. The duty-free policy in Dubai draws tourists from all over the world. For example, most DTTs apply across the United Arab Emirates, but the specific taxes that apply in each emirate are determined at the municipal level.
This is true for both UAE nationals and foreigners living in the country.
In most Emirates, there is a rental tax, and the laws varies from one Emirate to the next. Residential tenants in Dubai, for example, pay an additional 5 percent of their annual rent as a result of renting a property. Money Saver is a sponsored product. In Abu Dhabi, expat tenants are required to pay a rental tax of 3 percent of their yearly rent, although UAE nationals are exempt from this tax. In Sharjah, all renters are required to pay a rental tax of 2 percent of their yearly rent. Municipalities also levy a tax on services, which has an influence on the amount of money you pay at restaurants and hotels while dining out.
UAE tourist tax
Tourists may discover that they have been charged a 10 percent tax on the accommodation rate, a 10 percent service charge, and a 10 percent municipality fee in addition to the room rate. Some tourist attractions may also charge a local tax (which can range from 6 to 10 percent) as well as a 6 percent tourism fee on top of that.
Other taxes in the UAE
If you transfer property in the United Arab Emirates, you will also be charged a property tax, which is 4 percent in the Emirate of Dubai and 2 percent in the Emirate of Abu Dhabi. In the United Arab Emirates, there are no withholding taxes charged at the federal level.
115 double-taxation treaties have been signed by the UAE as of 2018, with the vast majority of them aiming to prevent double taxation of income and capital gains, lower tax on profits, and exempt deposits from being taxed.
Taxes in Dubai
In addition, all federal tax regulations apply to Dubai as well: there is no income tax in Dubai, VAT is charged at the national level, and Dubai inherits and benefits from all of the DTTs signed by the United Arab Emirates (UAE). Some taxes in Dubai, on the other hand, may be different from those in the rest of the United Arab Emirates.
Dubai income tax
There is no prospect of the zero-tax regime in Dubai being amended in the foreseeable future. Her Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emirates and Ruler of Dubai, has indicated that his country will never impose an income tax as a means of addressing the country’s fiscal problems. A personal income tax would never be implemented in my nation as a means of reducing the deficit. My response is that there are no income taxes. Sheikh Mohammed bin Rashid Al Maktoum is the ruler of Dubai.
Residents of Dubai also benefit from tax-free rental income, no stamp duty, no capital gains tax, and no inheritance tax, among other benefits.
The most important question is where you live for tax purposes.
Are you a tax resident in Dubai?
This is a very crucial topic since it determines whether or not you are required to pay tax while working in Dubai. In the event that you make your income in Dubai but are tax resident in another country, you may be subject to income taxation in your home country. This is due to the fact that most expats pay tax according to their place of residence.
What is your tax residency?
In the event that you sign a six-month contract in Dubai and live and work in the emirate for just six months, you are likely to continue to be treated as an ordinary resident of your home country for tax purposes, and your income may be liable to taxation in your home country. If you live somewhere else but own an investment property in Dubai from which you earn a rental income, you will be required to report this income on your tax return in the country where you have your tax residence, and you may be required to pay tax on it if your overall earnings exceed the nil rate band for income tax in that country.
A tax year trick
Many nations categorize their residents for tax reasons according to the tax year in which they were born. From this perspective, the timing of your departure from your place of residence for Dubai is critical. If you spend the majority of the current tax year in your country of residence, you may be considered a tax resident for the purposes of the tax authorities for that tax year, and you may be subject to tax on your total income for the year, regardless of the fact that part of your total income for the year was earned in Dubai.
If you are a British citizen and resident in the United Kingdom, even a one-year contract in Dubai may not be sufficient to free you from your income tax responsibilities in the United Kingdom, since it may only cover half of the current tax year and half of the next tax year.
Every individual’s situation is distinct, and you must be completely informed about your tax status and obligations for taxation at home and abroad before proceeding. If you are still unsure, consult with a certified specialist.
Indirect taxes and tax rates in Dubai
In terms of any other taxes in Dubai, contrary to common notion, they are in fact implemented. In the first place, the revenues of multinational financial institutions and energy companies are taxed at the federal level – which is likely a good thing! When alcohol is imported, it is subjected to a high level of taxation. For bringing it into the nation, there is a 50% tax, and then there is additional 30% tax if you hold a liquor license and purchase alcohol for personal consumption.
Dubai tourist tax
Furthermore, every visit to a hotel in Dubai, whether for a night’s stay or even a dine out, is subject to tax. The levy, which is referred known as the Dubai tourist tax, adds 10% to your total price. This tourist tax in Dubai is included in the bill and is levied against each and every guest that stays in a hotel, guestroom, or hotel apartment in the city. As a result, depending on the type of hotel and its rating, it may cost you between 7 and 20 dirhams a night to stay there. A reasonably inexpensive guest home will charge you 7 AED per night, whereas a 5-star hotel would price you 20 AED.
Council tax and rental tax
There is also a form of council tax that is secretly levied when you pay your utility bills – and many people are outraged by this tax because it is supposed to be used for street lighting, waste collection, and other services, but the vast majority of residents are forced to pay for these services through maintenance fees instead. As a result, you are essentially charged council tax twice in Dubai – yes, and there is also a 10 percent municipality tax as well as a 5 percent municipality tax on rental lodgings, both of which are collected through utility bills.
Dubai departure tax
When you purchase an airline ticket for a plane that either arrives or takes off from one of the Dubai airports, you will be charged a departure tax in the city of Dubai. No matter where you purchase your ticket, the Dubai departure tax is already included in the price of the ticket. Travelers in transit and members of the cabin crew are free from paying this type of Dubai tourist tax, as are children under the age of two and transit passengers.
Other taxes in Dubai
When you purchase an airline ticket for a plane that either arrives or takes off from one of the Dubai airports, you will be charged a departure tax in the city. No matter where you book your ticket, the Dubai departure tax is already included in the price of the flight. Exempt from paying this type of Dubai tourist tax are children younger than two years of age, transit passengers, and cabin crew members on board flights to and from Dubai.
Value added tax in Dubai
VAT was implemented on a federal level in the United Arab Emirates in January 2018. The value-added tax (VAT) is imposed at a rate of 5%. Food goods, health and education services, fuel products, social services, and bicycles are the only exceptions. In addition, the financial services and residential property industries are immune from the imposition of VAT (with certain exceptions).
Other consumption taxes
Excise taxes were introduced in 2017 for three types of products: carbonated beverages (at a rate of 50%), tobacco (at a rate of 100%), and energy drinks (at a rate of 50%). (100 percent )
Dubai income tax in summary
For those who are tax residents in Dubai and have no other obligations to any other state in terms of the payment of tax on foreign-earned and sourced income, you may be able to earn your salary completely tax-free in the emirate if you are a resident of Dubai and are not subject to any other state’s taxation obligations. While living in Dubai, you will be subjected to certain taxes, and it is essential that you consult with an accountant to ensure that you completely understand your particular tax requirements and liabilities.
You might find useful:
- Living in Dubai– a comprehensive reference for expats who are relocating to Dubai
- Working in Dubai– how to obtain employment in the United Arab Emirates
- Dubai’s Rules and Laws are outlined
- Please see ourDubai Guidespage for further information about living in Dubai.
Is Dubai Really Tax Free? Yes. and no.
If you are considering relocating to the United Arab Emirates to live and work, you have probably heard that there is no income tax in Dubai. This is exactly right. If you go to Dubai to work or if you own an investment property in the city and rent it out for a profit, there appears to be no taxation on your earnings. However, this does not represent the whole picture. As a result, we present the facts concerning taxation in Dubai in order to put the record right.
A Tax Free Emirate?
Is the United Arab Emirates truly tax-free? True – but not in every situation! There may be times when you will have to deal with taxing, and there are certain things you should know about taxation in Dubai if you are considering relocating to the emirate to live and work. Moreover, according to a televised report from last year, Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the United Arab Emirates and the Ruler of Dubai, claimed that “his nation would never implement an income tax as a means of addressing the deficit.” Because of this, it is quite improbable that an individual’s income will ever be subject to taxation in Dubai.
This is because your tax responsibilities are also dependent on where you have your tax residence for the purposes of the UAE tax law.
You will very certainly continue to be treated as an ordinary resident of the United Kingdom for tax reasons, even if you live and work in the UAE for six months.
For those who choose to live and work in the United Arab Emirates permanently, or who choose to become a non-resident for tax reasons in their home country, the situation should be unproblematic.
Other taxes in Dubai
In terms of other taxes in Dubai, contrary to common notion, they are in fact in place. For starters, the revenues of foreign banks and energy companies operating in the United Arab Emirates are subject to federal taxation. In addition, every visit to a hotel in Dubai, or even a dinner out, is subject to tax, which adds 10% to your total. If you have a liquor license and purchase alcohol for personal consumption, you will be subject to a 50 percent tax upon entry into the nation. If you don’t have a liquor license, you will be subject to additional 30 percent tax.
In addition, there is a ten percent city tax on all income, as well as a five percent municipal tax on rental revenue. The UAE implemented a 5 percent value-added tax (VAT) on nearly all purchases of services and commodities offered in the country in 2018.
Do you want to live a tax-free live in the UAE?
It is also possible to earn your salary in Dubai tax-free if you are a tax resident of the emirate and have no other obligations to any other state in terms of payment of tax on foreign earned and sourced income. If you are a tax resident of Dubai and have no other obligations to any other state in terms of payment of tax on foreign earned and sourced income In order to do so, you would need to secure a resident permission from the government.
Individuals who are not nationals of the UAE or the Gulf Cooperation Council (GCC) and wish to live in the UAE must get a resident visa. Obtaining a residency permit is the first and most important requirement for being deemed a resident in the United Arab Emirates. As a general rule, in order to apply for a residence permit in the jurisdiction, one must be sponsored by a local citizen. When it comes to a large number of expats, the firm that employs them will function as their sponsor and help them obtain a resident visa.
- Investment in real estate (visa for permanent residency in a property)
- Create your own corporation to serve as a sponsor
Real estate investor/property residence visa
As of June 2011, the UAE government has implemented a new mechanism that allows real estate investors to extend the validity of their visas for a maximum of three years. The following regulations and conditions must be met in order for a real estate investor visa to be issued:
- The property has been constructed and is ready for occupancy
- The applicant can demonstrate ownership (via a title deed issued by the Land Registrar)
- The property is worth a minimum of AED 1 million (equivalent to US$300.000) and does not have a mortgage
- And the applicant’s monthly income is greater than AED 10.000 (US$3.000).
Setting up your own company
The alternative method of obtaining residence is through the establishment of a company entity. As a general rule, in order to apply for a residence permit in the jurisdiction, one must be sponsored by a local citizen. For foreigners, forming a corporation is a realistic means of gaining sponsorship in the United States. This organization serves as the sponsor. In terms of the corporation, it is required to have a physical presence in the United Arab Emirates. That is where free zones in the northern emirates come into play, since they provide the most exciting and cost-effective alternatives.
Is it anything you’d like to do to relocate to Dubai?
Taxation in the United Arab Emirates – Wikipedia
A federation of sevenemirates, the United Arab Emirateshas independent emirate and municipal administrations. Each Emirate has issued a decree on income taxation, but in reality, the execution of these laws is limited to international banks and mining corporations. Value added tax (VAT) was established in the United Arab Emirates (UAE) on January 1, 2018, at a standard rate of 5 percent. The establishment of a federal company tax in the United Arab Emirates was announced in January 2022 by the government of the UAE.
An additional corporate tax rate of 15 percent for multinational corporations with earnings over 750 million Euros per year was announced as part of the statement, which is in accordance with the Global Minimum Corporate Tax Rate Agreement.
The implementation of the corporate tax regime is expected to begin on the first of June in 2023, according to the government.
Companies are also required to contribute a portion of their income to a local firm, which varies based on the region in which they operate. In addition, taxes are levied on alcoholic beverages and tobacco products in the UAE.
A significant portion of the earnings has come from the selling of oil to foreign countries. UAE is attempting to diversify its revenue sources away from oil and other hydrocarbons, and as a result, it is adopting other revenue sources such as VAT.
If a company’s taxable supply and imports surpass the statutory registration level of AED 375,000, the company is required to register with the VAT authority. Furthermore, if a company’s supply and imports are less than the statutory registration barrier but exceed the optional registration threshold of AED 187,500, the company may choose to register for VAT voluntarily. In a similar vein, a firm may choose to register voluntarily if its costs surpass the threshold for voluntary registration.
If the business’s or individual’s annual revenue in 12 consecutive months is less than the Dh187,500 voluntary registration level, the firm or individual may seek for de-registration within 20 days. Non-submission of a de-registration application will result in the imposition of a fine of AED ten thousand.
Zero-rated Items of VAT
A zero-percent VAT rate will be applied to the supplies falling into the following major categories:
- International transportation and related supplies
- The supply of certain sea, air, and land modes of transportation (such as airplanes and ships)
- The export of products and services to countries beyond the Gulf Cooperation Council a number of investment-grade precious metals (for example, gold and silver that are 99 percent pure)
- Residential homes that have been newly erected and are being supplied for the first time within three years of their completion
- Provision of certain education services, as well as the provision of related goods and services
- Provision of certain healthcare services, as well as the provision of relevant products and services
Exemptions from VAT
Supply of the following types of goods and services will be free from VAT:
- The provision of certain financial services (as defined in VAT legislation)
- The provision of residential properties
- The provision of bare land
- And the provision of local passenger transport
According to federal legislation, it is required for the FTA to undertake regularVAT audits in order to determine whether or not particular firms are in conformity with tax regulations. These audits are frequently carried either at the place of employment or at the other place of business of the concerned party, according on the preference of the FTA. The Federal Transit Administration (FTA) shall give a notice of a similar nature to the individual or company at least 5 days before the event.
- According to the timetable, the involved party/business/individual can file their tax returns using the FTA site.
- An audit of a corporation or a taxpaying entity should not be conducted only on the basis of a predetermined purpose.
- A notification will be sent to the affected party at least 5 days prior to the scheduled audit date to inform them of the upcoming audit.
- Meetings between the auditors and the taxpayer can take place at the specified location and at the scheduled time, and the procedure can commence.
- Take note that the audited party retains the right to request the credentials of the tax auditors, such as professional identity cards, in order to determine their level of power.
- It is recommended that the taxpayer or other person who is the subject of a tax audit, in concert with his or her legal representatives and tax agents, cooperate and assist the auditors in the performance of their duties.
- The audited individual has the right to request a copy of the notice and any accompanying documentation, as well as the right to remain present throughout any auditing operations that take place outside of the official locations.
31st of May, 2021 Loggerhead Partners is an acronym that stands for Loggerhead Partners, LLC. All that is required to print this article is that you be registered or logged into Mondaq.com. The United Arab Emirates has long been seen as a desirable location in which to work, live, or establish a company. One of the key reasons for this is the well-known claim that the United Arab Emirates is a “tax-free” haven. The most often asked question is whether or not this is indeed true. Yes, it is correct.
- The United Arab Emirates is generally tax-free, however there are rare cases in which taxes are levied and collected.
- Contrary to common assumption, certain taxes are levied in the United Arab Emirates (UAE).
- In addition, there are a number of municipal taxes that are applicable in the UAE: you may notice a 10 percent tax added to the bill while visiting a hotel or restaurant, and there is also a sort of council tax that is applied to your energy bills.
- While the foregoing appears to be a lengthy list, there is one important part of life in the UAE that is tax-free, and that is the absence of income tax (both individual and corporate).
- My response is: ‘There are no income taxes.'” As a result, it is highly improbable that income tax will ever be implemented in the United Arab Emirates.
Each Emirate has its own set of regulations governing corporate taxes for businesses doing business inside its borders, although in practice, as previously stated, taxes are only levied against foreign gas or oil producing corporations and branches of international banks doing business in the United Arab Emirates. As a result, no corporation taxes are levied against any other firms that have been founded in the UAE. This is applicable in all of the UAE’s administrative divisions (Onshore, Free Zone and Offshore).
As a result, profits repatriated are completely tax-free, and there are no restrictions on the amount of profits that can be repatriated.
It should be noted, however, that this is only relevant to UAE enterprises who provide products or services to clients domiciled in the UAE or the Gulf Cooperation Council. For VAT reasons, goods and services offered worldwide are not subject to any VAT rates.
Individuals earning money in the United Arab Emirates are not subject to any kind of taxation by the UAE Federal Government. Consequently, if you are a resident living and working in the UAE, it is probable that your UAE earnings are not subject to taxation in the country. Nevertheless, it is critical to distinguish between physical or civil residency and tax or fiscal resident in this context. An informal word that is frequently used to refer to the nation in which you are presently residing and/or the country with which you have the greatest affinity is “civil residence.” A Fiscal Residency is the nation that you declare as your “fiscal home,” and as a result, the country to which you are required to pay taxes in accordance with the tax regulations of that country.
You may take full advantage of the tax-free environment in the UAE by first gaining resident status, and then eventually fiscal residence status in the country.
Once you have established residency in the UAE, you must then demonstrate sufficient substance in the country in order to qualify as a fiscal resident.
A solid case of substance and legitimacy would be built by having a legitimate job (which would be a double benefit if you worked for your own UAE company), maintaining a personal current account (on which salary payments are made and from which local expenses are deducted), having a local phone number, having a local mailing address, and, of course, having a place of residence in the UAE.
In the UAE, a tax certificate serves as confirmation that you have satisfied the country’s fiscal residence requirements and certifies that you are a resident of the country for tax reasons.
Perhaps a more accurate statement is that “personal and corporate taxes are not levied in the United Arab Emirates.” And, while there are various types of tax that may be met, the UAE continues to be a very tax efficient nation overall. This, along with recent relaxations in the regulations governing corporate ownership, longer-term resident visas, and inheritance laws, has solidified the region’s position as a desirable base for today’s global citizens. For this reason, we at Loggerhead have created our UAE Residency Package, which is unlike anything else available in the area and covers everything we believe our customers will require to effectively establish a presence in the UAE, whether for business or personal reasons.
It is recommended that you get specialist guidance on your individual circumstances.
Cayman Islands: Cadwalader, WickershamTaft LLPOn January 7, 2022, the European Commission published a draft rule that added the Cayman Islands to its list of nations with strategic shortcomings in their anti-money laundering and anti-terrorist financing regimes.
This reference to the BVI’s private client sector contains comments on taxation, trusts, foundations, and private wealth structures that are often employed in the jurisdiction, including charity or philanthropic structures, among other topics.
It is the most significant information on legal companies and individuals that we have gathered from our specialists, which is contained in the Cyprus Tax Facts handbook.
The UAE introduces its first-ever corporate taxes, set to start in 2023
On December 8, 2021, a general image of the downtown area of Dubai, United Arab Emirates, was taken. Satish Kumar is an Indian businessman. | The Associated Press DUBAI, United Arab Emirates — DUBAI, United Arab Emirates — A federal corporation tax on business earnings will be introduced for the first time in the United Arab Emirates, according to the Ministry of Finance, which announced the move Monday. A fundamental shift has occurred in a country that has long drawn firms from throughout the world because of its reputation as a tax-free international trade powerhouse.
To “support small businesses and startups,” the country’s statutory tax rate will be 9 percent for taxable income exceeding 375,000 UAE dirhams ($102,000), and zero percent for taxable income up to that amount, according to the Ministry of Finance, which also stated that “the UAE corporate tax regime will be amongst the most competitive in the world.” Individuals will continue to be exempt from taxation on their earnings from work, real estate, equity investments, and other sources of personal income that are unconnected to a UAE trade or business, according to the ministry.
For the same reason, international investors who do not do business in the country will not be subject to the tax.
In contrast, free zone businesses, which number in the hundreds in the country, can “continue to profit from corporation tax benefits” as long as they “meet all essential standards,” according to the ministry, which did not provide more explanation.
WAM, the state news agency, reported that “the UAE corporate tax framework has been developed to combine best practices from throughout the world and to minimize the compliance burden on firms.” “Corporate tax will be levied on the earnings of UAE-based enterprises as reported in their financial accounts produced in line with internationally recognized accounting standards, with only the smallest number of exceptions and modifications permitted by law.
It will be applicable to all enterprises and commercial operations, with the exception of the exploitation of natural resources, which will continue to be subject to corporate taxes at the level of the individual Emirate.”
‘Practical and sensible’
Despite the fact that the news created ripples after it was announced on Monday, many in the UAE’s business community believe that the development should not be seen as a surprise. “Corporation tax in the United Arab Emirates has been discussed for several years, so I don’t believe this revelation should be taken as a surprise. Furthermore, corporate tax is already in place throughout the GCC, for example in Saudi Arabia and Qatar “According to Chris Payne, chief economist of Dubai-based Peninsula Real Estate, the real estate market is booming.
Companies in the United Arab Emirates will have around a year and a half to plan for taxes as a result of the news, but opinions on whether the move would allow the Gulf sheikhdom to preserve its attraction to enterprises are divided.
Headwinds for start-ups?
The threshold for being liable to taxation, however, is quite low (just over $100,000 in earnings per year), and this might have a negative impact on smaller businesses with costly start-up and renewal expenses, among other things. Rupert Tait, co-founder of Procurified, a construction technology start-up located in the United Arab Emirates, sees potential challenges for small firms like his. In an interview with CNBC, he explained that as a start-up entrepreneur, “we want to base ourselves in the most economical environment to expand.” Despite the fact that he recognizes the need for taxation to begin, he points out that his company, which is located in the Dubai Multi Commodities Centre free zone, already pays an annual fee of 20,000 UAE dirhams (approximately $5,450) that is collected regardless of profit.
- “While I recognize the need for taxation to begin, I also recognize that we are indirectly taxed in free zones,” he says.
- Emirates Airlines jets at Dubai International Airport on February 1, 2021.
- AFP |
- Karim Sahib |
- Among the countries with the lowest company tax rates are Montenegro (9%) and Gibraltar (10%), while Ireland and Lichtenstein (12.5%) both have the highest corporation tax rates in Europe.
- Still, it is unclear what products and services will be supplied in exchange for the higher levies, and this remains to be seen.
- “And the rate — while new for the private sector in this jurisdiction — continues to be lower than in other jurisdictions such as Singapore and Hong Kong,” says the author.
A guide to the tax system in the United Arab Emirates
The taxation system in the United Arab Emirates is full of unexpected twists and turns. This tutorial will teach you all you need to know about the peculiar lack of income tax in the country, as well as unique corporate tax-free zones, property taxes, and value-added tax (VAT). There’s a fun fact regarding the tax system in the United Arab Emirates: there is no federal income tax in the country. However, even with this significant financial advantage, you shouldn’t start packing your belongings and thinking you’re getting away with nothing — at least not just yet.
In this article, you will learn about the taxes that you will still have to pay, whether you are an individual or a business, while you are resident in the United Arab Emirates. The following information is contained inside the guide:
- The taxation system of the United Arab Emirates (UAE)
- Federal taxes in the United Arab Emirates
- State/regional taxes in the United Arab Emirates
- Taxes on goods and services (VAT) in the United Arab Emirates The taxation system in the United Arab Emirates for foreigners
- In the United Arab Emirates, there is a tax on property and wealth. In the United Arab Emirates, there is an inheritance tax. Company taxes and VAT rates in the United Arab Emirates
- Import and export taxes in the United Arab Emirates Taxation guidance in the United Arab Emirates
- Resources that are beneficial
The tax system in the United Arab Emirates
The tax system in the United Arab Emirates – or, more accurately, the absence of taxes paid – is one of the primary reasons that many expats choose to live in the area. Among other things, there is no system of corporation and inheritance taxes, nor is there any income tax paid by employees in the country. There was also no VAT in place until January 2018. With the introduction of an excise tax on specified products judged by the government to be hazardous to human health or the environment, the government was able to keep the tax on goods and services supplied at a manageable level of 5 percent.
Federal taxes in the UAE
The United Arab Emirates does not pay an income tax. As a result, there is no requirement to file an income tax return in the United Arab Emirates because there is no relevant individual tax in the nation. Freelancers and self-employed persons who are residents of the United Arab Emirates are subject to the same rules.
Employees in the UAE who are nationals of the Gulf Cooperation Council (which includes the UAE) are subject to a 17.5 percent social security regime. People who are citizens of the United Arab Emirates pay 5 percent (which is deducted automatically from their paychecks), while the remaining 12.5 percent is covered by the employer. Employees of enterprises and branches that are registered in a free trade zone are subject to social security requirements as well (FTZ). Residents of other GCC countries may be liable to differing social security contributions in comparison to residents of their native country.
In the United Arab Emirates, corporate taxes are only imposed against oil businesses and foreign banks. The government does, however, have 45 free zones where enterprises registered in the United Arab Emirates are excused from paying tax for a period of time that can be extended. Unless the corporation is subject to another type of income tax, there are no capital gains taxes to worry about.
As part of its efforts to promote strategic global alliances, the United Arab Emirates is expanding its network of Double Taxation Agreements (DTAs) and Bilateral Investment Treaties (BITs). A total of about 193 DTAs and BITs have been signed by the UAE, with the goal of exempting or decreasing taxes on investments and earnings that are subject to direct and indirect taxes.
Tourist facility tax
In addition to other things, restaurants, hotels, and resorts (among others) may levy the following taxes:
- 10 percent of the room rate
- Service charge (10 percent)
- Municipal fee (10 percent)
- City tax (6–10 percent)
- Tourism fee (6 percent)
- 10 percent of the room rate
Property transfer tax
When transferring property in the United Arab Emirates, a transfer fee is levied. This varies from Emirate to Emirate; for example, in Dubai, it is 4 percent. Despite the fact that both the buyer and the seller bear some of the financial burden, the buyer is typically responsible for the transfer fee.
There is no such thing as an inheritance tax system.
The inheritance of a person who dies without a will, on the other hand, is handled according to Islamic Shari’a rules.
Regional taxes in the UAE
In the United Arab Emirates, there are free-trade zones that have their own tax, customs, and import regimes that are unique to them. It is true that there are more than 40 zones spread throughout the United Arab Emirates. Company can be excused from paying corporation tax for up to 50 years if they operate inside these special zones, and they can take advantage of 100 percent exemptions from import and export taxes.
Tourism fees per Emirate
The cost of a hotel room varies depending on the Emirate. Each night of occupancy (for a maximum of 30 nights) in Dubai is subject to a Tourism Dirham Fee that ranges from AED 7 to AED20 per room, per night of occupancy. In most cases, this is determined by the hotel’s star rating. Abu Dhabi adds a 4% surcharge to hotel bills and costs AED 15 per night, per room, in addition to the standard rates. In addition, hotels in Ras Al Khaimah impose a tourist tax of AED 15 per room, every night. The Emirates Palace in Abu Dhabi is one of the most luxurious hotels in the United Arab Emirates.
Taxes on rental homes differ from one emirate to the next. Residential renters in Dubai are required to pay a rental tax of 5 percent of their yearly rent, while commercial tenants are required to pay a tax of 10 percent. In Abu Dhabi, on the other hand, UAE nationals are not subject to property taxes, although their expat counterparts are subject to a 3 percent levy. In Sharjah, all renters are required to pay a 2 percent rental tax.
Taxes on goods and services (VAT) in the UAE
VAT and excise duty are the two types of taxes that are levied on products and services in the United Arab Emirates.
The VAT rate in the United Arab Emirates is 5 percent. Certain commodities, on the other hand, are exempt from VAT. Some personal protective equipment used in the COVID-19 pandemic, including as medical and textile masks, single-use gloves, chemical disinfectants, and antiseptics, will be excluded from importation into the UAE starting in 2020. Other items and services that are subject to a 0 percent VAT charge are as follows:
- Exports of products and services to countries beyond the Gulf Cooperation Council
- International transportation
- Investment-grade precious metals
- Newly constructed residential properties
- Some education and healthcare services
- And other services.
Products and services exported to countries outside of the GCC; Intercontinental transportation; investment-grade precious metals; newly constructed residential buildings; certain educational and health care services
- Exports of products and services to countries outside of the Gulf Cooperation Council
- International transportation
- Investment-grade precious metals
- Newly developed residential buildings
- Certain education and healthcare services
Refunds of VAT in the UAE
VAT is collected at the time of sale from all customers, including tourists, expats, and residents. The ability to obtain refunds on products purchased with VAT has been available to qualifying travelers from November 2018. In order to do this, the following requirements must be met:
- Goods must be purchased from a shop who participates in the Tax Refund for Tourists Scheme
- Goods are not excluded from the Federal Tax Authority’s Refund Scheme
- And goods are not excluded from the Federal Tax Authority’s Refund Scheme. Along with the purchases, they must express a desire to discontinue use within 90 days after the date of supply. In order to export the items out of the UAE, they must do so within three months of receiving them. The process, as well as the purchase and export of goods, must be done in accordance with the regulations and procedures established by the Federal Tax Authority.
Refunds can be obtained by tourists by using a particular equipment that can be found at airports, seaports, and border checkpoints. Consumers may use the devices to electronically submit their tax invoices for purchases made from participating retailers who are enrolled with the Refund Scheme, as well as copies of their passport and credit card, to get a refund.
UAE tax system for foreigners
There is no income tax in the United Arab Emirates for anyone who work in the country, regardless of their residency status. Those who are not tax residents of the United Arab Emirates may nevertheless be required to pay income tax in their place of residence, depending on the legislation of their respective countries. About 115 countries have double tax treaties with the United Arab Emirates, including the following: Algeria, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina (Bosnia-Herzegovina), Bulgaria (Bulgaria), Canada (China), Czech Republic (Czechoslovakia), Egypt (Egypt), Estonia (Finlandia), France (France), Germany (Germany), India (Indian Ocean Territory), Indonesia (Ireland), The Ministry of Finance’s website has further information on these accords, which you may read here.
On foreign pension schemes, citizens of the United Arab Emirates are not subject to any taxes.
The Common Reporting Norm (CRS) is a legislative standard that allows governments to transmit tax data amongst members. This is beneficial in a variety of situations, such as tax evasion investigations.
Tax on property and wealth in the UAE
As a general rule, there is no capital gains tax in the United Arab Emirates unless the profits are acquired from the sales of a corporation that is subject to income taxes or banking taxes.
When transferring property in the United Arab Emirates, a transfer fee is levied. This changes from Emirate to Emirate (for example, it is 4 percent in Dubai). Despite the fact that both the buyer and the seller bear some of the financial burden, the buyer is typically responsible for the transfer fee.
As previously stated, taxes on rental properties differ from one Emirate to the next in the UAE. Residential renters in Dubai are required to pay a rental tax of 5 percent of their yearly rent, while commercial tenants are required to pay a tax of 10 percent. Meanwhile, in Abu Dhabi, nationals of the United Arab Emirates are not subject to property taxes, while their expat counterparts are subject to a 3 percent levy. In Sharjah, all renters are required to pay a 2 percent rental tax.
In the United Arab Emirates, there is no stamp duty to pay.
Inheritance tax in the UAE
In the United Arab Emirates, there is no inheritance tax. For those circumstances in which the deceased did not leave a will, inheritance is administered in accordance with Islamic Shari’a principles, regardless of the country of the individual who died.
Company taxes and VAT rates in the UAE
The vast majority of firms in the United Arab Emirates do not pay corporate tax. Generally speaking, most emirates have the authority to levy a corporation tax of up to 55 percent – but this is only applicable to international oil firms and branches of foreign financial institutions.
Excise tax for businesses
Businesses who participate in any of the following activities must register for excise tax:
- The importation of excise items into the United Arab Emirates
- The manufacture of excise items for consumption in the United Arab Emirates
- Stockpiling of excise items in the United Arab Emirates (on occasion)
- Personnel with responsibility for monitoring an excise warehouse or designated zone
Businesses can register for excise tax by visiting the e-services portion of the Federal Trade Commission’s website.
VAT for businesses
The VAT rate in the United Arab Emirates is 5 percent. Businesses that make taxable supplies and imports worth more than AED 375,000 per year are required to register for VAT. Businesses that earn more than AED 187,500 per year are eligible to join the register on their own initiative. Businesses that are VAT-registered are required to do the following:
- In addition to charging VAT on the taxable items they offer, they can also claim VAT back on any commercial goods and services they buy. Maintain records for the benefit of the government.
When conducting business in the United Arab Emirates, foreign companies can claim their VAT expenses.
Import and export taxes in the UAE
Customs taxes are determined at a rate of 5 percent of the Cost, Insurance, and Freight (CIF) value for the vast majority of commodities. Some categories are exempt, and alcohol is subject to a 50 percent customs charge, while tobacco items are subject to a 100 percent customs tax. Gasoline is subject to a 5 percent value-added tax (VAT).
Tax advice in the UAE
Because there is no income tax in the United Arab Emirates, many people do not require the services of an accountant because there is no income tax form to complete. It is nevertheless critical for people who own larger enterprises to get independent financial counsel on their company tax obligations.
Resources to assist you with taxation in the United Arab Emirates include the following:
- The taxes branch of the government
- The Federal Tax Authority
- Double taxation agreements
- And the PWC tax report on the UAE
4 Countries Without Income Taxes
There are a number of prominent nations that provide the financial benefit of not having to pay income tax, including Bermuda, Monaco, the Bahamas, and the United Arab Emirates, to name a few (UAE).
There are a handful of nations that are free of the burden of income taxes, and many of them are really pleasant places to live. However, taking advantage of the fact that you are residing in a nation with no income tax is not as simple as packing a suitcase and purchasing an airline ticket.
- Personal income taxes are not levied in Bermuda, Monaco, the Bahamas, or the United Arab Emirates (UAE)
- Nonetheless, citizens of the United States are required to file and pay U.S. income taxes even if they reside in another nation. If you choose to renounce your citizenship in the United States, you may be subject to a financial penalty known as an expatriation tax.
Escaping Taxes by Renouncing Citizenship
Citizens of the United States cannot avoid paying income taxes in the United States simply by relocating to another nation. All United States citizens, regardless of where they choose to live, are legally compelled to submit their federal income taxes in the same manner as if they were physically present in the United States. Although it may appear enticing, giving up one’s citizenship is not a simple process. The first point to mention is that many nations do not provide simple access to citizenship.
Some governments would purposely make the barrier to entry as high as possible in order to attract only the most elite investors.
The government has responded by making it increasingly difficult and expensive to renounce citizenship in the United States by charging an expatriation fee, which may become exceedingly expensive in some cases.
Please see the next section for our examination of certain countries that are completely habitable – and even rather attractive – but do not levy an income tax.
United Arab Emirates
Several oil-producing nations in the Middle East do not levy personal or corporate income taxes, and the United Arab Emirates is regarded to be one of the most appealing due to its relatively stable government and economy. Although the United Arab Emirates has a booming economy, it has a more multicultural atmosphere than the bulk of nations in the region. As a result, there are several good dining and entertainment alternatives. There are also excellent educational opportunities accessible, as well as a significant English-speaking population.
Taxes on most products and services are levied in the form of value-added tax (VAT).
The ability to profit from not having to pay income taxes in the Bahamas is contingent on residency rather than citizenship, making it one of the most straightforward countries in which to live a tax-free lifestyle. For permanent residents, a minimum of 90 days of residency is required before they may qualify for the tax reduction, and expatriates are not permitted to stay in another country for more than 183 days. Furthermore, a minimum investment of $500,000 in a completely completed house is required for permanent residency to be granted.
In general, the country’s infrastructure and services are excellent.
Many American expats who have opted to make the Bahamas their home continue to fly back to the United States for major medical treatment.
Nassau has a somewhat high crime rate, which is to be anticipated in a vacation destination like this. Overall, the Bahamas appeals to many tax ex-pats because of its remoteness from the United States and its lovely environment.
In terms of tax-free income, Bermuda is an even more enticing Caribbean option than the Bahamas; but, it is a far more costly country in which to reside. Bermuda’s remoteness makes it one of the most costly places to live in the Western hemisphere due to the high cost of living there. Bermuda is far more developed than the majority of Caribbean islands, with good roads and public transit infrastructure. And beyond that, from its world-renowned pink sand beaches to its expensive restaurants, Bermuda is often regarded as one of the Caribbean’s most picturesque and pleasant countries.
While Bermuda does not have a personal income tax, it does impose a payroll tax on employers as well as a land tax on homeowners and long-term tenants who own their homes.
Monaco has long been regarded as one of Europe’s most attractive and desirable locations to live, owing to its reputation as a year-round holiday destination for ultra-high-net-worth individuals and their families. As part of the French Riviera, Monaco boasts a number of huge and well-developed marinas, which are frequently filled with a diverse range of boats from around world. The Monaco Grand Prix is a favorite of the wealthy, with several apartments renting for $10,000 or more a night during the race.
It boasts one of the lowest rates of crime of any country in the world, if not the lowest.
Accessing Monaco’s tax-free financial environment is quick and easy, but it is not inexpensive.
Honorable Mention: Andorra
Andorra, which is located in the Pyrenees mountains between France and Spain, has long had a reputation as a tax haven since it does not charge personal income taxes. As of 2015, the government has a graduated tax rate, with the top rate capping out at 10 percent for those earning more than 40,000 euros per year. With its low personal income tax rate as compared to other nations, Andorra may be a more attractive alternative, especially considering the country’s other distinguishing characteristics.
Aside from the influx of ski tourists, life in Andorra is largely calm and uncomplicated.
According to its tax-friendly policy, Andorra has one of the most established offshore banking businesses in the world, which is consistent with its tax-friendly policy.
Correction dated November 13, 2021: Andorra was wrongly characterized in an earlier version of this article as a country that does not impose income taxes.