Do Expats Need To Pay Taxes In The UAE? Know All The Details

The “City of Dreams” aka Dubai doesn’t collect an annual property tax and applies no income or inheritance tax. Expats in the city are benefiting from the policy of not taxing individuals. There is also no property tax on homes. 

In fact, no personal tax is levied in the UAE. Individuals living and working in the country may be considered a resident of the UAE and can obtain a UAE Tax Residency Certificate under certain conditions, including their stay in the country for more than 183 days within the 12 months. However, there is a 4% transfer tax applicable when a property is transferred. While that fee is supposed to be split between the buyer and seller, it is the buyer who usually pays up. 

All Dubai residents, both owners, and tenants have to pay a municipality tax of 5% of their home’s annual rental income to fund local services. 

The tax system in the United Arab Emirates is one of the main reasons that attracts expats to the country. There is no income tax obligation on the employees, and no system for corporate and inheritance taxes, among others. 

Until January 2018, there was also no VAT. The tax on goods and services sold was introduced relatively low at 5%. The inclusion of an excise tax in the emirate for specific products that are harmful to human health or the environment. The VAT component is typically included in the asking price for products and services, so the price that appears on the label is the one to be paid. 

The UAE does not levy an income tax. Hence there is no need for an income tax return in the UAE as there is no applicable individual tax within the country. The same also applies to freelancers and self-employed individuals who are residents of the Emirates. 

Employees in the UAE who are GCC nationals are subject to a social security regime of 17.5%. Those who are UAE nationals pay 5% and the employer pays the further 12.5%. 

Corporate taxes are only levied on oil companies and foreign banks in the UAE. However, there are 45 free zones in the country; the businesses registered in the United Arab Emirates are exempt from paying tax for a specified period that can be extended as well. There are no capital gains taxes unless the company is taxable under another income tax. It applies to both UAE citizens and expats. As a result, there is no special taxation regime for expat workers in the UAE as they are treated the same way as citizens when it comes to personal or capital income tax. 

The United Arab Emirates is expanding its Double TaxationAgreements (DTA) and Bilateral Investments Treaties (BIT) network to encourage strategic global partnerships. The UAE has secured approximately 193 DTAs and BITs with the purpose of exempting or reducing taxes on investments and profits from direct and indirect taxes. The UAE has double tax treaties with approximately 115 countries. 

The UAE does not have any income tax for those working in the UAE, regardless of their residency status. Those who are not tax residents of the UAE may still have to pay income tax in their country of residence depending on the taxation laws. 

There are no taxes levied on UAE residents for international pension plans. 

Tourist facility taxes include taxes on restaurants, hotels and resorts (among others) and may charge the following taxes: 

10% on the room rate 

Service charge (10%) 

Municipality fee (10%) 

City tax (6–10%) 

Tourism fee (6%) 

There is no law that specifies inheritance tax if there is no Will, however, inheritance is dealt with according to Islamic Sharia principles. 

There are free-trade zones in the UAE that have special tax, customs and import rules within themselves. In fact, there are more than 40 zones throughout the Emirates. Within these special areas, companies can be exempted from paying corporate tax for up to 50 years and they have 100% exceptions on import and export taxes. 

There is also no stamp duty in the United Arab Emirates. 

Businesses must register for excise tax if they partake in: 

The import of excise goods into the UAE 

The production of excise goods to be consumed in the UAE 

Stockpiling of excise goods in the UAE (sometimes) 

Those overseeing an excise warehouse or designated zone 

Businesses can register for excise tax through the e-services section on the FTA website. 

Well, there is no unified federal tax legislation in the UAE. That is why although most UAE tax rules and international agreements work in all the Emirates, there are cases when each emirate can set its own tax rules. 

One can potentially earn his full salary free of any tax in Dubai if he is a tax resident in the emirate and has no other obligation to any other state for the payment of tax on foreign-earned and sourced income. 

Connect with NRI experts via WhatsApp | Click here