Dubai taxes for expats in 2023
The UAE is known for its liberal taxation system. Low taxes and no income tax have become yet another reason why Dubai turned into one of the financial centres of the Middle East and continues to attract entrepreneurs from all over the world.
This does not really mean that there are no taxes in the UAE. Residents, for instance, are charged VAT, and banks and oil and gas companies are subject to corporate tax on their profits. On top of that, residents pay additional fees, ranging from business licence renewal fees to administrative fees on the purchase of real estate.
Tax residency in UAE
Foreign citizens pay taxes in the Emirates if they have become tax residents in the country. The status of a tax resident applies to those foreigners who are living in the UAE for 183 days per year. In order to legally stay in the country for an extended period of time, a foreign citizen must obtain a residence visa in the Emirates.
There are double taxation avoidance agreements between the UAE and 92 other states. The double taxation avoidance means that the citizens receiving income in both countries of the agreement will only be taxed in one of them. Thus, foreigners earning income in the UAE pay taxes either in the home country or in the Emirates, but never in both countries. Even if taxes were overpaid by mistake, a foreign national may apply for a refund if the tax agreement had been signed before the tax payment.
Income taxes in Dubai
In the UAE, there is no income tax neither for individuals nor for companies in the vast majority of business fields. The exceptions are subsidiaries of foreign banks and foreign oil and gas producers.
Foreign oil and gas companies in the UAE are taxed at 50% and branches of foreign banks at 20%.
In all other industries, employees are paid the exact same amount as stated in their job contracts, and business owners pay no profit taxes on the company’s earnings.
Taxes for legal entities in UAE
Zero-rate income tax does not imply that there is no deduction to the state for doing business or working in Dubai.
Local companies and self-employed residents must regularly renew their business licences. A licence fee is paid every year in a range between 2,000 and 6,000 US dollars depending on the type of licenced activity.
Free zone employers also pay a monthly contribution ranging from 5.83% to 8.33% of an employee's salary to a pension fund. The contribution depends on the number of years of service.
Effective since July 2022, foreign workers employed by the UAE government will be able to receive a state pension. Previously, pension payments were only available to UAE nationals. Pension insurance for employees of companies registered in the freezones is mostly voluntary. An exception is the Dubai International Financial Centre (DIFC), where employers have to contribute an amount equal to between 5.83% and 8.33% of salary to the pension fund on a monthly basis. Authorities are urging other companies to follow DIFC's example.
In 2023, the UAE will introduce a corporate income tax for the first time. The country's tax rate will be 9% for taxable income in excess of 375,000 UAE dirhams (102,000 US dollars). If a company earns less than this amount, however, it will not be subjected to profit tax. According to the UAE Ministry of Finance, this is done to support small businesses and start-ups.
Taxes for individuals in UAE
The UAE’s new income tax law will not affect natural persons. The finance ministry announced that individuals will not need to pay income taxes on the earnings from employment, real estate, share investments or other personal income sources unrelated to trade or business in the UAE. The new income tax will also not apply to foreign investors doing no business in the country.
Value Added Tax (VAT) in the UAE
In 2018, the UAE introduced a VAT of 5%. The Emirati government attributed the VAT introduction to the fact that the county needs to reduce dependence on oil and other hydrocarbons as the main source of income.
VAT is levied both on companies registered in the free zones and on companies from the UAE's local territory (mainland).
Dubai property taxes
There is a transfer tax of 4% on property price for the real estate purchase. The tax amount is shared equally between the property buyer and the seller.
Along with the transfer tax, the buyer pays an administrative fee of 540 dirhams (147 US dollars) and a registration fee, which varies from 2,000 to 4,000 dirhams (545 to 1,089 US dollars) depending on the value of the property.
Dubai residents do not pay income tax when renting out their accommodation. Instead, there is a municipal levy, which is usually paid by the tenant as part of the utility bill. In Dubai, its rate is 5% of the annual rental value for residential properties and 10% for commercial properties.
There is no annual housing tax, gift or inheritance tax.
VAT is only payable on commercial property transactions.
Detailed information about property taxes in Dubai.
It is important to note that foreign tax residents need to pay taxes on rental income, profits earned on the property sale or other taxes on assets in the Emirates applied in their respective tax residences.
Tax on accommodation in Dubai for tourists
In the UAE, hotels and other tourist facilities may charge additional fees to visitors. The UAE state portal lists the following charges:
- 10% room rate tax;
- 10% service charge;
- 10% municipal tax;
- city tax of 6-10%;
- 6% tourist tax.
In Dubai, tourists are charged a tourist fee of 7 to 20 dirhams (1.91 to 5.44 US dollars) per night, depending on the hotel category.
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