Is there Income tax in Dubai?

One of the reasons people from other countries are eager to be in the UAE is that they need not pay income tax. There is no income tax on individuals in the UAE, including Dubai. The law applies to those who have a UAE residence visa. If you want to save on income tax, you must be a residence visa holder, which is not complicated as Dubai welcomes people from around the world.

Citizens of the country automatically qualify for income tax exemption.

Whatever amount you earn and from whichever source or manner, such as salaries, dividends, the interest of savings, luxury, wealth, gifts, inheritance, and capital gains, you need not pay any income tax. Residence visa holders who are natives of other countries need not pay taxes on pensions in the UAE.

Taxes payable by foreigners

Foreigners who visit the UAE as tourists must pay taxes on the money they spend on hotels and traveling across the Emirates. The government collects many types of taxes from tourists, such as hotel taxes @ 10%, municipal tax up to 10%, service fees @ 10%, tourist fees @ 6%, and city tax @ 6-10%. The tax rates are variable across the Emirates as each Emirate fixes the tax rate. For example, the municipal tax rate in Dubai is 7%, whereas, in Sharjah or Ajman, it is 10%. There is no municipal tax applicable in Ras Al Khaimah.

Dubai is a major tourist destination in the Emirates, and guests at hotels must pay an additional fee, tourism dirham' that ranges from AED 7, and AED 20 per night depending on the hotel's status defined by the number of stars and the room category.

Staying in a 4-star hotel will cost you an extra AED15 per night which goes up to AED 20 for 5-star hotels. For a two-room accommodation, the additional charges will be doubled. However, there is a cap on the additional charges as guests must pay it for a 30 days stay only and not beyond it. It means if you stay for 35 days, you must pay the additional charges for 30 days only.

Company taxes in the UAE

Corporate Tax- Although the UAE does not levy taxes on the income of individuals, companies must pay different types of taxes such as Value added tax (VAT), excise tax, import and export tax, and corporate tax. Corporate tax in UAE will come into effect for companies that have their financial year starting from June 01, 2023.

Companies that report income/ profit up to AED 375,000 are exempt from Corporate Tax, and those exceeding the limit must pay the tax at a flat rate of 9%.

Branches of foreign banks are paying 20% tax, and foreign companies in the oil and gas sector are paying 55% tax. No taxes are payable for reorganization and inter-group transactions. There are no taxes on dividends and capital gains.

VAT - Value-added tax (VAT) @ 5% is applicable for companies earning more than AED 375,000, and such companies must register with FTA as VAT payers. VAT registration is voluntary for companies having income between AED 187,500 and 375,000.

VAT is payable within 28 days of the expiry of the tax period but quarterly. But, the FTA might fix different tax periods for some eligible companies.

Excise tax – Items harmful to the environment and human health attract excise tax. The tax is calculated as a percentage of the difference between the retail price, excise, and VAT elements or as a percentage of the product price determined by FTA and whichever is higher.

Products containing sugar or sweetener

and fizzy drinks, except soda attract a 50% excise tax.

Energy drinks, tobacco products, and electronic smoking devices attract a 100% excise tax.

Companies that manufacture, store or import these products are liable to pay excise tax after duly registering with FTA as excise taxpayers.

Import and export taxes - There are no export taxes. Import taxes @5% of CIF (cost, insurance, and freight) are levied on imported goods. Imports from Free Zones are tax-free until the goods reach the local markets. An import tax of 50-100% is applicable on harmful products like alcohol and tobacco.

Free Zone companies are exempt from taxes for 15-50 years from the date of registration.