Paying taxes in Dubai – what it means? What type of taxes does Dubai have? Who is subject to pay these taxes? What is the declaration to be filed to the tax authorities to be able to pay taxes on time? Our review is dedicated to these and other related questions.
First of all, we need to outline that the UAE tax law, as of any other country, clearly separates physicals and legal entities. The physical persons who have a resident visa in the UAE are considered tax residents of the country. The types of residency visas may differ - investor visa, property visa, employment, visa or family visa.
Residents of Dubai – what taxes they are paying
When talking about paying taxes in Dubai by physical persons living in the UAE, at present there are no taxes on physical persons in any form whatsoever. Means any form of income – be it salary, income from business, interest, etc. are completely tax-free. Presently the country’s residents do not even have a UAE tax number as there is no system as such for the tax number registration by the UAE residents. As there are no taxes which are due for paying by physical persons, there is also no requirement to file any respective yearly tax declarations to the local tax authorities.
The only tax which is due to the residents of the country is the tax on the income from properties rent if such properties are located in the UAE. Such tax is 5% from the average rent, though there is no obligation to file any type of tax declaration as this tax is calculated automatically by the state and is charged together with the property utility costs.
Same as most other countries in the Middle East, the majority of the UAE revenues come from oil related industry and other sources thus it offers a tax-free living to attract talented persons, wealthy investors, and global companies to further support and diversify country’s economy.
Resident of Dubai does not mean that there would be no taxes due for payment abroad
When talking about international taxation, it is crucial to note that the UAE residency visa and the UAE residency status is not a guarantee that you would be free from paying any taxes in another country. For example, if you live in some country in Europe and spend most of your time there and also have residency visa in the UAE – your tax on your income would be most likely due for paying in that European country as you are the resident most of your time in there.
That would even apply to income in Dubai - if you have your income here but are tax resident somewhere else, you may be subject to paying taxes on your UAE income in another country. This may happen as you have to pay your taxes depending on the country where you are deemed as the resident for taxation purposes. Means when obtaining the UAE residency or receiving income from this country you need to wisely check the tax regulations in other countries where you live or make your business and may be subject to taxes.
In other situation, when you entirely move to the Dubai or spend the majority of your time here, you may become fully tax resident of the UAE. The regulations on how many years you must be absent in your home country and maximum possible number of days of stay there as subject to regulations of every specific country. Be aware that every personal situation is unique and improper assumptions on your obligations on taxes due for payment can cause severe complications.
Companies in the UAE – corporate taxes due for payment and the applicable regulations
For the companies being registered in the UAE, the are no payable corporate taxes of any type, neither withholding taxes as such, or taxes on dividends paid to shareholders. When leasing commercial premises on the main territory of the country businesses have pay 10% tax on top of the rental payments.
If companies import some goods into the UAE, there is the customs duty which is on average 5%. From 2018 the VAT of 5% is applicable as well.
Onshore free zone companies do have to file yearly audit reports. However, these are not followed by any tax declarations as these are absent. There are only the VAT declarations which are due for filing from 2018 according to the applicable praxis.
Dubai – paying indirect taxes
Even though there are no direct taxes on persons and minimum taxes on companies in Dubai which are due for paying, there are certain indirect taxes. Such taxes include various governmental fees and charges. For example, for physical persons these are the property purchase registration fees in Dubai which are 4% from the purchase price, costs of the visa, taxes on gasoline, alcohol and tobacco, municipality tax which is paid by certain businesses and then levied on consumers. There are also certain other fees – notary fees which are due when you need some notary services whereby the public notaries in the UAE are the governmental entities, fees for Emirates ID cards which you need to renew regularly, etc. From 2018 there is also the VAT tax which is 5% from the value of goods and services. This tax would be added to the costs of goods and services and becomes payable by end consumers.
For businesses in Dubai, the indirect taxes they are paying are such as yearly license fees, various governmental fees and charges, visa fees for company owners and employees, etc.
Summary on taxes in Dubai and city’s standing for persons and business
Dubai is very well known and a popular destination for wealthy individuals and various businesses. Apart from offering very competitive tax treatment it also provides great facilities for living and doing business. Moreover, Dubai is the very busy business hub thus presence here means outstanding business perspective. The country has also signed a large number of DTAA agreements.
Details on the tax system of the UAE – please see the page on Dubai taxes published by The World Bank
There may be confusion for you on why there is the indication of salary taxes of 14.1 % on The World Bank website and other sources. This tax is related to local companies which hire local citizens as employees – in this case; they are liable for paying taxes on salaries which are, in effect, the payments into the pension system for these local citizens.
Apart of all the above Dubai has a very strong banking system which follows the strictest international compliance regulations guaranteeing the safe and secure environment.