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Why UAE has no tax and how can it exist without such

Tax question

Many people find it surprising that there are essentially no taxes in the United Arab Emirates. Income tax, VAT, social contributions and number of other taxes – the vast majority of people from other countries pay up in total to 50% of their income (and sometimes even more) to the country's budget in the form of various taxes. But the UAE residents are exempt from most of the typical taxes. However, it does not mean that there are no taxes at all and there are also plenty of scenarios when residents and companies are subject to certain UAE taxes.

There is no direct income or corporate taxes in the UAE, that is true, whereby the money that generates the revenue for the budget is received from other sources, and are the part of the indirect taxes. For example, such taxes are the tax on commercial real estate rent, the fees for residence visas, licenses for companies, car registration fees, road taxes, and some other charges which are applicable as the UAE indirect taxes.

Another source of securing the budget is public services, fees for which are relatively high. In addition, there are also additional regional fees, for example, in the Emirate of Dubai there is a road tax in the form of SALIK. There is also the special municipality fee, which is automatically added to all bills in restaurants. All this ensures the stable inflow of money to the local budget.

Among the few direct taxes, we can name VAT, which has been introduced since January 2018, although it is much smaller than in other countries of the world and is 5% (in other countries this tax is on average around 20%). VAT applies to all goods and services sold in the country.

In addition, one cannot disregard the country's income from the sale of oil products, tourism, and logistics. All this is sufficient to ensure the regular operation of the country institutes. Local authorities often declare their intentions not to impose additional charges and taxes until the certain time, for example, the latest statement mentions 2021 as the term, which means that till that time foreign investors and expats can receive 100% profit without worrying about any taxes if they are tax resident in the UAE.

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