Taxes in Dubai: What do you need to know?

If you’re considering a move to Dubai you’ll have heard a lot about its tax system. Much has been said about its simplicity and convenience for residents and investors. And it’s true, taxes in Dubai are significantly lower than in most developed countries . However, this doesn’t mean that you’ll be exempt from taxation. Is it the tax haven we’ve been sold?

Before you pack your bags and land in this city of skyscrapers and over-the-top luxury, or any of the interesting towns that surround it, it’s best to stop and understand how the tax structure works. You’ll avoid problems and have more options to manage your finances wisely in a place where the cost of living is quite high. So that you leave with all the information in hand, in this article we aim to break down, point by point, the most important taxes that you will have to face when you arrive. And, yes! And tax benefits too. 

Taxes for individuals or natural persons in Dubai

Talking about taxes? It may seem tedious if you aren’t very interested in the subject. But when it comes to Dubai, the subject becomes more interesting. Since, like the rest of the world, you’ll have heard a lot of things, it’s important to digress before going on to list the different taxes: While it’s true that you won’t have to pay personal income tax when you move to Dubai, you’ll have to pay other taxes. Let’s see what they are for individuals.

1. Income Tax (IT)

That’s right, as we said, you won’t have to pay tax on your salary when you move to work in Dubai. Here, the government doesn’t tax personal income. This means that everything you earn stays in your pocket. This approach is particularly advantageous for those with high salaries. In many other countries they could lose up to 40% or more in income taxes.

Are you going to earn $10,000 a month? That money is entirely yours. You won’t have to worry about annual returns or tax adjustments, which is a financial relief for many.

2. Value Added Tax (VAT)

Although there’s no direct income tax, Dubai levies VAT at 5% on most goods and services. It affects commodities, technology, transport or restaurants, among many others, but it’s one of the lowest rates in the world. To give you an idea, countries like Spain or Germany have VAT rates of 21% or even higher.

Imagine buying a laptop in Dubai for DH5,000 (about $1,360). You’ll pay DH250 ($68) in VAT. If you buy it with paying this tax in another country such as France, which is 20 %, the same laptop would have a surcharge of DH1,000 ($272) for tax. As you can see, the difference is significant, which is why prices in Dubai are more competitive even after adding VAT.

3. Municipal fares

Although not called a tax, Dubai levies a municipal fee on residential rents. This charge is equivalent to 5% of the annual rent and usually appears on utility bills. For example, if you rent a flat for DH100,000 per year ($27,200), you’ll pay an additional DH5,000 ($1,360) as a municipal fee.

4. Property transfer tax

For those looking to buy a property in Dubai, there’s a transfer fee of 4% of the property value. This amount is paid at the time of purchase and is usually split between the buyer and seller. Although it’s competitive with other countries with higher rates, there are places where the tax burden is lower or even non-existent. In France, for example, you would have to pay 7%. In New Zealand, on the other hand, the system doesn’t include a specific tax on residential property purchases.

As you can see, Dubai’s tax system for individuals is simple and very competitive. However, this doesn’t mean that you are completely exempt from taxation. While the absence of a personal income tax is a major attraction, other levies, such as VAT or municipal rates, can impact your day-to-day finances.

Taxes for legal persons or companies in Dubai

Now, what about taxes? Is it a good decision to invest in Dubai? Before we get into the subject, it’s not by chance that it has become one of the most attractive destinations for companies. It has done so thanks to its competitive and simplified tax system. The emirate has recently introduced corporate taxation, but it’s still a very low rate place compared to other countries. Let’s take a look at the main taxes payable by companies in Dubai and how they work in practice.

1. Corporate income tax

As mentioned above, corporate income tax is one of the most recent developments in Dubai’s tax system, having been introduced in June 2023. Although this levy is new to the emirate, it remains one of the lowest in the world. It has a general rate of 9% on net profits, which is considerably lower than the global average. For example, while here it has a general rate of 9%, in countries such as Spain it’s 25%. In the United States, companies have to pay a federal rate of 21%, not counting additional state taxes. However, there are jurisdictions that still have lower or even zero taxation, such as Cayman or Bermuda, where no such taxation is applied.

General taxation and exemptions in Dubai

• General rate: 9 % of net profits.
• Initial exemption: The first DH375,000 (approximately $103,882) are exempt from the tax.
• Applicability: Affects businesses that generate revenue within Dubai or in the local UAE market.

Shall we look at a practical example? If a company has net profits of DH1,000,000 (approximately $272,000):

• In Dubai, the first DH375,000 (approximately $102,000) are exempt, so 9% will be applied on the remaining DH625,000 ($170,160.62). This is equivalent to a tax of DH56,250 ( about $15,300).
• In Spain, with a general rate of 25 % and no specific exemptions for small companies in this case, the tax would be calculated on the total of DH1,000,000 ($272,257). This would result in a payment of DH250,000 ( approximately $68,000).

As you can see, the company in Dubai would pay less than a quarter of the taxes it would have to pay in Spain. This shows why Dubai remains an attractive tax destination, especially for companies with high profit margins.

2. Value Added Tax (VAT)

VAT was introduced in Dubai in 2018, and most goods and services are subject to VAT. Although not directly borne by companies, they are obliged to register as taxpayers and collect this tax on behalf of the government.

• The standard rate is: 5 % on the value of goods and services.
• Registration requirement: Businesses with annual revenues exceeding DH375,000 ($102,096.37) are required to register as VAT payers.
• Exemptions: Some sectors, such as health, education and basic goods, may be exempt or subject to reduced rates.

3. Excise duties

In order to promote healthier consumption, Dubai also applies specific taxes on products it considers harmful to health or the environment. These levies not only affect the final price of products, but also the pricing strategies and margins of the companies that market them.

What are they?

• Tobacco: 100 % of the price of the product.
• Energy drinks: 100 %.
• Sugary drinks: 50 %.

The aim isn’t only to discourage consumption, but also to promote corporate responsibility. Businesses must be prepared to manage these additional costs and, in many cases, look for healthier or more sustainable alternatives that can escape these fees.

4. Business licence fees

This isn’t a tax, but it’s a fixed cost. You’ll need to take this into account when setting up a business in Dubai. All companies are required to obtain a business licence to operate. They’re renewed on an annual basis and their cost varies depending on the type of business and location.

• Average cost: Between DH10,000 and DH50,000 ($2,720 to $13,600) per year.
• Types of licences: Include commercial, professional and industrial, each designed for different activities.

Tax benefits in Dubai

As you can see, it’s a very interesting destination in the eyes of investors or residents who want to save on taxes. Right? There’s more. In Dubai, they’ve managed to build an ecosystem that not only reduces tax burdens, but also fosters growth and stability. Let’s look at some of the benefits you could enjoy.

1. Residency programmes for expatriates and digital nomads

Dubai not only offers tax benefits, but has also created programmes that make it easier for both remote workers and entrepreneurs to set up in the emirate. These programmes not only ensure stability, but also facilitate integration into a modern environment with first-class infrastructure.

• Golden Visa: Designed for investors, entrepreneurs and highly skilled professionals, this visa gives you long-term residency (5 or 10 years) and eliminates the uncertainty of frequent renewals.
• Visa for digital nomads in Dubai: Ideal if you work remotely for a foreign company. This programme allows you to enjoy the tax benefits of Dubai without having to change employer.

2. Free trade zones: a paradise for companies

Dubai has more than 30 free zones that offer exceptional tax conditions for companies operating outside the local market. These areas are designed to attract foreign investment and foster growth in key sectors such as technology, trade and financial services.

Key benefits:

• Full exemption from corporate income tax.
• 100 % foreign ownership.
• Unrestricted profit-free repatriation.

For global companies looking for a strategic location in the Middle East, these areas are a hard option to beat. In addition, each free zone is specialised in one sector, which facilitates access to relevant resources and networks.

3. No wealth and inheritance taxes

If you’re looking to protect your wealth and plan for your family’s future, Dubai offers a secure environment with no estate, inheritance or gift tax charges. This makes the emirate an attractive choice for high net worth individuals who wish to hold and transfer their assets.

As you can see, despite the taxes that have been introduced in recent years, Dubai remains a dream destination for businesses and residents alike thanks to its competitive tax system and unique incentives. Tax rates are low and exemptions in key sectors offer considerable financial leeway. If you’re thinking of expanding your business to Dubai or setting up a new company, the emirate offers an exceptional opportunity to grow in a tax-friendly environment. If you’re still in doubt, it’s best to consult an expert advisor who’ll study your case and tell you how to proceed in order to protect your finances. And don’t forget to get your eSIM Holafly for UAE to stay connected at all times!

Frequently Asked Questions about taxes in Dubai

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