Tax in GCC
- Overview of tax in GCC
- Taxes in UAE
- Taxes in Saudi Arabia
- Taxes in Qatar
- Taxes in Oman
- Taxes in Kuwait
- Taxes in Bahrain
Taxes in UAE
Get a quick overview of the different taxes currently applicable, and what are not currently applied.
UAE Tax System
The lack of income tax and the special business tax-free zones – is one of the main draws to the region for many expats. There is no income tax paid by employees, and no system for corporate and inheritance taxes, among others.
Excise tax is an indirect tax that is levied on goods that are deemed to be harmful to human health or the environment.
On 1 October 2017, the UAE introduced an excise tax on tobacco and tobacco products, carbonated drinks, and energy drinks. On 1 December 2019, the UAE expanded the scope of excise tax to include sweetened drinks, electronic smoking devices and tools, as well as liquids used in electronic smoking devices and tools.
The applicable tax rates are as follows:
- 100% on tobacco and tobacco products, electronic smoking devices and tools, liquids used in electronic smoking devices and tools and energy drinks.
- 50% on carbonated drinks and sweetened drinks.
The UAE government implemented value added tax (VAT) in the country from January 1, 2018 at a standard rate of 5% and applies to most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT (subject to specific conditions being met).
The UAE has one of the lowest VAT rates in the world.
The UAE does not levy income tax. Therefore, there is no need for an income tax return in the UAE. The same also applies to freelancers and self-employed individuals who are residents of the Emirates.
Employees in the UAE who are GCC nationals (this includes the UAE) are subject to a social security regime of 17.5%. Those who are UAE nationals pay 5% (automatically deducted off their paycheck) and the employer pays the further 12.5%. Those who are residents of other GCC nations may be subject to different social security contributions relative to their home country.
Most businesses in the UAE pay no corporate tax. Corporate taxes are only levied on oil companies and foreign banks in the UAE. However, there are over forty free zones in the country; businesses registered here are exempt from paying tax for a period that can be extended. There are no capital gains taxes unless the company is taxable under other income tax.
Double Taxation Treaties
The United Arab Emirates has more than 94 agreements in place with other countries to avoid double taxation on overseas investments.
The UAE has double tax treaties with the following countries:
Algeria, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Czech Republic, Egypt, Estonia, Finland, France, Georgia, Germany, India, Indonesia, Ireland, Italy, Kazakhstan, Republic of Korea, Latvia, Lebanon, Luxembourg, Malaysia, Malta, Mauritius, Montenegro, Morocco, Mozambique, Netherlands, New Zealand, Pakistan, Panama, Philippines, Poland, Portugal, Romania, Serbia, Seychelles, Singapore, Spain, Sri Lanka, Sudan, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, Uzbekistan, Venezuela, Vietnam, Yemen and more.
Further details on these treaties may be found on the Ministry of Finance.
Capital Gains Tax
Generally, there is no capital gains tax in the UAE, unless they are derived from the sales of a company that is liable to pay income tax or banking tax.
Property Transfer Tax
A transfer charge applies to the transfer of property in the UAE. This varies by Emirate; it is 4% in Dubai. Although the buyer and seller both share the burden of this, the buyer generally pays the transfer fee.
There is no inheritance tax in the UAE. If there is no will, however, inheritance is dealt with according to Islamic Sharia principles, regardless of the nationality of the deceased.
Taxes on rented properties vary between the Emirates.
In Dubai, residential tenants pay 5% of their annual rent in rental tax, while 10% is added onto commercial tenants. However, in Abu Dhabi, UAE citizens are not taxed on their properties, but their expat counterparts pay 5%. In Sharjah, all tenants pay a rental tax of 2%.
There is no stamp duty in the United Arab Emirates.
For most items, customs duties are calculated at 5% of the Cost, Insurance and Freight (CIF) value. Some categories are exempt, and alcohol has a 50% duty, while tobacco products have a 100% customs duty added.
Restaurants, hotels, and resorts may charge the following taxes:
- 10% on the room rate
- Service charge (10%)
- Municipality fee (10%)
- City tax (6–10%)
- Tourism fee (6%)
Tourism fees and hotel charges vary by Emirate.
In Dubai, there is a Tourism Dirham Fee per room for each night of occupancy (for up to 30 nights) that ranges from AED 7 to AED 20. In general, this depends on the grade of the hotel. Abu Dhabi charges an additional 4% fee onto hotel bills and charges AED 15 per night, per room. Ras Al Khaimah hotels also charge a tourism fee per room per night of AED 15
UAE does not impose withholding tax, but other GCC nations impose withholding taxes if a resident pays interest or dividends and royalties to a non-resident.
(A withholding tax, also known as retention tax, is an amount that an employer withholds from employees’ wages and pays directly to the government. The amount withheld is a credit against the income taxes the employee must pay during the year. In other words, a retention tax is an income tax to be paid to the government by the payer of the income rather than by the recipient of the income.)
Tax System for Foreigners
The UAE does not have any income tax for those working in the UAE, regardless of their residency status. Those who are not tax residents of the UAE may still have to pay income tax in their country of residence depending on their own taxation laws. There are no taxes levied to UAE residents on international pension plans.
The UAE has signed up to the Common Reporting Standard (CRS), which is the global standard for the Automatic Exchange of Information (AEOI) system. CRS is a legal standard allowing countries to exchange tax data between participants. This is useful for example to investigate tax evasion.
Tax Advice in the UAE
As there is no income tax in the UAE, many people don’t need to hire an accountant – there’s no income tax form to fill. For those with larger businesses, it is still important to seek independent financial advice on business tax liabilities.