Individual income taxation is not practiced in the UAE. However, it imposes a corporate tax on foreign banks and energy businesses. Specific products that are particularly damaging to the environment or human health are subject to excise taxes. Most goods and services are subject to value-added tax.
There is no federal or state-level individual income tax in the United Arab Emirates.
In the United Arab Emirates, there is no individual income tax at the federal or state level.
1. Social security contributions
The United Arab Emirates has a social security system that solely covers eligible nationals of the UAE and other Gulf Cooperation Council (GCC) countries. In the United Arab Emirates, social security does not apply to people who are not GCC citizens.
Social security contributions for UAE national employees are computed at a tax rate of 20% of the employee’s gross compensation as specified in the local employment contract. Additionally, employees of businesses and branches registered in a free trade zone are subject to social security duties (FTZ). Out of the 20%, 5% is paid by the employee, 12.5% is paid by the employer, and the government also contributes 2.5%. In the Emirate of Abu Dhabi, where the employer payment is raised to 15%, the government contribution is raised to 6%, and the employee contribution is kept at 5%, a higher rate of 26% is in effect.
Social security contributions are calculated for other GCC citizens who work in the United Arab Emirates in accordance with the social security laws of their home countries. Withholding and remitting of employee social security contributions is under the purview of the employer.
To safeguard long-term employee investments, the Dubai International Financial Centre (DIFC) has replaced the End of Service Gratuity Benefit (EOSG) with the DIFC Employee Workplace Savings Scheme (DEWS). With the implementation of the new system on February 1, 2020, employers are now obliged to make monthly contributions to DEWS or another regulated Qualifying Scheme in place of providing an employee with a lump sum “gratuity payment” at the conclusion of their employment. Employers are obligated to contribute monthly contributions to the plan equal to 5.83% or 8.33% of an employee’s base salary (the exact proportion depends on the employee’s length of service).
2. Capital gains taxes
In the United Arab Emirates, there is no personal tax at the moment. As a result, neither UAE citizens nor residents are subject to capital gains tax.
3. Consumption taxes
On January 1st, 2018, the United Arab Emirates adopted a value-added tax (VAT).
For more details, see Value-added tax in the Other taxes part of the Corporate tax summary.
4. Net wealth/worth taxes
Individual income tax are not yet subject to wealth taxes in the United Arab Emirates.
5. estate, Inheritance, and gift taxes
In the United Arab Emirates, there aren’t any taxes on gifts, estates, or inheritances at the moment.
6. Municipal or property tax
The majority of Emirates levy a municipality tax on properties, typically based on the annual rental value. Typically, tenants are responsible for paying the tax. In rare circumstances, both tenants and property owners must pay different fees. For instance, in the Emirate of Dubai, municipal property taxes are currently levied at 5% on the yearly rental value of commercial buildings, also known as “market fees” (paid by property owners), and 5% on the annual rental value of residential properties, also known as “housing fees” (paid by tenants).
On the transfer of real estate or land ownership, a registration fee may be assessed. For instance, the Emirate of Dubai imposes a land registration fee on any third-party transaction at a rate of 4% of the property’s fair market value (a cost that is typically split among the buyer and seller), payable to the Dubai Land Department. The registration fee may also be charged in Dubai for the direct or indirect transfer of stock in a company that owns real estate.
Each Emirate imposes and administers these levies in a unique way and at a distinct rate.
7. Luxury taxes
The United Arab Emirates does not currently impose any luxury taxes.
8. Excise taxes
The United Arab Emirates began levying an excise tax on tobacco and tobacco products, carbonated beverages, and energy drinks on October 1, 2017.
The United Arab Emirates amended the scope of excise duty to cover sweetened beverages, electronic smoking equipment and devices, as well as the liquids used in those items, effective December 1, 2019.
The following taxes are applicable:
• 100% on tobacco and tobacco products, electronic smoking tools and devices, liquids used in those tools and devices, and energy drinks.
• 50% off on sweetened and carbonated beverages.
9. Customs duties
Typically, imports are subject to a 5% customs charge on their cost, insurance, and freight (CIF) value. For some products, like alcohol and cigarettes, different prices might be applicable, and there might also be possible exclusions and reliefs. Additionally, the United Arab Emirates levies anti-dumping taxes on the importation of some products, including hydraulic cement, ceramic and porcelain tiles, and vehicle batteries. The anti-dumping duty rates change based on the HS codes of the products and the exporting and/or originating nations. The anti-dumping duty can sometimes be as high as 67.5% of the CIF value of the products.
The GCC Customs Union, which was founded in 2003 to reduce trade and customs barriers between the GCC member states, includes the United Arab Emirates. Trade among GCC members is not subject to customs taxes (subject to certain conditions). In addition, the United Arab Emirates allows duty-free imports of the majority of domestic products from Singapore, the European Free Trade Association, and the Greater Arab Free Trade Agreement’s member nations (i.e.
Liechtenstein, Iceland, Switzerland and Norway).
The UAE Free Trade Zones are located on United Arab Emirates land, however they are not included in the customs territory. As a result, imports into UAE FTZs are exempt from customs duties. Until the products are brought into the GCC domestic market, customs duties are suspended.
10. Hotel tax and tourism levies
The majority of Emirates levy hotel charges that are based on the cost of services, entertainment, and hotel room rentals. Each Emirate imposes and manages these fees differently.
The Emirate of Dubai levies a tourism dirham levy. According to the hotel’s star rating, this fee is assessed to visitors and tenants of hotel apartments and ranges from AED 7 to AED 20 per room per night. For instance, a five-star hotel will charge a Tourism Dirham fee equal to AED 20 per room per night, whereas a two-star hotel will charge a Tourism Dirham fee equal to AED 10 per room per night. Hotels in the Emirate of Abu Dhabi will charge a destination fee of AED 15 per night as well as a tourist fee equal to 6% of the hotel room rental.
In addition to the aforementioned tourism levies, the Emirate of Dubai also imposes hotel taxes individual on each hotel sale in the amount of 7% municipality charge. There are no destination fees in the Emirate of Dubai. Similar to this, hotels in the Emirate of Abu Dhabi are compelled to pay a 4% municipality charge. A hotel makes money via sales of goods and services it offers to tourists and guests, such as lodging rent, meals, drinks, and other services. Hotels in all of the Emirates charge an additional service fee equal to 10% of the revenue from hotel sales.
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