Friday 22 November 2019 (UAE)

Tax system in the UAE

[Category] Tax system in the UAE

This page and related pages in the section about the UAE tax system are intended as information to help UAE residents and visitors get an general idea of what and how much to pay or not pay to government agencies in the UAE as taxes and related charges, whatever they might be called. These pages are absolutely not any form of tax advice, legal or otherwise. Nor are they intended to be an accounting, economics, or finance course in federal or international taxation.

To know more about specific details and how they might apply to you, visit a lawyer or accountant specialised in UAE taxes and/or contact the UAE tax authorities. If you disagree with a payment made and want to fight it, go to the legal authorities in the UAE (but many would advise you contact a lawyer and/or the UAE tax authorities first).

Contents, headings on this page

What is tax?

Taxes are compulsory payments to government organisations made by taxpayers (company or individual) which are used to fund government activities e.g social services, infrastructure development. The payment can be a tax, tariff (generally means import or export tariffs), fee, levy, charge, customs duty, etc. Fines imposed as penalties for breaking laws or as a result of civil or criminal court cases are not generally regarded as taxes even though they might be compulsory payments to a government agency. However, any additional service fees when paying those fines would often be regarded as some form of taxation.

Benefits of taxation

Countries usually run better with a government of some sort (for a no-government lifestyle, consider Somalia). Governments need to be paid, and governments build infrastructure (roads, electricity, water, etc) and operate services (education, health, police, tax inspection and collecting departments, etc). The money for these services usually comes from people and businesses in the country, collected as taxes. It can also come from other sources such as government activities which earn a profit (e.g. selling oil, land, bananas, etc), governments selling assets (privatisation), governments taking assets from other governments (invasion, war, colonisation), governments taking assets from people or businesses (nationalization), etc.

So the tl;dr version of the benefit of being taxed is: taxes pay for services (and occasionally goods) provided by the government to businesses, citizens, residents, and visitors to a country. When people disagree with the government calculations of tax cost-benefit ratios, possible outcomes include: strongly worded discussions on the internet or in cafes, increased sales of soap boxes, trips to airport departure lounges, emigration, tax payment avoidance or evasion, elections, riots, revolutions, new governments.

Sources of tax income in the UAE

List of different forms, categories, or types of taxation in the UAE
Type of tax Rate if exists Notes
Airport taxes   See Passenger taxes (airport)
Alcohol License   Permit to drink and/or possess alcohol in UAE. Free for tourists (if available), AED 200 for residents.
Alcohol tax 30% Unusually, not charged if alcohol license not shown. Is Excise, Sales, or different tax?
Bank Tax 0% or 20% Corporate tax applies to foreign banks in AUH, DXB, SHJ?
Cancellation fees Various Cancelling visas, company or trade licenses, etc. Can be significant.
Capital Gains Tax (CGT)   Not in UAE
Consumption taxes   See Sales Tax, VAT
Carbon Tax    
City Tax   Usually for tourists, in UAE applied in Abu Dhabi, Dubai ("Tourism Dirham"), and RAK (AED15/night).
Corporate Tax 0%, 20%, 50%, or 55% Mostly 0% but some tax on some banks and oil companies.
Customs Duty 5% Payable on any imported goods with value > AED 1,000 per shipment, includes e.g. Amazon.
Direct taxes    
eChannel fees ~AED7,200 setup + annual MOI fee introduced 2017 for companies, ~5k deposit, ~2k setup.
Environmental taxes    
Estate Tax   Not in UAE?
Excise Tax 50%-100% Tobacco, e-cigarettes, energy and other sweetened soda pop drinks. Federal Law No. 7 of 2017.
Expatriation Tax   Not in UAE?
Financial services taxes   Not in UAE except for corporate tax on profits for foreign banks in some emirates.
Free Trade Zone taxes   Not directly, but fees for setting up, licences, renewal, visas, audited accounts, shutting down.
Gift Tax   No information, never heard of it in UAE, assume 0%.
GST (see VAT)   Goods and Services Tax, referred to as VAT in the UAE.
Hotel tax 6%-10% Municipality tax of 6% in AUH, 10% in DXB, per night. See also Hotel Service Charges.
Income Tax 0% UAE is tax-free on income or payroll tax.
Indirect taxes    
Inheritance Tax   Probably 0% but double check.
Innovation Dirham Fee AED 10 Added to Dubai Government services, some exemptions (Jan 2018).
Knowledge Dirham Fee AED 10 Added to Dubai and federal government services done in Dubai emirate (Jan 2018).
Labour Permit   Fee or charge for permits for expatriate employees.
Licence fees, company Various Company establishment depend on type of company e.g. school, restaurant, hospital, etc.
Licence fees, individual Various Permits for e.g. alcohol, driving, Emirates ID.
Luxury Tax   Not in UAE except for soda and energy drinks.
Municipality Tax Various Council Tax, Poll Tax, hotel tax, local body tax, housing tax, etc.
Passenger taxes Airports AED 80-115 Facilities (Dh35), Service (Dh75), Security and Safety (Dh5). Not all UAE airports charge all fees.
Payroll Tax   See Income Tax, but is 0% in the UAE so far.
Post Office tax AED 10 per package Collection fee for packages sent to PO boxes. Not for letters, seems to be inconsistently applied.
Property Tax   Municipality and/or Land Department taxes on rentals and purchases.
Road Tolls   Road user charges in Abu Dhabi and Dubai (Salik). Not federal (so far).
Sales Tax 5% VAT, 5%-100% some items See also Excise Tax, Customs Duty, VAT.
School fees (public) AED 5,000-7,000 For expat children in government schools (very rare, most attend private schools).
Stamp Duty   See also Property Tax
Tourist Dirham, DXB AED7-20 per night In Dubai emirate or city? City taxes also charged in AUH and RAK. Only applies first 30 nights per stay.
Transfer Tax   Not in UAE?
Transport taxes    
Value Added Tax (VAT) 5% See also Customs Duty, Sales Tax. Also applied to service fees and other charges and taxes.
Vehicle taxes   Annual registration fee
Visa costs AED 100s to 1000s AED 100s for tourist and visit visas if applicable, AED 100s-1000s for residence visas.
Wealth Tax   Not in UAE?

Service charges, fees, and other payments which do not go to a government department

School fees (private) (AED 5,000-100,000 annual) Public schools not an option for most expats. Tuition fees are VAT exempt.
Hotel service charges (10%-20%) +VAT Not (usually) a government tax, charged at hotels but not given to serving staff.
Restaurant service (10%-20%) +VAT Not (usually) a government tax, charged at some dining outlets but not given to serving staff.

The table includes taxes which go to a government organisation: directly or indirectly, local or federal. It does not include other charges which might be referred to as taxes but do not go to a government agency, for example Zakat, church tax (doesn't exist in the UAE anyway). Hotel and restaurant service charges are listed because of overlap with city, tourism, and municipality taxes and fees, for the average tourist, what it feels like is an extra 30% on the hotel room rate as "taxes".

Public transport charges are not included because public transport use is voluntary, even if the ticket fees go to a government agency. Road tolls are a bit of a grey area since it could be argued that road use is also voluntary, but for now we'll go with our perception of general public opinion which seems to be that road tolls are a tax, and public transport tickets are not.

Sales or similar tax additional to VAT includes tax on purchases of: soft drinks 50-100%, alcohol 30%, cigarettes 100%, hotel and restaurant various fees and charges 20-30%.

Tax system in Abu Dhabi

Differences with the UAE federal tax system:

Tax system in Dubai

Differences with the UAE federal tax system:

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References

Last update Sunday 03-Nov-2019.
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