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Taxation in Dubai

Taxation in Dubai

Updated on Monday 23rd October 2017

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Dubai is known for its attractive taxation regime, as the UAE is a country which imposes few taxes on companies and individuals. This regime is the main reason why business owners choose to open companies here and individuals choose to move to and live in Dubai. Taxes in Dubai can be direct or indirect. For a better understanding of the requirements regarding the taxation system in the UAE, we suggest you solicit complete guidance and legal assistance from our lawyers in Dubai. Our team can provide services for you and your company regarding the imposed levies, if there are any, and information about the tax compliance in Dubai

 

Taxes for companies in Dubai

 

The main business entities that can be set up in Dubai are the limited liability company, the private and public joint stock company, the branch and representative office. A company incorporated in Dubai is considered a resident company if all of the shares of the company are beneficially owned by United Arab Emirates residents, if the company’s income is derived from activities other than investments businesses in the UAE or if all or part of the value of the company’s property is used in the respective trade or business.

The income of a Dubai company is exempt from taxes, except if the company engages in oil and gas exploration and production or if it is a branch of a foreign bank. These companies are taxed according to the following rates: 20% for foreign bank branches and 55% for oil and gas companies. There are no withholding taxes in the UAE, no capital duty or payroll tax and no stamp duty. Dubai has several free trade zones where incentives apply. 

 

Taxes for individuals in Dubai

 

Dubai can be regarded as a tax haven for companies and for individuals as there are no income taxes for individuals in Dubai. Also, individuals living and working in Dubai have no compliance obligations. Foreign citizens living and working in Dubai may be subject to taxation in their home countries for the income earned in Dubai, provided that:

 • the income is generated by the rental of a property;
 • if they spend only a part of the fiscal year in Dubai and the rest in their home countries.
 

However, due to the UAE’s double taxation agreements, the taxation of income can be avoided.

 

The VAT in Dubai

 
Starting with January 2018, the VAT rate of 5% will be applicable in Dubai for certain goods and services. For example, jewelry, beverages, tobacco products and specific luxury premium cars will be subject to VAT in 2018.  Even if the list is still open, there are also exemptions from VAT: real estate, basic food, healthcare, international transport and education services will not be on the list of goods and services subject to a VAT rate of 5%. The new taxation system regards any foreign investor with businesses and companies in the UAE, therefore, you may address your questions in this matter to our Dubai lawyers
 

The excise tax in Dubai

 
Starting with October 2016, the financial authorities in Dubai have agreed for an excise tax applicable for unhealthy products for sale. In this matter, the soft and sugary drinks, alongside with the tobacco products, will be levied with the newly imposed tax. This means that a tax of 50% rate from the sale price will be added to each product. The excise tax is applicable for the products available in supermarkets, pubs, restaurants, hotels, and shops. It is good to know that companies which do not comply with the new tax regulations in Dubai will be subject to penalties.
 

Indirect taxes in Dubai

 

The Dubai Government applies the following indirect taxes which need to be considered when relocating in the Emirates:

a municipal tax of 10% which is levied on hotels and entertainment activities;
a 50% tax on the import of alcoholic beverages;
a 30% tax on the purchase of alcohol.
 

If you want to know more about how to make investments in Dubai or about the taxation system in the UAE, please do not hesitate to contact our attorneys in Dubai.

 
 

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