Dubai is well known for its attractive taxation system, as it imposes few taxes on individuals and companies. This regime is the main reason why foreign investors want to set up a business here and individuals choose to move, live and work in Dubai. There are two types of taxes in Dubai
- direct and indirect.
Our law firm in Dubai
provides legal assistance and further information for your company on the tax compliance in Dubai
Corporate and individual taxes in Dubai
Despite the fact that there are no personal income taxes, value added tax,any withholding taxes on dividends, capital gains, there are still few other taxes that are applied to companies in Dubai. Dubai structures
must pay, for example, a real estate property tax to the municipalities. As for the foreign entrepreneurs who want to set up a business in Dubai
, it is relevant to know that corporations will benefit from incorporating a company in free trade zones that present up to 50 years tax exemptions and no other customs duties.
The taxation rates vary between 5% and 15% in general, depending on the company’s type. Commercial and industrial corporations will be subject to 5% of their annual income, branches of foreign banks will be subject to a 15% tax rate. Companies must also contribute to the pension fund of national employees by paying a 12.5% tax and local employees will be subject to a tax rate of 5% for the same pension funds.
As for taxes applied to individuals, the ones living and working in Dubai have no tax obligations. Foreign citizens living and working in Dubai may be subject to taxation in their home countries for the earned income in Dubai if the generated income is from the rental of a property. A 5% municipal tax will be imposed in the case of renting a residential property in Dubai. Tax applies also if the international entrepreneurs spend only a period of the fiscal year in Dubai and the rest of it in their origin country.
In addition, a tax on alcohol is required from individuals after they have obtained a liquor license. Moreover, another tax is to be paid on restaurant and hotel services. If you are interested in all imposed tax or maybe you want to know how to avoid the taxation of income (through UAE’s double taxation treaties), feel free to ask for our Dubai law firm’s help.
Taxation treaties in Dubai
Dubai has concluded double taxation treaties with a significant number of countries so that its investment environment would be more attractive to foreign entrepreneurs who want to open a company in Dubai.
Tax burdens were reduced through these treaties for companies which redistribute their profits in other countries with more imposing taxation laws. Some of the countries Dubai has signed tax agreements with are the neighboring countries in the Middle East, some countries from Europe such as Germany, Malta, Italy, the Netherlands, Greece, France, Spain and Switzerland and other countries around the world such as China, India, Japan, South Korea, Australia, Canada.