The administration — FTA (Federal Tax Authority, Federal Tax Service) deals with the appointment of taxes in different emirates. There is no unified tax code in the UAE.
Taxes for individuals
There is an insurance system for citizens: 5% of wages are charged for public and private sector employees.
For foreign citizens who are residents, a funded program is being introduced from 2022, which will allow residents with sufficient pension experience in the public sector to receive monthly assistance from the state on an equal basis with the indigenous inhabitants of the country.
Taxes for legal entities
To date, until June 1, 2023, there are no income taxes for legal entities. The exception is banks and oil–producing organizations. Legal entities pay VAT when buying various products and excise duty. There is a tax on the rental of premises and the transfer of ownership.
The amount of VAT is 5%. The zero rate applies to the following activities:
- export of services and goods outside the Persian Gulf States;
- goods and services that are used in the international transportation of goods and passengers;
- types of transport intended for the transportation of people and goods, as well as services and goods for the maintenance of these vehicles;
- aircraft and vessels designed for rescue and assistance by air or by sea;
- some investment expensive metals;
- sale of real estate within 3 years from the date of completion of construction;
- realization of real estate objects intended for charitable organizations;
- crude oil and gas;
- services and products for students of different levels;
- Medical services.
The city tax is paid when the property is rented out. For Dubai – 5% for residential real estate and 10% for commercial. No tax is provided for when buying or selling. There is a tax on the transfer of ownership – 4% for Dubai.
Hotels, bars, restaurants, tour desks charge additional fees from foreign citizens: 10% for the cost of a hotel room, for service, as well as municipal tax, 6-10% city tax and 6% tourist tax. Travelers also pay VAT on all purchases, but in some cases have the right to claim a refund for VAT: leaving the country 3 months after the purchase of the goods, the seller participates in the Planetpayment system.
This tax applies to certain goods: carbonated drinks, various concentrates and powders, tobacco products, electronic devices for smoking/vaping, sugary drinks.
Features of the UAE tax system
There is no fixed and universal tax in the UAE. It all depends on the specific emirate and its tax system. It is thanks to this feature that the UAE has become an international financial center that attracts and stimulates investors from abroad. Tax–free environment and free economic zones are the reason for Dubai’s success. The UAE gives entrepreneurs and investors the opportunity to expand the horizons of their companies and investment decisions without worrying about taxes. In the UAE, and in particular in Dubai, everything is complementary – some regions do not pay tax, but there is a tax on their goods, while there is also a tax-free regime for purchasing products. Residents pay commissions and fees (with the exception of some goods and real estate transactions), and tourists pay VAT for hotel stays or services.