The UAE Tax System (2024): What Surprises Await Immigrants?

Ever wondered why the UAE is a magnet for professionals and businesses from around the world? One major reason is the intriguing UAE tax system, which is full of surprises.

From no income tax to special corporate tax thresholds and a unique VAT structure, there’s a lot to discover. Let’s delve into what immigrants can expect from the UAE taxation system landscape.

UAE / Dubai Tax System

The United Arab Emirates tax system, or more accurately, the absence of taxes, is what attracts many expats to the nation. One of the most significant advantages is that residents and workers in the UAE do not have to pay income tax.

• In January 2018, the UAE introduced a value-added tax (VAT) at a relatively low rate of 5%.
• Additionally, there is an excise tax on specific products deemed harmful to human health or the environment by the government.
• In June 2023, the UAE government introduced a corporate income tax rate. The eligibility of your business for this tax depends on its profits for the tax year.
• For corporate tax purposes, the tax year in the UAE runs either from January 1 to December 31 or from June 1 to May 31, depending on how your business is structured.

Tax-Free Dubai Taxation System

Each Emirate in the UAE operates its own government and tax system, alongside a UAE federal tax system overseen by the Federal Tax Authority (FTA). The UAE, known for its status as a global tax haven, offers:

• No Income Tax for employees, freelancers, and self-employed individuals
• No Inheritance Tax
• No Social Security Tax for non-Gulf Cooperation Council (GCC) nationals
• No Capital Gains Tax, unless a company is subject to other income taxes
• No Estate or Gift Tax
• No Wealth Tax
• No Luxury Tax
• No Taxes on Foreign Pensions
• No Stamp Duty on property transactions

Now let's know the tax system in UAE in detail.

Types of Taxes in UAE

What are the recorded types of taxes in the UAE? Well, we have the details listed out for you. So let us explore the taxes in the UAE tax system in detail.

1. Income Tax System in Dubai

Imagine earning your salary without worrying about personal income tax deductions. Sounds too good to be true? In the UAE, it's a reality.

As per the Dubai income tax system, there is no personal income tax, meaning your hard-earned money stays with you. This is a huge draw for expatriates seeking to maximize their earnings in a tax-friendly environment.

2. Municipal/Property Tax

Municipal taxes in the UAE tax system vary by Emirate and are generally based on property value, with tenants responsible for the payment. For instance, in Dubai, the municipal tax is 5% of the property's annual rental value, applicable to both residential and commercial properties.

3. Corporate Tax Rates in UAE

On June 1, 2023, the UAE introduced a flat corporate tax (CT) rate of 9% for businesses with net profits of AED 375,000 or more. Exemptions as per this new tax system in UAE exist for small businesses, self-employed individuals, and investors.

To determine your business’s eligibility, visit the UAE Ministry of Finance website. Businesses subject to this tax must register with the Federal Tax Authority and submit annual tax returns.

• Financial Year from June 1 to May 31: First tax return due by February 28, 2025
• Financial Year from January 1 to December 31: First tax return due by September 30, 2025

4. Value Added Tax (VAT) System in UAE

The UAE has a VAT rate of 5%. However certain items are exempt from this VAT UAE tax system, including:

• Export of goods and services outside the GCC
• International transportation
• Investment-grade precious metals
• Newly constructed residential properties
• Some education and healthcare services

Tourists can request VAT refunds on goods purchased from participating retailers when leaving the UAE. Refunds are processed through special devices at airports, seaports, and border ports, where tourists submit tax invoices, passport copies, and payment card information.

For businesses, registration for VAT is mandatory if annual earnings exceed AED 375,000. Businesses with annual profits over AED 187,500 may register voluntarily. According to the Dubai VAT system, VAT returns and payments must be submitted within 28 days after the tax year ends.

5. Excise Tax Structure in UAE

The UAE tax system imposes excise tax on goods considered harmful to health or the environment. Specific rates apply to different products.

6. Inheritance Tax Structure in Dubai/UAE

There is no federal inheritance tax in the UAE tax system. For non-Muslim expats, inheritance laws from their home country may apply in the absence of a will. For Muslims, inheritance is divided according to Islamic Sharia law.

7. Payroll Tax Structure in UAE

Employees who are GCC nationals, including UAE nationals, are subject to a social security regime of 17.5%. UAE nationals pay 5%, automatically deducted from their paycheck, while employers contribute the remaining 12.5%.

Social security obligations also apply to employees of companies in free trade zones. Non-GCC nationals are not subject to social security in the UAE. Residents of other GCC countries may have different social security contributions based on their home country’s regulations.

Become a Tax Resident in the UAE: Process & Requirements

Foreigners holding UAE residence visas automatically attain tax residency status and are not required to obtain a tax identification number for this purpose. However, individuals aiming to avoid double taxation, especially if their home country has a tax treaty with the UAE, may need to acquire a Tax Residence Certificate.

To verify your tax status, follow these steps:

Step 1: Reside in the UAE for at least 180 days: Applicant would need to spend a minimum of 180 days living in the UAE.

Step 2: Establish Residence: Rent or purchase a property in the UAE to establish residential ties.

Step 3: Submit an Application: Fill out an application with the Federal Tax Authority (FTA) to confirm your tax residency status.

Documents Required for Obtaining a Tax Residence Certificate

To obtain a Tax Residence Certificate in the UAE, you will need the following documents:

• Passport copy.
• UAE residence visa copy
• Copy of the long-term rental or property purchase contract
• Confirmation of income, such as salary or pension statement
• Bank account statement from a UAE bank for the last 6 months
• Confirmation of residency in the UAE for at least 180 days

You can obtain the certificate from either the General Directorate of Residency and Foreigners Affairs or the Federal Authority for Identity and Citizenship.

When completing the application with the FTA, individuals must indicate the country for which they are requesting a Tax Residence Certificate, select a start date for the financial year, attach document copies, and pay a fee of AED 1,000.

The Tax Residence Certificate is typically issued within three days and can be downloaded from the website along with the automatically generated Tax Identification Number.

These documents, the Tax Residence Certificate, and the Tax Identification Number serve as ample evidence of a UAE tax residency status in other countries.

Fulfill Your Dream of Working in UAE With Job Seeker Visa

The UAE tax system is transitioning from its status as a tax haven, the UAE government's implementation of taxes signifies a commitment to fueling economic growth and development.

While this move ends its tax-free status, it brings about enhanced transparency and positions the country as a globally compliant jurisdiction with a suitable structure.

What do you need to be part of this tax-free economy?

Job seekers interested in opportunities in the UAE can seek guidance from GetGIS for assistance with obtaining your UAE job seeker visa, securely and within the timelines.

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