If you are thinking about moving to live and work in the UAE you have probably heard that there is no income tax in Dubai.
This is correct...
is seemingly levied against your income if you go and work in Dubai or if you have an investment property in the city and rent it out for profit.
However, this is not the entire picture. Which is why, we lay out the facts about tax in Dubai to set the record straight.
A Tax Free Emirate?
Is it really tax-free in the UAE? Yes, it is - but not in all circumstances! There are times when you will have to face tax, and there are tips that you need to know about taxation in Dubai if you are thinking of going to live and work in the emirate.
The UAE levies no personal taxation on income: what is more, in reporting on a broadcast last year, Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE and the Ruler of Dubai as having stated that: “his country would never adopt an income tax as a way to tackle the deficit. ‘My reply is: No income taxes.’”
This means that it is unlikely that tax will ever be levied on an individual’s income in Dubai. However, if you earn your income in Dubai but are tax resident elsewhere, you may be subject to taxation on your income – this is because your tax obligations also depends on where you are resident for taxation purposes.
For example, if you live in the UK and have an investment property in Dubai from which you earn a rental income, you will have to declare this income on your UK tax return and potentially pay tax on it if your overall earnings are above the nil rate band for income tax. Even if you live and work in the emirate for six months, you are likely to remain ordinary resident in the UK for tax purposes and your income could again be subject to British taxation.
If on the other hand you move permanently to live and work in the UAE, or you become non-resident for tax purposes in your home country, then you should be fine.
In short: you can earn your salary in Dubai 100% free of income taxation.
Other taxes in Dubai
In terms of other taxes in Dubai, they do exist contrary to popular belief. For a start the profits of international banks and energy firms operating in the UAE are taxed at the federal level.
Further, you are taxed on any visit to a hotel in Dubai or even a meal out: tax adds 10% to your bill. Alcohol is heavily taxed upon importation, it is 50% to bring it in to the country and then another 30% if you have a liquor license and buy alcohol for home consumption.
There is also a form of council tax when you pay your utility bills – and many people protest against this tax as it is supposedly for street lighting, waste collection etc and yet most residents pay for this through maintenance fees. And there is a 10% municipality tax as well as 5% municipality tax on rental income.
In 2018, the UAE introduced a 5% VAT to mostly all purchases of services and goods sold in the UAE.
Do you want to live a tax-free live in the UAE?
You also can potentially earn your salary 100% free of tax in Dubai if you are tax resident in the emirate and have no other obligation to any other state for the payment of tax on foreign earned and sourced income.
In order to do, you would have to obtain a residence permit.
Individuals, other than UAE and GCC citizens, must have a residence visa if they want to live in the UAE. Obtaining a residence permit is the primary condition for being considered as resident in the UAE. As a general rule, one has to have a sponsor in order to apply for a residence permit in the jurisdiction.
For many expatriates, the company that employs them will act as their sponsor and secure them residence visa. For those who do not come on an employment contract, there are two other ways for obtaining UAE residency:
Investment in real estate (property residence visa)
Set up your own companyto act as sponsor
Real estate investor/property residence visa
The UAE government in June 2011 introduced a new system extending the validity of the visa granted to real estate investors for up to 3 years.
The following rules and conditions govern the issuance of a real estate investor visa:
The property is built and ready for accommodation;
the applicant proves ownership (title deed issued by the Land Registrar);
the property is worth minimum AED 1 million (equivalent to US$300.000) with no mortgage; and
the applicant’s income is higher than AED 10.000 (US$3.000) monthly.
Setting up your own company
The other way to obtain residency is through a corporate structure.
As a general rule, one has to have a sponsor in order to apply for a residence permit in the jurisdiction. For foreigners, setting up a company is a practical way of obtaining sponsorship. This company acts as the sponsor.
As far as the company is concerned, it must have physical presence in the UAE. In that regard, the most interesting and cost effective options are proposed by free zones situated in the northern emirates. Usually, these options consist of “flexi desks” or “flexi offices”.
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