UAE tax guide: everything you need to know about tax rates and exemptions for individuals and companies

A UAE residence visa allows one to become a tax resident of the country and legally optimise their taxes.

Foreigners with residence visas do not pay pension tax in the UAE — while, for example, in Portugal, the tax rate for pensions obtained from overseas is 10 to 48%.

Tourist taxes. Foreigners pay taxes in the United Arab Emirates on resorts, hotels and restaurants. Several taxes and fees can be included in the bill:

• hotel tax — 10%;

• service fee — 10%;

• municipal tax — 0–10%;

• city tax — 6–10%;

• tourist fee — 6%.

Tax rates may vary in different emirates. For example, in Ajman or Sharjah, a municipal tax is 10%; in Dubai, it’s 7%, while in Ras Al Khaimah, this tax isn’t charged.

Dubai is the most popular emirate in the country, with 5.1 mln tourist visitors from January—April 2022. When staying in Dubai hotels, guests pay an additional fee called “tourism dirham“, ranging from AED 7 to 20 per night, depending on the hotel’s stars and room category.

A fee for the night in a one-bedroom room in a 4-stars hotel will be AED 15; in a 5‑stars hotel — AED 20. If the room has two bedrooms, the dirham will be charged twice. However, a guest will only need to pay this fee for the first 30 days of their stay in the hotel.

Foreigners with UAE residence visas automatically become tax residents. They do not need to obtain their tax identification number for that.

However, if one wants to avoid double taxation and their primary country has a double tax treaty with the UAE, they will need to obtain a Taxation Residence Certificate.

To confirm your tax status, here’s what you need to do:

1. Get a residence visa and live in the UAE for at least 180 days.

2. Rent or buy a property in the UAE.

3. Fill in an application with the Federal Tax Authority.

Documents needed to obtain a Taxation Residence Certificate:

1. Copy of the passport.

2. Copy of the UAE residence visa.

3. Copy of the long-term rental contract or the property purchase contract.

4. Confirmation of income, like salary or pension statement.

5. UAE’s bank account statement for the last 6 months.

6. Confirmation that the applicant has indeed resided in UAE for at least 180 days. It is obtained at the General Directorate of Residency and Foreigners Affairs or in the Federal Authority for Identity and Citizenship.

When filling an application with the FTA, the applicant needs to specify the country they wish to obtain a Taxation Residence Certificate for, choose a start date for a financial year, attach copies of the documents, and pay an AED 1,000 fee.

The Taxation Residence Certificate is issued within the next three days. It can then be downloaded from the website along with the Tax Identification Number, which is obtained automatically.

The Taxation Residence Certificate and Tax Identification Number are sufficient to confirm a UAE’s tax resident status in another country.

Individual cost calculation of the UAE Golden Visa

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Foreign companies in the oil and gas sector pay 55% corporate tax. Branches of foreign banks pay 20%.

There are no taxes for dividends and capital gains, as well as intragroup transactions and reorganisations.

VAT. The value-added tax is 5% in the UAE. VAT is obligatory for companies earning more than AED 375,000 ($102,000). To pay the tax, a company must register as a VAT payer with the FTA.

For companies earning between AED 187,500 and AED 375,000, registration is voluntary.

VAT is usually paid on a quarterly basis within 28 days after the end of the tax period. However, the Federal Tax Authority may appoint different tax periods for some taxpayers.

Excise tax is imposed on products the UAE government considers harmful to human health or the environment. The tax is calculated in percentage from the retail price minus excise tax and VAT or from the price of the product appointed by FTA — whichever is higher.

The UAE Cabinet approves the list of products and their taxes rates:

• 50% for fizzy drinks, except for plain soda;

• 50% for all products containing sugar or sweeteners;

• 100% for tobacco products;

• 100% for energy drinks;

• 100% for electronic smoking devices.

The excise tax is paid by companies which manufacture, import, or store excise products. Such companies must register with the FTA as excise taxpayers. The tax itself is paid quarterly within 15 days after the end of the tax period.

Import and export taxes. The import tax may vary depending on the nature of imported goods. But generally, it is 5% of the cost, freight, and insurance value of imports (CIF).

However, certain harmful products, like tobacco or alcohol, are imported with a 50–100% tax. Others, like most national products of the Greater Arab Free Trade Area, are imported without any tax at all.

Goods imported into Free Zones are also exempt from import tax until they are transferred to the local market.

The export tax is 0% in the UAE.

Investors and entrepreneurs register businesses in the UAE to minimise their tax burden. The most favourable terms for companies are in Free Zones, which have special tax and customs regimes.

Benefits of the UAE Free Zones for companies:

1. No corporate tax for 15–50 years after company registration.

2. No VAT.

3. No custom fees.

4. Revenue generated from the international businesses of both individuals and companies is not subject to taxes in the UAE and can be withdrawn from bank accounts freely.

5. An investor can also be the sole owner of the company, as opposed to the necessity of finding a local partner and giving them 51% shares of the company when registering a business outside Free Zones.

There are currently 45 Free Zones in the UAE and counting. The majority of them are in Dubai.

When a company is registered in the UAE, it is automatically considered a tax resident.

How to minimise taxes legally

However, applying for a Taxation Residence Certificate is only possible after one year of registration. This certificate is needed to confirm the UAE tax residency in another country and avoid double taxation.

The companies’ founders fill in an application with the FTA. The registration fee for businesses is AED 1,750.

Documents needed for obtaining the Taxation Residence Certificate for companies:

1. Trade licence and the enclosed list of founders and shareholders.

2. Foundation agreement.

3. Copies of passports, ID cards and residence visas of the company’s owners, partners, and managing directors.

4. Financial statement for the year of the certificate, prepared or confirmed by an accredited UAE audit company.

5. Corporate account statement from the UAE bank for the last 6 months.

6. Rental or purchase agreement for the commercial property.

When filling an application with the FTA, the applicant needs to specify the country they wish to obtain a Taxation Residence Certificate for and choose a start date for a financial year.

Offshore companies cannot obtain a UAE Taxation Residence Certificate.

When buying property in the UAE, two types of taxes are paid: a Transfer Fee and a Registration Fee.

The administrative fee is AED 540, or $147. It is paid along with the Transfer fee.

The buyer pays the registration fee. Its rate depends on the cost of the property:

• AED 2,000 ($545) for property worth less than AED 500,000, or $137,000;

• AED 4,000 ($1,090) for property worth more than AED 500,000, or $137,000.

After the purchase, the new owner has to obtain an ownership certificate. The fee for this certificate is AED 250, or $68.

When buying a commercial property, a new owner additionally pays a 5% VAT. FTA explains how to pay this type of VAT in its User Guide.

Taxes and fees for real estate owners. In the UAE, there are no annual taxes for property owners.

Owners pay an annual fee for property maintenance. This money is invested in capital repair, common areas maintenance, children’s playgrounds, sports facilities, and other infrastructure.

The developer establishes the fee amount, usually between $15 and $60 for m². The fee is paid once a year in advance; if owners rent their property out, they still pay maintenance fees themselves.

When selling property, the seller usually pays half the Transfer fee, for example, 2% in Dubai and 1% in Abi Dhabi.

There are no taxes on gifts and inheritance in the UAE.

The municipal rental tax in the UAE is paid by the tenants, along with utility bills. The tax is automatically added to the bill. For tenants in Dubai, the tax is 5% of the rent; in Abu Dhabi, 3%; in Sharjah, 2%.

The tenants pay a 10% municipal tax when renting a commercial property.

United Arab Emirates, Dubai

€211,000 — €454,000

Spacious apartments in the international golf complex

49 m² — 123 m²

1

1

United Arab Emirates, Dubai

€368,000 — €396,000

Designer villa in a large-scale residential project with infrastructure

193 m² — 198 m²

3

3

United Arab Emirates, Dubai

€433,000

Villa with three bedrooms in a residential project with infrastructure

176 m²

3

3

Double tax treaties. The UAE has double tax treaties with 138 countries, including Singapore, India, the UK, and most European countries.

The treaty covers taxation for tax residents of one country making an income in another. An individual or a company pays taxes in the country where the income is made and then submits a tax deduction in a country of residence.

Those who are not UAE tax residents are obliged to pay an income tax in their residence country, according to its tax policies.

Tax information exchange. In 2018, the UAE joined the Common Reporting Standard (CRS), a unified system for exchanging tax information.

The CRS Agreement was signed by more than 100 countries, including European countries, Canada, several Asian countries, and island countries such as Antigua and Barbuda or Saint Kitts and Nevis.

According to the agreement, the banks, investment institutions, and insurance companies inform the local authorities of non-residents’ bank accounts. The authorities then exchange the information between the countries. This system allows the countries to find debtors and charge taxes.

The UAE tax system attracts investors from all over the world: they buy real estate and open businesses in the Emirates. Some of them also obtain residence visas for 2 or 10 years.

How to get a UAE Golden Visa

Investors obtain a 2-year residence visa if they buy real estate for at least AED 750,000 (or $204,000). Investors who purchase property for at least AED 2 mln (or $545,000) get a 10-year Golden Visa.

By keeping ownership of the property, the investor can prolong their visa for however many times they wish.

A UAE residence visa enables one to minimise tax burden and open bank accounts in dirhams, dollars, or euros. Moreover, an investor and their family can benefit from UAE’s modern healthcare system, and their children can study in international schools and universities.

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