Taxes for individuals in the UAE and Turkey

About 80% of the UAE’s population are foreigners. In 2019—2022, the country issued 151,600 Golden Visas to entrepreneurs, skilled professionals and investors.

One of the reasons for the popularity of the UAE as a destination for relocation is its beneficial tax policy.

Taxes for individuals. There is no tax on income, interest, dividends, royalties, inheritances, gifts or capital gains in the United Arab Emirates.

Tourists pay taxes and fees when staying at resorts, living in hotels, and visiting restaurants. They are included in the bill for services, and several taxes can be included in one bill. Rates vary by the emirate.

To become a UAE tax resident, a person must fulfil one of the following conditions:

• spend at least 183 consecutive days in the country within a year;

• move the main place of residence, the centre of personal and financial interests to the UAE;

• be a citizen or a holder of a UAE resident visa, and spend at least 90 consecutive days in the country within a year.

These rules are effective from March 1st, 2023. Previously, the concept of a tax resident was not enshrined in the country’s legislation, and a tax certificate could be obtained if one lived in the country for at least 180 days a year.

A UAE residence visa is an analogue of a residence permit. It can be obtained in different ways, for example, by opening a company in the country or finding a job. A property owner can get a 2-year visa for a purchase of AED 750,000 ($204,000) or a 10‑year Golden Visa for a purchase of AED 2,000,000 ($545,000).

Property taxes are levied on buying and selling. There is no annual property tax in the UAE.

When buying or selling a property, a transfer tax is paid. The rate depends on the emirate. For example, it is 4% of the property value in Dubai and 2% in Abu Dhabi. Usually, the buyer and the seller share the tax in half.

The buyer also pays a registration fee. It is AED 2,000 ($545) for properties worth up to AED 500,000 ($137,000) and AED 4,000 ($1,090) for more expensive properties.

Additional fees are charged during the deal. Buyers of commercial properties also pay VAT at 5%.

Individual cost calculation for the UAE Golden Visa

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Compared to the UAE, Turkey has high taxes. But the country remains a fairly popular destination for relocation: as of January 2023, there were 1.35 million foreigners living there with a residence permit.

Income tax is levied on a progressive scale. The rate is up to 40% and depends on the annual income.

The tax base is calculated in the national currency, the Turkish lira (TL): in January 2023, its value slightly exceeded $0.05. The tax is levied on income from employment, rental of real estate, yachts and aircraft, as well as on pensions, dividends, interest, royalties and capital gains.

Residents pay tax on income earned in Turkey and abroad, and non-residents pay only on income from Turkish sources.

The rates of income tax in Turkey are the following:

• 15% — up to TL 32,000;

• 20% — TL 32,000 to TL 70,000;

• 27% — TL 70,000 to TL 250,000;

• 35% — TL 250,000 to TL 880,000;

• 40% — over TL 880,000.

Part of the paid tax can be returned as deductions for education expenses, life and health insurance, and charitable donations.

Withholding tax rates are:

• 15% — on dividends;

• 20% — on royalty;

• 0% to 18% — on interest.

Taxes on capital gains from the sale of securities, dividends and interest, in some cases, are levied on special conditions:

• profits from the sale of certain securities, such as shares traded on the Istanbul Exchange, may not be taxed at source at a reduced rate or not be taxed at all;

• half of the dividends from Turkish companies are free from income tax;

• interest on certain government and corporate bonds is subject to withholding tax at reduced rates;

• interest on bank deposits is taxed at 10% or 18%, depending on the deposit amount and currency.

Investors with income in other countries can reduce the taxes they pay in Turkey through double tax treaties. Turkey has concluded such agreements with 87 states; the conditions depend on the specific country.

Becoming a Turkish tax resident is available to a person who has lived in the country for more than 6 months during a calendar year. At the same time, foreigners who came to the country for study, treatment or recreation cannot apply for tax residence.

Long-term residence in Turkey requires a special status, a residence permit or citizenship. Foreigners can get a Turkish passport by investing at least $400,000 in real estate or $500,000 in securities, a business or a deposit. The most popular option is the purchase of the real estate.

Property taxes are paid on purchase, ownership and sale.

A transfer tax of 4% is paid on purchase. By law, the seller and the buyer pay it in half, but in practice, the buyer pays the full amount more often than not.

Also, VAT of 1 to 18% of the property value is paid, depending on the property area and purpose. Foreigners don’t pay VAT when buying real estate from a developer.

When concluding and registering a transaction, a stamp duty of 0.1 to 0,6% and a fee for issuing a TAPU, an analogue of a certificate of ownership, are paid.

Owners of residential and industrial real estate annually pay tax at 0.1—0.2%, depending on the property location. The rates are higher for land plots and commercial real estate.

The sale is accompanied by paying taxes if the tenure is less than 5 years. The rate is 15% to 35%; the tax base is the difference between the sale price and the value in TAPU.

Turkey citizenship by investment doesn’t allow investors to optimise taxes as effectively as a UAE residence visa. But a Turkish passport provides many other benefits, such as relocation to the country, getting a long-term visa for tourism or doing business in the USA, and visiting 100+ countries without visas.

Applicants can return the investment as early as 3 years after obtaining citizenship. This period is shorter than under many other investment programs.

Individual cost calculation for Turkish citizenship

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1. The UAE does not tax personal income, inheritance, capital gains, dividends, interest, or royalties. Property taxes are paid only when buying or selling.

2. Turkey has rather high taxes. For example, the income tax rate reaches 40%. Residents can take advantage of various benefits, such as investing in assets subject to lower income taxes or receiving tax deductions.

3. You must live for part of the year in the chosen country to become its tax resident. It’s only possible with a status that gives you the right to long-term residence: a UAE residence visa or Turkey citizenship.

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Comparison of citizenship and residency by investment programs

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