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Who should pay income tax in the UAE?

Кто должен уплачивать подоходный налог в ОАЭ?

Many entrepreneurs seek to start a business in the Emirates. The country has favorable conditions for any type of business, many opportunities and offers. There are also some peculiarities regarding tax legislation. It is important to know how income tax is paid in the UAE and in what amount so that the business develops and does not bring problems. Read more about payroll taxes later in the article. 

How the UAE tax system works

It is very convenient to do business in the Emirates, because most of the tax obligations that Russian businessmen are used to simply do not exist here. So, for example, you don’t have to pay:

  • personal income tax; 
  • inheritance tax; 
  • corporate tax (for most companies).

There is also no income tax in Dubai. However, everything that is considered harmful, such as tobacco, energy, liquids for electronic smoking devices and the devices themselves, are subject to a high excise tax. Its size is 100%. Even VAT did not exist before 2018. Now its size is only 5%. In addition to value added tax, there are several other types of tax obligations in the Emirates:

  • corporate tax for companies whose income exceeds 102 thousand dollars per year; 
  • value added tax; 
  • collection for tourists; 
  • to change the owner; 
  • excise taxes; 
  • an individual fee for Emirati citizens.

In addition to federal taxes, regional taxes may be established. There may be different standards in different emirates. There is no income tax in the UAE for foreigners, however, in Dubai, foreigners are required to pay tourist, municipal, city, and hotel fees. Do not forget about the various fees when buying real estate by foreigners.

Agreements of the Arab Emirates with other States

Income tax in the UAE

As a key element of international tax policy, the Emirates actively participates in agreements between countries. This is necessary to avoid double taxation and reduces the burden for all entrepreneurs doing business in the UAE.

About 70 countries have already signed an agreement with the Emirates excluding double taxation. There is no legal requirement to pay taxes on salaries in Dubai, as well as many others. But if an entrepreneur is engaged in investment activities in EU countries, then he makes only those deductions that are established in these countries. The tax burden is significantly reduced, which makes doing business in the Emirates even more comfortable, affordable and profitable.  

All about income tax in the UAE

Regardless of the status of an entrepreneur, whether it is a freelancer, self-employed, sole proprietor, if the business belongs to an individual, it is subject to relief – it does not pay income tax in the UAE. There is no single federal regulation on this issue, and each of the emirates has its own regulations. But even in such a situation, none of them decided whether there were deductions to the local treasury regarding income tax.

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Vladimir Sviridov
Vladimir Sviridov
General Manager RLC Consulting
With a Postgraduate Masters in Finance from The, Moscow State University, Russia. Vladimir started his professional career as an auditor of the financial sector of EY. After that, he worked for several years in senior positions in corporate banking. In 2018-2021, he managed the finances of a large agricultural holding, and is currently responsible for strategic planning, corporate partnership and financial management in the role of General Manager of RLC Consulting GROUP in the UAE.

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