Taxes in Dubai and the UAE for business in 2023

24.01.2023

The United Arab Emirates is considered an optimal business and financial center. In general, the country has achieved this status thanks to a loyal tax system in relation to foreign investor firms. The amount of cash flow that comes on a regular basis from foreign countries exceeds the indicators of many Asian and European countries by several times. Let’s look at what business taxes are applicable in Dubai and other emirates.

Principles of taxation in the UAE

There is no single law in the country that could regulate taxation. The legislation is closely intertwined with Muslim law. These principles are based on religion – the Islamic scriptures do not contain a record of taxes. Therefore, most types of tax payments are not here.

There are separate regulatory provisions for each emirate/FEZ.

What taxes exist in the UAE

For legal entities

Tax payments apply only to such areas as banking, oil and gas and tourism. Companies in this field must pay income tax. The bids for Dubai are as follows:

with a profit of 1 to 2 million dirhams – 10%;
from 2 to 4 million AED – 20%;
4-5 million dirhams – 40%;
more than 5 million dirhams – 55%.

The tax on the trade license is 10% of all objects leased by the company and 5% of the price of the device and the placement of labor. It, as well as income tax, must be paid 1 time a year. There is no simultaneous taxation in different countries (double).

Corporate tax payment is not provided on the territory of the country, with the exception of some FEZs. At the same time, a legal entity may not pay it for the first fifteen years after the opening of its company. When the period ends, it can be extended for another fifteen years.

For individuals

Individuals do not have to pay state taxes. The following fees are used as compensation for the country ‘s budget:

rental housing – 5% of the annual cost;
purchase of real estate – 4% from the buyer;
catering establishments and hotels – 10-20% of the price for services;
travel, etc.

Individuals who live in the hotel must pay a tourist tax. Its size depends on the stars:

one–star – from 7 AED;
two-, three–star – from 10 AED;
four–star and Superior rooms – from 15 AED;
five-star and Deluxe rooms – from 20 AED.

In hotel complexes 4* and above, a refundable deposit is provided – $ 30-260 per night.
Individuals do not pay income tax.

For offshore companies

Firms registered in the offshore zone do business outside the Emirates. They are considered non-residents, so they do not pay income tax (except for the previously listed sectors) and duties on export/import of products. The exemption is valid for the first 15 years with the possibility of extension for the same period.

Offshore companies can repatriate investments and income. They receive a short-term license to operate. It needs to be renewed every year.

Property taxes

The sale of real estate is taxed equally, but its payment is not – 2\3 is charged from the buyer, the rest is from the seller.

The rental of objects is not taxed.

VAT

The standard rate is 5%. It was introduced due to a decrease in income from oil production activities.

Business Requirements

Every type of activity in the UAE is licensed with the exception of offshore companies.
The license is valid for a year. To extend it, you need to confirm that the established requirements are met.
Certain rules and regulations apply on the territory. This is reflected in various sectors. For example, restrictions on the % income on the loan, which affects the choice of the method of providing finance within the company.
Local firms with licenses must enter data on the final owners in the register of beneficiaries (with the exception of residents of ADGM and DIFC, companies owned by the government).
The company must have a real economic presence on the territory of the country.
The business must work in the direction of generating income according to the license.
The company must have sufficient personnel and assets to carry out its activities.