Is The UAE really Tax-Free?
Introduction
The United Arab Emirates (UAE) is known for its luxurious lifestyle, stunning architecture, and bustling businesses. Among its many attractions, one of the most significant benefits of living or working in the UAE is its tax regime. It is well known that the UAE has been considered a very attractive place for individuals and businesses to work, live, and set up a business. A major reason for this has to be the fact that the UAE is tax-free.
There is a common misconception that the UAE is a tax-free country. While this is generally true, there are some instances in which taxes are applicable.
We have put together an insight where we analyze the taxes that are applicable in the UAE, as well as which areas are actually tax-free in the UAE so that businesses and individuals are well informed.
Personal Income Tax
One of the biggest advantages of living and working in the UAE is that there is no personal income tax. This means that the money you earn is yours to keep, and you do not have to pay a portion of it to the government as income tax. This applies to both UAE nationals and expatriates.
Corporate Tax
A new corporate tax regime will take effect for accounting periods starting on or after June 1, 2023. The CIT Law will apply to businesses on tax periods commencing on or after 1 June 2023, with a 9% headline tax rate. It incorporates international best practices and offers exemptions for certain strategic industries. Free Zone persons are taxed at 0% on Qualifying income and at 9% on taxable (non-qualifying) income.
Value Added Tax (VAT)
However, the UAE does have a Value Added Tax (VAT) system in place. VAT is a consumption tax that is applied to most goods and services. The standard rate of VAT in the UAE is 5%. Some items such as basic food items, healthcare, and education are exempt from VAT. Other items such as luxury goods, tobacco, and soft drinks are subject to a higher rate of VAT.
Excise Tax
In addition to VAT, the UAE also has an excise tax on certain goods such as tobacco and energy drinks. The excise tax rate varies depending on the type of product.
Property Tax
There is no property tax on residential properties in the UAE. However, there is a 5% rental tax on commercial properties.
Other Fees
There are other fees and charges that individuals and businesses may be subject to in the UAE. For example, there is a municipality fee that is applied to hotel stays, a visa fee for individuals who require a visa to enter the country, and a toll fee for using certain roads in Dubai.
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