If you’re thinking about moving to live and work in the UAE you’ve probably learned by now that there is no income tax in Dubai.
Like many other Middle East countries the UAE earns its revenue mainly through the oil industry and offers tax-free living to attract global companies and talent to diversify and enrich their economy further.
However, that sounds far too good to be true doesn’t it? Which is why, in this article we’re going to lay out the truth about tax in Dubai for the sceptics among you.
Is it really tax-free in the UAE?
Yes it is – but only in certain circumstances! Otherwise there are times when you will have to face tax, and there are plenty of top tips that you need to know about taxation in Dubai if you’re thinking of going to live and work in the emirate.
With the Degtev guide to tax in Dubai you will be forewarned and forearmed and will have the very best chance to find a way to go and live, work and earn a tax free salary in this fabulous part of the world. After all, if you can earn a good income and protect it from the erosion of taxation entirely legitimately, you will be giving your bank balance a massive boost!
Dubai is a shining star in the Middle East. It is still very much a place where everyone wants to be, where the local economy is quite affluent and the way of life for some can be lavish and amazing. Even when the reality of economics began to bite and the world caught fiscal flu, Dubai has managed to stay the place with massive job opportunities and where talented expatriates are welcome.
Just like other countries Dubai has been struggling through economic difficulties. Among those most affected, for example, were people profiting from the over-inflated property market. However, Dubai has not died as many people suggested it would, it has simply readjusted to the massive shock its economy has suffered. It has become more diverse and is embracing technology and innovation in the bid to become a global innovation hub. There is a dramatic turn in jobs in Dubai and especially in the top paying jobs in the region. There is still a great way of life to be enjoyed and yes, there are massive tax advantages available to many people who go and live and work in the emirate.
That said, Dubai should no longer be approached with a careless attitude by those out to make a fast buck, who want to work hard and play harder. As recent news stories have highlighted, authorities in the emirate are cracking down on the hedonistic behaviour of non-domiciled individuals, and expatriates thinking of moving to the UAE are warned that they need to learn about the customs, traditions and laws before they relocate. For example, women please don’t flaunt yourself in public, unmarried couples please don’t even think about living together, men and women please do not make public spectacles of yourself with even the most ‘innocent’ of sexual behaviour, (even kissing in public is a no-no). Learn the laws, follow the rules, respect the country and its laws and be prepared to adjust and adapt to what is a very different way of living at times.
If you can appreciate that there are differences in Dubai and that you will have to accept them if you want to live a comfortable and peaceful life, it’s time to find out the truth about tax free Dubai.
The UAE levies no personal taxation on income: what’s more, Sheikh Mohammed bin Rashid Al Maktoum, the Vice-President and Prime Minister of the UAE and the Ruler of Dubai stated that: “his country would never adopt an income tax as a way to tackle the deficit. ‘My reply is: No income taxes.”
This means that it is unlikely that tax will ever be levied on an individual’s income in Dubai. Dubai residents also enjoy tax-free rental income, no stamp duty, no tax on capital gains or inheritance.
Are you a tax resident in Dubai?
This is a very important question which actually defines whether you pay tax when working in Dubai or not.
If you earn your income in Dubai but are tax resident elsewhere, you may be subject to taxation on your income – this is because where you pay tax and what you pay it on also1 depends on where you are resident for taxation purposes.
For example, if you live in the UK and have an investment property in Dubai from which you earn a rental income, you will have to declare this income on your British tax return and potentially pay tax on it if your overall earnings are above the nil rate band for income tax. Alternatively, if you take a 6 month contract in Dubai and live and work in the emirate for just 6 months, you are likely to remain ordinary resident in the UK for tax purposes and your income could again be subject to British taxation.
If on the other hand you move permanently to live and work in the UAE, or you are out of the UK in Dubai for a full tax year or you become non-resident for tax purposes in Britain according to the following guidelines as published on the HMRC website: –
“Normally if you leave the UK to work abroad full-time, you will become not resident and not ordinarily resident in the UK if your absence and employment from the UK covers a complete tax year (i.e. 6 April to 5 April), and you spend less than 183 days in the UK during the tax year, and your visits to the UK do not average 91 days or more a tax year over a maximum of 4 years. (For visits to the UK, days of arrival and departure are not normally counted as days spent in the UK.)”
Then you may be able to earn your salary in Dubai 100% free of income taxation. But every person’s position is unique, and you have to be fully clear about your tax status and obligation for taxation at home or abroad – false assumption is not acceptable when it comes to tax!
Indirect Tax in Dubai
In terms of any other taxes in Dubai – they do exist contrary to popular belief.
For a start the profits of international banks and energy firms are taxed at the federal level – which is probably no bad thing! What’s more, you’re taxed on any visit to a hotel in Dubai for a stay or even a meal out. Tax adds 10% to your bill.
Alcohol is heavily taxed upon importation – it’s 50% to bring it in to the country and then another 30% if you have a liquor license and buy alcohol for home consumption.
There is also a form of council tax secretly levied when you pay your utility bills – and many people protest against this tax as it is supposedly for street lighting, waste collection etc., and yet most residents pay for this through maintenance fees. So you are effectively charged council tax in Dubai twice – oh and there is a 10% municipality tax as well as a 5% municipality tax on rented accommodations collected through utility bills.
VAT is coming to Dubai thanks to the IMF having suggested it might be a good way for the UAE to diversify its economic resources. This is a very unpopular addition for individuals and businesses alike, and many have warned it will have a negative impact on foreign investment at all levels. That aside, it is happening, with a deadline for its implementation at GCC level fixed at 2018.
It is also worth taking into account changes in Dubai healthcare system as mandatory health insurance has been introduced for all Dubai residents.
In conclusion, you can potentially earn your salary 100% free of tax in Dubai if you are tax resident in the emirate and have no other obligation to any other state for the payment of tax on foreign earned and sourced income. However, there are taxes that you will encounter if you live in Dubai, and if you want to make sure you fully understand your personal tax obligations it is recommended you speak to an accountant.