You've probably heard that the United Arab Emirates is a tax haven for businesses and individuals. In fact, at first glance, the tax system seems straightforward and friendly. Oil companies and foreign banks are exempt from corporate tax. Taxes are imposed on certain goods that are harmful to human health or the environment. There is a value-added tax on most goods and services, but it is lower than the global average.
Does that mean you only need to worry about that when moving or doing business in the UAE? If so, what is the catch?
Our proposal is to investigate the question of taxation in the UAE by assessing the tax burden on individuals.
Taxes on personal income
Amazingly, most UAE citizens have no negative associations with the word "tax" because they have never had to deal with them. Any individual's material remuneration cannot be withheld by the state. In addition, each Emirati receives free of charge a land plot for the construction of a house, an interest-free loan for its construction, or the purchase of apartments (subsequent reimbursable transactions on such property are prohibited). Regardless of where citizens study, the government will cover the costs of their education.
As we can see, the state offers significant privileges to UAE citizens. But what about expats? All individuals are equal before the law when it comes to fulfilling their tax obligations. Despite the fact that it sounds strict, residents of the country as well as expats do not pay income taxes. Taxes on income are not the responsibility of the employee or the company. As a result, if you receive a voice or a salary during your work, then it will just be that, without any taxes.
Although not all of it is as enjoyable for the employer as it is for his employees. Costs for each subordinate should include mandatory expenses for obtaining visas, whose duration is dependent on the length of the contract but should not exceed three years. Visas must be extended or revoked when they expire. Accordingly, at least once every three years, each work visa will cost the employer about USD 2500 (turnkey expenses - see "How much will it cost to open a company in the UAE?").
In fact, these costs may actually be higher when we consider employee turnover. A basic medical insurance policy is also included in these minimum expenses since you are unable to apply for a residency visa without it. Be aware, however, that this is only a medical emergency insurance policy. By providing voluntary insurance coverage, the employer will increase the cost of its insurance policy, and as a result, its employment costs.
Previously, some unscrupulous employers included provisions in their employment contracts requiring employees to cover the costs of visa support, including insurance. The UAE has updated its labor legislation to ensure the protection of workers' rights as the country strives for global standards. Regulation of labor relations in the private sector was established by Decree-Law No. 33 of 2021. The law will take effect on February 2, 2022. Employers are responsible for directly paying the fees and expenses associated with hiring. They cannot charge them directly or indirectly to employees.
Tax on real estate
In the UAE, there is no real estate tax. However, this does not mean that you will not have to pay anything in order to own long-awaited real estate in the country. Authorities have at their disposal two mechanisms that can darken the mood of the new owner.
First, in order to register the transfer of ownership, you must pay an appropriate fee. Whenever you transfer real estate directly or indirectly (for example, if you sell a stake in a company that owns real estate), this tax is incurred.
There are different rates in each emirate where the property is located. The Dubai Land Department requires that all purchases be registered within 60 days following the completion of the transaction. Otherwise, the purchase will be canceled. Although the costs of registering the transaction are theoretically split 50/50 between the buyer and seller, in practice the buyer pays the entire Land Department fees (4% of the transaction amount). There is also a fee for registering the property. For properties purchased with a bank loan, the buyer must also pay an additional fee of 0.25 percent of the total loan amount to register the mortgage.
Second, some emirates charge a municipal fee based on the annual rental value of the property, which varies depending on which emirate the property is located in.
Taking Dubai as an example, your funds will be received by the Dubai Municipality, which will include them in the monthly bill of the Dubai Electricity and Water Authority (DEWA).
Tenants are required to pay an additional municipal fee of 5% of their annual rent per month. Consider renting an apartment for 100 thousand per year. It will cost AED 5,000 for the year, divided into 12 equal parts, payable monthly in the amount of AED 416 as part of the DEWA account.
A fee is charged for municipal services such as cleaning, pollution reduction, food safety, opening and maintaining recreational facilities, and disposal services. So whether you live in a low-cost apartment in Dubai or a luxury villa on Palm Jumeirah, you have to pay these municipal fees.
Expats who own or rent property in Dubai are charged housing fees. However, Dubai Municipality exempts UAE citizens from paying a housing fee.
If the property is rented, the tenant is responsible for paying the housing fee. Otherwise, it is the homeowner's responsibility.
The housing fee in Dubai is set at 5% of the annual rent specified in the Ejari rental agreement.
The Dubai Municipality's housing fee is calculated based on the average rental value of a home as determined by the Real Estate Regulatory Authority (RERA). Using the RERA rent calculator, homeowners can determine the average rent for their apartment or villa. Housing in Dubai will then cost them 5% of this amount.
Transport taxes
A transport tax is not included in the UAE's taxation system, just like any other tax. The Road Transport Authority charges a registration fee annually. The amount is set by the local authorities in the emirate and is based on the weight and type of vehicle.
The registration fee for passenger transport of individuals in Dubai is 400 dirhams. 1200 dirhams is the highest amount to be paid for a bus that can carry 26 or more passengers. After passing the registration procedure, the vehicle will also have to undergo a technical inspection, which ranges from 120 to 420 dirhams.
Other
Finally, be prepared for the fact that there are virtually no free municipal or public services in the country for expats. If you have been receiving the service for free, you will have to pay now. There will always be an innovative fee of 20 dirhams in Dubai, but it will vary from power to power. In this way, the Dubai government supports educational and cultural projects and creates a more innovative environment for the emirate.
If you have any questions, leave your contacts on the site, we will contact you for a free consultation. And if you are in Dubai, we will be glad to see you in our office in the Jumeirah Lake Towers area to combine communication with a cup of delicious coffee.
