The United Arab Emirates (UAE) is known for its relatively favorable tax regime, but it does have several types of taxes that individuals and businesses should be aware of. Here’s an overview of the main taxes in the UAE and the differences between them:
- Value-Added Tax (VAT)
- Introduced: January 1, 2018
- Rate: 5%
- Scope:
- Applied to most goods and services at a standard rate of 5%.
- Certain goods and services are zero-rated (0%) or exempt (e.g., healthcare, education, and specific financial services).
- Who Pays:
- Businesses with taxable supplies and imports exceeding AED 375,000 per year must register for VAT.
- VAT-registered businesses collect VAT from customers and remit it to the Federal Tax Authority (FTA).
- Corporate Tax
- Introduced: June 1, 2023
- Rate:
- 0% for taxable income up to AED 375,000.
- 9% for taxable income above AED 375,000.
- Different rates may apply to multinational corporations meeting specific criteria under the OECD’s Pillar Two framework.
- Scope:
- Applicable to businesses operating in the UAE.
- Free zone entities can benefit from special tax incentives if they comply with regulatory requirements.
- Who Pays:
- All businesses (except for extractive industries, which may be subject to Emirate-level taxes) are subject to this tax.
- Customs Duties
- Rate:
- Generally 5% on imported goods.
- Certain products may have higher rates (e.g., tobacco and alcohol).
- Scope:
- Levied on imports into the UAE, with some exemptions for goods traded within the Gulf Cooperation Council (GCC) countries under specific conditions.
- Who Pays:
- Importers of goods into the UAE.
- Excise Tax
- Introduced: October 1, 2017
- Rates:
- 50% on carbonated drinks (except unflavored carbonated water).
- 100% on energy drinks, tobacco products, and e-cigarettes.
- 100% on sweetened beverages.
- Scope:
- Designed to reduce the consumption of harmful products.
- Who Pays:
- Manufacturers, importers, and stockpilers of excisable goods.
- Municipality Taxes
- Rates:
- Varies by Emirate (e.g., Dubai charges 5% on rental income and a tourism tax on hotel stays).
- Scope:
- Levied on hotel stays, restaurant bills, and residential rentals in certain Emirates.
- Who Pays:
- Tenants, hotel guests, and diners (usually added to bills).
Key Differences:
| Tax Type | Rate | Applies to | Who Pays |
| VAT | 5% (standard rate) | Most goods and services | Consumers (collected by businesses) |
| Corporate Tax | 0%-9% | Business profits | Companies and entities |
| Customs Duties | 5% (common rate) | Imported goods | Importers |
| Excise Tax | 50%-100% | Specific harmful products | Manufacturers/importers |
| Municipality Taxes | Varies by Emirate | Rentals, hotels, dining | Consumers (via service providers) |
Notable Points:
- No Personal Income Tax: UAE residents do not pay income tax on their salaries or personal earnings.
- Free Zones: Businesses in free zones enjoy exemptions from corporate tax, provided they meet specific conditions.
- International Comparisons: The UAE’s tax rates remain lower compared to most countries, making it an attractive destination for businesses and individuals.
