Dubai is often perceived as a tax-free city, as there is no income tax levied on businesses and individuals by the UAE government. However, expatriates registered for taxes in other countries might still need to pay income earned taxes in Dubai. To mitigate this, Dubai has negotiated numerous double taxation agreements with other countries to prevent double taxation on foreign nationals.

How Does the Taxation System Work in Dubai?
Dubai’s tax system follows a series of tax decrees issued in 1969 and other tax laws, including the Value Added Tax (VAT) and the excise tax, administered by the UAE government since 2018. Companies in Dubai must electronically charge VAT and excise tax on the UAE Tax Authority’s website.
Additionally, the Dubai government plans to introduce a new corporate tax soon. Dubai’s tax laws are also regulated by over 100 double tax agreements signed by the UAE, providing various tax exemptions or reductions on individual incomes for local and foreign residents and companies.
Value Added Tax (VAT) in Dubai
One of the most significant changes to the UAE’s taxation system was the implementation of VAT in Dubai in 2018. Here’s how VAT is applied:
– Collection: VAT is collected by businesses in Dubai but is ultimately borne by the final consumer.
– Rate: Dubai has one of the lowest VAT rates globally, set at 5%.
– Zero-Rated Products: A 0% VAT rate is applied to certain goods and services, including exports outside the GCC, international transportation, 99% pure gold/silver, and specific education and health services.
– Registration: VAT registration is mandatory for all businesses incorporated or to be incorporated.
– Refunds: VAT-registered companies can claim refunds from Dubai tax authorities under certain conditions.
– Tourist Refunds: Visitors and tourists can claim VAT refunds on purchases made during their stay in Dubai.
– Exemptions: VAT exemptions apply to certain financial services, residential properties, and local passenger transport services.
Excise Tax in Dubai
Implemented in 2017, the excise tax is an indirect tax imposed on goods that are harmful to human health, such as carbonated and energy drinks, cigarettes, and related products. The excise tax rates are as follows:
– Carbonated Beverages: 50%
– Energy Drinks and Tobacco: 100%
Corporate Taxes in Dubai
Corporate tax is levied on the profits earned by a corporation during the tax year. Although Dubai follows its corporate tax laws, which differ from the UAE’s tax structure, corporate taxes apply only to gas and petroleum companies and branches of foreign banks operating in Dubai.
– Gas and Oil Firms: Subject to a 55% tax rate on company income.
– Foreign Bank Branches: Subject to a 20% tax rate on taxable income.
– No Withholding Taxes: No taxes on dividends, interest, or royalty remittances overseas.
Taxes in Dubai Free Zones
Dubai Free Zones offer numerous tax incentives for international companies:
– Corporate Income Tax Exemptions: Up to 50 years.
– Repatriation of Income: Free of charge from free zones to other countries.
– No Withholding Taxes or Capital Gains: In any free zone in Dubai.
Other Taxes in Dubai
Dubai also imposes several indirect taxes:
– Municipal Levy: 10% on hotels, entertainment facilities, and industrial space leases (offices and warehouses).
– Residential Property Rental: 5% municipal levy.
– Utility Taxes: Charged by the Dubai Electricity and Water Authority on energy bills.
– Road Tolls: Applicable as well.
Taxes in Dubai Free Zones
Navigating the taxation system in Dubai can be complex, but understanding the various types of taxes can help you stay compliant and optimize your business operations. If you are planning to start a business in Dubai, obtaining professional advice is crucial.
At Unicorn Global Solutions, we provide comprehensive business setup and support services. Our experts will help you understand the latest tax legislation in Dubai and guide you through the setup process. Contact us today to schedule a free consultation with one of our Business Setup Advisors! Text us on WhatsApp or call us today to get started.