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MEDIA / Blog / Is It Really Tax Free In Dubai?
If you are thinking about moving to live and work in the UAE you have probably learned by now that there is no income tax in Dubai.  This is correct, no tax is seemingly levied against your income if you go and work in Dubai or if you have an investment property in the city and rent it out for profit.

However, that sounds too good to be true. Which is why, we lay out the facts about tax in Dubai to set the record straight.

Is it really tax-free in the UAE?  Yes, it is - but not in all circumstances!  Otherwise there are times when you will have to face tax, and there are tips that you need to know about taxation in Dubai if you are thinking of going to live and work in the emirate.
 
Dubai was a shining star in the Middle East. It was a place where everyone wanted to be, where the local economy was massively affluent and the way of life subsequently lavish and amazing. And then the reality of economics began to bite and the world caught fiscal flu and all of a sudden people began to see Dubai in a new light.  For a while, Dubai was no longer a place where the streets were paved with gold, where there were massive job opportunities and where unlimited numbers of Western expatriates were welcome.
 
Some who had been profiting from the unreality of the emirate have certainly fallen foul of the fact that Dubai  is  struggling  through  economic  difficulties. Among  those  most  affected  were  people  profiting from the inflated property market.
 
However,   Dubai   has   not   died   as   many   people suggested it would, it has simply re-adjusted to the major shock its economy has suffered.  There are still jobs  in  Dubai,  there  is  still  a  great  way  of  life  to  be enjoyed and, yes, there are substantial 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 cautioned that they need to learn about the customs, traditions and laws before they relocate.  For example, women should not flaunt themselves  in  public,  men  and  women  should  not make public spectacles with even the most ‘innocent’ of sexual behaviour.  Learn the laws, follow the rules, respect the country and its laws and be prepared to adjust and adapt to what is a different way of living at times.
 
The UAE levies no personal taxation on income: what is more, in reporting on a broadcast last year, Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE and the Ruler of Dubai as having 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.  However, 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 also 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  UK  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 Dubai for a full tax year or you become non-resident for tax purposes in your home country, then you should be fine.
 
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  clear  about your tax status and obligation for taxation at home or abroad.
 
In terms of other taxes in Dubai, they do exist contrary to popular belief. For a start the profits of international banks and energy firms operating in the UAE are taxed at the federal level. Further, you are 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 is 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 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. And  there  is  a  10%  municipality  tax  as  well  as  5% municipality tax on rental income.
 
VAT  may  be  coming  in  the  future  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.  That aside, it is happening, with a deadline for its implementation at GCC level set for 2022.
 
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  a professional in the country.

Residence permits

Individuals, other than UAE and GCC citizens, must have a residence visa if they want to live in the UAE. Obtaining a residence permit is the primary condition for being considered as resident in the UAE. As a general rule, one has to have a sponsor in order to apply for a residence permit in the jurisdiction.
 
For  many  expatriates,  the  company  that  employs  them  will  act  as  their  sponsor  and  secure  them residence visa. For those who do not come on an employment contract, there are two other ways for obtaining UAE residency:

•    investment in real estate (property residence visa)
•    set up of corporate structure to act as sponsor

Real estate investor/property residence visa
 
UAE government in June 2011 introduced a new system extending the validity of the visa granted to real estate investors for up to 3 years.

The following rules and conditions govern the issuance of a real estate investor visa:
 
•    the property is built and ready for accommodation
 
•    the applicant proves ownership (title deed issued by the Land Registrar)
 
•     the property is worth minimum AED 1 million (equivalent to US$300.000) with no mortgage
 
•    the applicant’s income is higher than AED 10.000 (US$3.000) monthly
 
Corporate structure
 
The other way to obtain residency is through a corporate structure.
 
As a general rule, one has to have a sponsor in order to apply for a residence permit in the jurisdiction. For foreigners, setting up a company is a practical way of obtaining sponsorship.
 
As far as the company is concerned, it must have physical presence in the UAE. In that regard, the most interesting and cost effective options are proposed by free zones situated in the northern emirates. Usually, these options consist of “flexi desks” or “flexi offices”.

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