There is no income, corporate or capital gain taxes for residents and expat workers in Dubai unlike in the US and the UK. Individuals in the US are subject to federal graduated tax rates from 10% to 39.6%, while corporations are subject to federal graduated tax rates from 15% to 35%. In the UK, individuals have to pay income tax if they earn more than GBP 12.6K. And the rate for income from GBP 12.6K to GBP 50.3K constitutes 20%. There are also no taxes levied on Dubai’s residents’ international pension plans, while foreign pension plans of the US and UK residents are subject to taxation.
If expats are not tax residents in Dubai, they will have to pay their income taxes back in their home countries. In order to obtain a Tax Residency Certificate in the UAE, the expat needs to fulfill one of the following criteria:
- To register a local company and obtain a visa.
- To purchase the property on the territory of Dubai and obtain a visa.
- To approve a visa on the basis of an employment contract.
However this document is not available for all expats, because the home country of foreign nationals must have a 2-year tax avoidance agreement with the UAE. For example, the US does not have such a treaty with the UAE while the UK had signed this agreement with the UAE on 12 April 2016.
5% of annual rent is added to the bill for residential tenants when renting a property in Dubai. Expats must pay 4% of a property tax if they transfer any property in Dubai to their name. There is also a tourist tax, which is levied on any visit to a hotel in Dubai for a nights stay which adds 10% to your bill.
Departure tax is charged during the purchase of an airplane ticket, which will land or take off at one of Dubai’s airports. This tax is included in the price of the airplane ticket. But members of the cabin crew, transit passengers and children under two years of age are exempt from paying the departure tax.
Value Added Tax (VAT) in the UAE is levied only at a national level of 5%, except for specific products which are harmful to human health or the environment. For example, alcohol is heavily taxed upon import into the country at 50%. You have to pay another 30% if you have a liquor license and the alcohol was bought for home consumption. Excise duties are levied from tobacco (100%), energy drinks (100%) and carbonated beverages (50%).
Food, healthcare, petroleum products, bicycles, education, financial and social services and the residential property sector are exempt from VAT (with certain exceptions) in the UAE while in the UK the standard rate of VAT for most goods and services constitutes 20%. The US does not utilize a VAT system, instead, there is a sales tax: at a rate from 0% to 15%, depending on the state.