Taxation in Dubai

Are you curious about taxes in Dubai? Then you’re not alone. One of the biggest attractions for expats moving to Dubai is the extremely favorable tax climate. Dubai has no income tax for individuals, which means you keep almost your entire gross salary as net income.

This highly attractive tax situation draws many people from all over the world who are wealthy and/or have a high income that isn’t location-dependent. As a result, many people come to Dubai to work, start a business, or invest in Dubai.

There’s also no wealth tax or capital gains tax (for example, on the sale of shares or your house). This provides a significant financial advantage for many people and encourages saving and reinvesting money.

So, no taxes in Dubai, that sounds incredibly attractive. Who wouldn’t want to pay absolutely no tax on their entire income? However, it’s important to understand the whole picture – Dubai isn’t just a tax-free utopia; there are indeed some other taxes you sometimes have to pay. If you’re considering moving to Dubai for 0% tax, read this article carefully.

So, do you pay taxes in Dubai? Yes, in some cases you do pay taxes, but something like income tax doesn’t exist. In this article, we’ll list the main taxes in Dubai.

Income Tax in Dubai

How much income tax do you pay in Dubai? In Dubai, you pay 0% income tax as an individual, so simply put, there isn’t any.

Your employer doesn’t withhold anything for taxes, and you don’t need to file an annual income tax return as a resident of Dubai. This applies to both salary and income from rentals, investments, or salary from your own business within Dubai (i.e., money you earn as an individual).

This policy has made Dubai so attractive to international professionals and entrepreneurs. Expats (estimated at nearly 8 million in the UAE) massively benefit from this extremely tax-friendly climate.

Note: As a Dutch person emigrating to Dubai, you must deregister in the Netherlands, and usually Dubai then becomes your fiscal residence. The Netherlands and the UAE have a tax treaty to prevent double taxation, which means that if you’re really established in Dubai, the Netherlands leaves your foreign (Dubai) income alone.

Be sure to seek advice on this when emigrating, especially if you still have income or assets in the Netherlands.

VAT in Dubai

Just like in the Netherlands, you pay VAT (Value Added Tax) in Dubai. How much VAT do you pay in Dubai? In 2018, a VAT of 5% was introduced in the UAE on most goods and services. This means you pay 5% VAT on purchases – from supermarket groceries to restaurant bills and clothing.

This rate is significantly lower than the VAT in the Netherlands (21% high VAT and 9% low VAT), but it’s good to realize that this is not tax-free in Dubai.

Certain categories are exempt and taxed at 0%, such as basic foodstuffs, medical services, and education, but this is also the case in the Netherlands.

For the average consumer, the impact of the 5% VAT is fairly limited, but you’ll certainly notice it on large purchases (car, furniture, electronics). However, as a consumer, you hardly notice this because it’s simply included in the price. If you start a business in Dubai, you would need to take into account that you have to pay 5% VAT on most things.

Business Tax in Dubai

Do you pay taxes as a company in Dubai? Yes, above AED 375,000, you pay 9% corporate tax on your profits. This is, of course, still much less than in the Netherlands, where you pay 19% under € 200,000 and 25.8% above € 200,000 (at the time of writing). Check here for the most current corporate tax rates in the Netherlands. As a company, you therefore pay corporate tax.

In addition, as a company, you often pay yourself a salary. This salary then falls under income, on which you don’t pay taxes. This probably also differs from your home country.

For a long time, the Emirates did not levy profit tax on business profits outside the oil and banking sector. However, as of June 2023, a federal corporate tax of 9% has been introduced on profits of companies exceeding AED 375,000 (approximately € 94,000) per year. Check here for the most current corporate tax rates in Dubai.

Small businesses or entrepreneurs below that profit threshold remain taxed at 0%, which means that many freelancers or small start-ups still don’t pay profit tax in Dubai. Additionally, that 9% is also quite reasonable. The introduction of this profit tax is intended to comply with international standards and make the economy less dependent on oil revenues, but at 9%, the rate remains very low compared to other countries in Europe.

Are you going to work in Dubai? Then it has little direct effect on you as an employee (it mainly affects companies). However, it may be relevant if you plan to set up a business in Dubai.

If you’re going to start a business in Dubai, you choose between setting up a company in a free zone or in the mainland. Free zones often offer up to 50 years guarantee of 0% profit tax, which is still a reason why companies establish themselves in free zones.

Other levies

Are there any other levies in Dubai? Besides the standard taxes in Dubai that we have now covered, there are also a number of levies in Dubai that are useful to know. Dubai has import duties of usually 5% on products you import (although as a consumer you hardly notice this, except that imported items are slightly more expensive).

How much import costs do you pay for alcohol and tobacco in Dubai? Specific products are subject to excise duties or higher taxes: there is a 50% tax on alcohol and 100% on tobacco as a health measure. Read here the most current import duties in Dubai.

Municipal tax Dubai

If you buy a house in Dubai or rent a house, you will have to deal with municipal tax. As a tenant, you pay municipal tax indirectly through your energy bill: approximately 5% of your rent is charged monthly as a ‘housing fee’ via the DEWA bill (in some emirates this is called baladiya tax).

Hotel bills and vacation home rentals also have tourist tax. For most expats, these remain footnotes; the big advantage remains the absence of income tax.

Advantages and disadvantages of taxes in Dubai

Now that you know everything about taxes in Dubai, we have summarized the advantages of the tax system in Dubai.

Advantages

The advantage of Dubai’s tax system is clear: you keep more money from your salary, which increases your financial power. This is ideal for building more wealth, paying off debts, or investing in Dubai.

Also, the UAE has no complicated system of deductions or allowances – it’s all very easy, nothing is deducted.

It’s also attractive for entrepreneurs: profits are taxed low and reinvesting your income in Dubai pays off. For example, you can get a visa if you invest a lot and you also don’t pay income tax on your private income.

In addition, the government uses other sources of income (oil, VAT, tourism), making the infrastructure and services all very good without directly taxing citizens.

Disadvantages

However, there are also downsides. For example, there is no social security or pension in Dubai from the government as there is in the Netherlands. You don’t pay premiums, but you also don’t build up any entitlement to state pension, unemployment benefits, or disability benefits in Dubai. In Dubai, you are on your own and must be able to take care of yourself. The government will not help you.

You will have to arrange these matters yourself or trust that your savings provide sufficient buffer if something unexpected happens.

Furthermore, no income tax also means no redistribution: things like schools for expat children and healthcare are not subsidized by the state, so you pay a lot for these yourself (high school fees, insurance premiums, etc.).

Another disadvantage could be that if you ever return to the Netherlands, you will not have built up a pension and may have to pay social premiums again if you start working in the Netherlands – so if you want to move to Dubai for the attractive tax situation, think carefully about how you’re going to manage in Dubai.

Finally, the absence of income tax means that the government tries to generate income in other ways. This is through fines and permits, for example. Think of high traffic fines or costs for residence permits, which can indirectly feel like a “tax”. However, the government is very wealthy, so they simply don’t need the money from the residents.

All in all, for many expats, the advantages of tax-free income in Dubai outweigh the disadvantages, making Dubai a popular destination for career seekers and entrepreneurs. As long as you know that you must be able to take care of yourself in Dubai and that the government has a less extensive safety net compared to the Netherlands.

Frequently Asked Questions