Rumor has it that UAE
is a tax free country and the life we lead here is one of luxury and comfort. After all, if those weren't the case, why would so many expatriate workers and foreign investors flock to this tiny Middle East
country? Well, I can't speak for everybody, they all have their personal reasons. What I can do instead, is address those long standing myths about taxes in the UAE and clear any doubts about them once and for all.
is a tax free country and the life we lead here is one of luxury and comfort. After all, if those weren't the case, why would so many expatriate workers and foreign investors flock to this tiny Middle East country? Well, I can't speak for everybody, they all have their personal reasons. What I can do instead, is address those long standing myths about taxes in the UAE and clear any doubts about them once and for all.
Myth 1 : My salary is my own. I don't owe income tax to nobody.Truth : Yes and no. Yes, by UAE law, you are not required to pay personal income tax to the UAE government. Yipee! That's gotta be good news right? Read on. No, because many countries like the US require their citizens and green card holders to report their annual income tax return. So if you're an expatriate like me, check with your local embassy or look online on the foreign workers tax information for your country.That might burst your bubble but hey, better find out now than be sorry later. The good thing though is that the UAE has signed Avoidance of Double Taxation Agreements with many countries so that expatriates working here don't get stung twice. Here's a list of those countries http://www.dubaifaqs.com/double-taxation-treaties-uae.php.
Myth 2: Setting up a business here is OOOHH-SOOOO-OH-EASY!
Truth : Mmm, I'll give you the details and you be the judge of that. It's true that there are currently no federal tax legislation in place in the country regarding corporate business, however, each Emirate has its own tax laws. There are currently legislations in force in the Emirates of Abu Dhabi, Dubai
and Sharjah establishing a general corporate taxation regime - the Abu Dhabi income tax decree of 1965 (and its amendments), Sharjah Income Tax Decree of 1968 (and amendments) and Dubai income tax decree of 1969 (and amendments). The good news is, in practice, only oil, gas and petrochemical companies and branch offices of foreign banks are required to pay 55% and 20% corporate taxes respectively. Simply put, fiscal legislation is not the same as the fiscal practice.
and Sharjah establishing a general corporate taxation regime - the Abu Dhabi income tax decree of 1965 (and its amendments), Sharjah Income Tax Decree of 1968 (and amendments) and Dubai income tax decree of 1969 (and amendments). The good news is, in practice, only oil, gas and petrochemical companies and branch offices of foreign banks are required to pay 55% and 20% corporate taxes respectively. Simply put, fiscal legislation is not the same as the fiscal practice. No corporate tax? YES! But wait a minute, I got more to tell you. First of all, you can't start a local business without a local partner declaring 55% ownership of it. Say what?!! Unless of course your business is registered in one of the ten Free Trade Zones set by the government. So you see, there's more to setting up a business here than first meets the eye.
Myth 3: There's no VAT in place too.
Truth: True. VAT is not levied on imported goods and products. However, some of the goods coming in are subject to customs duty ( between 1-5%) but so many are exempted from it too. Lately, the International Monetary Fund (IMF) has been calling on UAE to put a VAT in place in order to promote corporate accountability of products produced by the companies involved in the business.
Myth 4 : There's no sales tax in placeeither.
Truth : Sooo False. Just walk into a restaurant or other entertainment place and you'll see a 16% service charge of your total bill. Yep, sales tax is in place and it's got a cute name too : municipal service charge. Unfair right? Yep, the government thinks so too because as of January 2010, the Supreme Committee for Consumer Protection warned restaurants against imposing service charges to the total consumer bill. According to www.ameinfo.com press release dated January 3, 2010, The Supreme Committee for Consumer Protection took this action in order to implement the Consumer Protection law No. 26 for year 2006. What?!! It's been in place for almost 4 years now and it's implementation has only started? Talk about delayed reaction.Hummpp...Still, it's better late than never right? Oh one more thing before you give your wallet a high 5, let me remind you that alcohol sales tax is up to 30% and cigarettes up to 50%. Sucks. Which is why many expatriates here purchase their liquor and cigarettes from the Dubai Duty Free. Okay.
Myth 5 : No property taxes. Truth : Depends. If you're renting a property (apartment, condo, villa etc.), you are required to pay an annual 5% municipal tax. If you're renting a commercial property, you will then need to pay 10% annually. But if you own a property and are a non-resident (spend less than 183 days in the UAE), you are not liable to pay tax on the earnings of that same property.
Myth 6 : No capital gains tax, inheritance tax, withholding tax.
Truth : Yes, yes, and yes! At last, some of these rumors prove to be true!
Mmmm...Set free by the truth now, are you?
