The UAE currently has no system of federal income taxation. Instead, most of the emirates – including Dubai – enacted their own corporate tax decrees in the late 1960s. These emirate-level corporate tax decrees are of general application and remain in force as amended.

These decrees are similar in nature and text, and deal in broad terms with the identities of taxable persons, rates, administration, computation of taxable profits and loss relief. The decrees limit the scope of taxation to “bodies corporate” carrying out a trade or business in the respective emirates.

These decrees are technically still applicable and allow corporate income tax to be levied on all companies. In practice, however, corporate income tax is only enforced on foreign oil companies engaged in upstream activities, certain petrochemical companies and, under separate banking tax decrees, branches of foreign banks. This practice is unlikely to change in the future, partly because the relevant mechanisms with which to implement the emirates’ corporate tax decrees more widely have not yet been established.

There is currently no withholding tax, stamp duty, personal income tax or any other taxes in the UAE.

Entities established within designated free trade zones (FTZs) are subject to the rules, regulations and tax regime of that FTZ, rather than to an onshore corporate tax decree. FTZs generally offer companies and branches a complete exemption from all emirate-level taxes or a 0% tax rate. The length of these tax holidays ranges between 15 and 50 years from the date that the entity registers with the FTZ, with a possibility of renewal upon expiry.

Future Landscape

Based on public sources, we understand that the UAE is looking into the possibility of introducing a federal corporate income tax. No official statements have been made in this regard beyond general comments in the media and references to carrying out impact studies. As such, there is neither visibility on the scope of application of any future federal corporate income tax regime, nor on the interaction between a federal corporate income tax, the existing emirate corporate taxes and FTZ tax holidays.

The UAE’s two financial FTZs – Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) – are the only FTZs established by federal decree. Accordingly, only ADGM and DIFC may potentially offer protection against a future federal corporate income tax. Other FTZs established under emirate decrees may only offer exemptions from emirate-level taxation and would therefore need to be specifically exempted or grandfathered in with regard to a potential federal income tax.

Global Developments

On December 5, 2017 the UAE was added alongside 16 other jurisdictions to a blacklist of jurisdictions that the EU considers to be non-cooperative against a wider tax evasion agenda.

The UAE responded to its inclusion on the blacklist by committing to undertake certain tax reforms, which led to the UAE being moved to the so-called “grey list” on January 23, 2018. Grey-listed jurisdictions are considered by the EU to have deficiencies in their tax regimes, but have committed to introduce relevant changes to improve transparency and fairness, as well as to implement measures related to base erosion and profit shifting (BEPS).

In line with its commitment, the UAE joined the OECD’s Inclusive Framework on BEPS on May 16, 2018, and signed the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS on June 27, 2018. The UAE is also expected to issue regulations on economic substance similar to the draft legislation on economic substance issued in October 2018 by the States of Jersey, as well as those of other grey-listed countries.

Dubai Corporate Tax Regime

As originally issued in 1969 and amended in 1970 and 1971, the Dubai income tax decree is based on the French concept of territoriality. It provides that any “chargeable person” that carries on a “trade or business” in the emirate is subject to corporate income tax at progressive rates of up to 55%.

A “chargeable person” is defined as “a body corporate wherever incorporated, or each and every branch thereof, carrying on trade or business of any type during an income tax year through a permanent establishment situated in the emirate, whether directly or through the agency of another body corporate”.

A “permanent establishment” is defined as “a branch, management or other fixed place of business and does not include an agency unless the agent has and habitually exercises authority to conclude contracts on behalf of such body corporate”.

“Carrying on a trade or business” is defined as including the following activities:

• Selling goods or rights to such goods in Dubai;

• Operating any manufacturing, industrial or commercial enterprise in Dubai;

• Letting any property located in Dubai; or

• Rendering services in Dubai, excluding the mere purchasing of goods or rights in such goods. In practice, however, corporate income tax is currently applied only to the following:

• Upstream oil and gas companies, which pay corporate tax at rates specified in their concession agreements or specific fiscal letters;

• Foreign bank branches, the annual profits of which are subject to a 20% tax, and for which taxable income is calculated by reference to audited financial statements and subject to certain adjustments, as per the Dubai banking tax decree; and

• Certain other companies and activities, on an ad hoc basis.

Investment Incentives

There are over 30 industry-focused FTZs in Dubai offering a combination of tax and business incentives that were introduced to attract foreign investment. The incentives usually include a 15-to 50-year tax holiday, with the possibility of renewal upon expiry. Furthermore, FTZs allow for 100% foreign ownership of companies established within the zone, while “fenced” FTZs specifically also offer a suspension of Customs duties on goods imported into the FTZ.

Withholding Taxes

There are no withholding taxes in the UAE or in Dubai.

Capital Gains Tax

There is no capital gains tax in the UAE or in Dubai. For taxpaying entities, capital gains are taxed as part of business profits.

Customs Duty

Generally, a Customs duty of 5% is imposed on the cost, insurance and freight value of imported goods. Other rates may apply to certain goods, such as alcohol and tobacco, while certain exemptions may also be available.

Goods imported and intended for re-export often benefit from Customs duties relief, as do manufacturers on the import of their machinery, raw materials and spare parts used for industrial purposes.

Additional Customs duty relief measures and exemptions are available for certain activities and goods originating in certain countries.

Excise Tax

A 50% excise tax on carbonated drinks was introduced in the UAE on October 1, 2017. Energy drinks and tobacco products are subject to excise tax at a rate of 100%.


The UAE introduced a value-added tax (VAT) that came into effect on January 1, 2018. VAT applies to most supplies of goods and services at the standard rate of 5%. A 0% rate applies to goods and services that are exported, the first sale of residential buildings, and supplies in specific areas such as health care and education. VAT exemptions also apply to certain financial services, local transport and other aspects of residential real estate.

Designated FTZs are treated as being outside the territory of the UAE, resulting in the supply of certain goods not being subject to UAE VAT, while services in those zones remain subject to VAT.

Mandatory VAT registration is set at a threshold of Dh375,000 ($102,000) in annual turnover, while voluntary registration is made available for yearly turnover of at least Dh187,500 ($51,000). VAT grouping of UAE entities is possible if certain conditions are met. Where businesses have an excess of input VAT on expenditures, such input VAT can be claimed back from the UAE Federal Tax Authority.

Personal Income Tax

No system of personal taxation currently exists in the UAE.

Social Security

The UAE social security regime applies only to GCC and UAE national employees. Social security levies and rates are administered differently by each emirate.

Contributions in Dubai are calculated at a rate of 17.5% of an employee’s fixed remuneration – salary and fixed allowances – as stated in the employment contract.

In the private sector shares of those contributions are divided among three parties: 2.5% is payable by the employee; 2.5% is payable by the government of Dubai; and the remaining 12.5% is payable by the employer. Within the public sector, 2.5% is payable by the employee, and the remaining 15% is payable by the employer. For other GCC nationals working throughout the UAE, employee contributions are assessed according to the social security regulations of their native country. The liability to withhold falls on the employer.

Municipal & Property Tax

A 7% municipal tax is imposed on hospitality and entertainment services, while a 10% charge is levied on the total invoice values of hotel stays. A nominal tourism fee is also levied on hotel guests and tenants of service apartments, ranging from Dh7 ($1.91) to Dh20 ($5.44) per room, per night.

Most municipalities impose a tax on properties that is usually assessed with reference to a property’s annual rental value. It is generally the tenants’ obligation to pay the tax. In some cases, separate fees are payable by both tenants and property owners. In Dubai, the municipality tax on property is levied at 5% of the annual rental value for tenants, or at 5% of the specified rental index for property owners.

Real Estate Registration Fees

Land registration fees are charged on the transfer of Dubai real estate – including long-term leases – at 4% of the property’s sale value. This fee is shared equally between a property’s buyer and seller and is payable to the Dubai Land Department. This fee may also apply to the transfer of shares of companies that either directly or indirectly own real estate.

No real estate transfer taxes or stamp duties are levied on the transfer of real estate in the UAE.

Reporting Requirements

All companies are required to maintain proper accounting records. There are no national generally accepted accounting principles (GAAP) in the UAE and no specific language requirement for the purpose of keeping books and records, although English is widely used.

International financial reporting standards are mandated by the Emirates Securities and Commodities Authority and the Central Bank of the UAE, and adopted as the default GAAP by other firms. The requirement to prepare statutory financial statements (SFS) varies with each regulatory authority.

Most authorities request audited SFS at the time when a company’s annual trade licence is renewed. In some cases, an exemption from preparing and filing audited SFS may be available, though generally companies prefer to prepare SFS as measures of good corporate governance and best practice. Branches are permitted to prepare and submit consolidated financial statements to their head offices.

As for payroll obligations for companies operating in Dubai, although there are no personal income tax obligations in the UAE, it is important to comply with all aspects of labour law, as well as with certain requirements, like the wages protection system (WPS). The WPS applies to employees registered with the UAE Ministry of Labour. A key requirement under the WPS is that employers must pay their employees in local currency, from the local bank accounts of the employers to the local bank accounts of the employees. Employers that are found to be non-compliant with the rules of the WPS can face financial penalties and problems with renewing or processing visas for their workforce.

Foreign Exchange Laws

There are no foreign exchange controls or other restrictions on capital flows into and out of Dubai or the UAE, and there are virtually no restrictions on foreign trade.

Double Taxation

The UAE double tax treaty network is large, especially for a country that historically has had little taxation. As of December 17, 2018 the UAE had 90 such treaties in force, making its double treaty network wider than those of Cyprus, Hong Kong, Ireland, Luxembourg, Singapore and Mauritius.

The UAE has double tax treaties in force with the following countries: Albania, Algeria, Andorra, Armenia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brunei Darussalam, Bulgaria, Canada, China, Comoros Islands, Croatia, Cyprus, the Czech Republic, Egypt, Estonia, Fiji, Finland, France, Georgia, Germany, Greece, Guinea, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Jersey, Jordan, Kazakhstan, Kenya, South Korea, Kosovo, Kyrgyzstan, Latvia, Lebanon, Lichtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, the Maldives, Malta, Mauritius, Mexico, Moldova, Montenegro, Morocco, Mozambique, the Netherlands, New Zealand, Pakistan, Panama, the Philippines, Poland, Portugal, Romania, Russia, Senegal, Serbia, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Switzerland, Syria, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, the UK, Uruguay, Uzbekistan, Venezuela, Vietnam and Yemen. The UAE has also signed and entered into tax treaties with an additional 31 countries: Angola, Antigua and Barbuda, Argentina, Belize, Benin, Bermuda, Botswana, Burundi, Brazil, Cameroon, Chad, Colombia, Costa Rica, Ecuador, Ethiopia, Equatorial Guinea, the Gambia, Iraq, Saudi Arabia, Libya, Mali, Mauritania, Nigeria, Palestine, Paraguay, Rwanda, San Marino, St Kitts and Nevis, Suriname, Uganda and Zimbabwe.