What are the taxes in UAE for Foreigners?

Income Tax in UAE for Foreigners

As a foreigner residing in the UAE, you’ll appreciate your employer’s absence of payroll tax withholding and the lack of individual tax registration or reporting requirements. This tax-free environment extends to the capital gains tax, wealth, inheritance, estate, and gift taxes. However, American citizens residing in the UAE are still obligated to file taxes in the U.S.

VAT in UAE

The VAT system in the UAE includes certain exemptions and zero-rated conditions. These apply to goods and services exported outside the VAT-implementing GCC member states, international transportation, crude oil/natural gas, the first supply of residential real estate, and specific sectors like health care and education.

Non-resident businesses supplying VAT-liable goods or services in the UAE have no registration threshold. The mandatory VAT registration threshold for resident businesses is AED 375,000, and the voluntary registration threshold is AED 187,500.

Other Indirect Taxes Foreigners Should be Aware of

Foreigners should also be conscious of other indirect taxes in the UAE. A customs duty of 5% is typically levied on the CIF value of imports, with different rates for certain goods like alcohol and tobacco.

There are also potential exemptions and reliefs. The UAE also imposes an excise tax, colloquially known as the “sin tax”, on specific goods deemed harmful to human health or the environment. Hotel levies and property transfer tax are standard, with each Emirate administering these differently.

For example, in Dubai, a Tourism Dirham fee is charged to hotel guests and tenants of hotel apartments, and a 7% municipality fee is levied on each hotel sale.

The Absence of Property and Wealth Tax

The lack of property and wealth tax further enhances the UAE tax system’s appeal to foreigners. However, most Emirates levy a municipality tax on properties, typically based on the annual rental value. As the tenant, you’re usually responsible for this tax. A registration fee may also be levied on land transfer or real estate property ownership.

For example, in Dubai, a land registration transfer fee is charged at a rate of 4% of the property’s fair market value on any third-party sale.