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Taxes in Dubai: An Overview
People are often surprised to learn that Dubai—and the United Arab Emirates (UAE) as a whole—practically offers a tax-free environment for individuals. In fact, the UAE is known globally as one of the most attractive destinations for tax-free living. In this article, we cover the three primary types of taxes in Dubai: income tax, value-added tax (VAT), and corporate tax.
There is no income tax whatsoever in Dubai, regardless of income source. Whether from stocks, rental income, or dividends, individuals are entirely tax-free. However, it is important that individuals establish their official residency and tax domicile in the UAE. Interestingly, Dubai does not require any formal registration of residence or a minimum length of stay for tax purposes.
Nevertheless, individuals should be cautious about inadvertently becoming tax-resident in another country. This is particularly relevant for people who may be subject to the 183-day rule or who own property elsewhere, like in Germany, that could imply a tax obligation.
Since 2018, a 5% VAT has been implemented in Dubai, which also applies across the other emirates. The VAT system operates similarly to that in many European countries, including input tax deduction on domestic transactions.
For businesses, VAT is primarily a pass-through cost affecting only the end consumer. However, companies that are not eligible for input tax deduction need to pay close attention. Notably, VAT only applies to domestic transactions; international invoices to customers in Germany or other countries, for example, are not subject to VAT. Businesses with annual revenue of at least AED 375,000 are required to register for VAT, while smaller companies can voluntarily register starting from AED 175,000.
As of January 1, 2024, the UAE introduced a 9% corporate tax applicable to all companies, regardless of whether they are located on the mainland or in one of the many free zones. Therefore, all companies in the UAE must register for corporate tax.
Profits up to AED 375,000 (approximately €95,000) remain tax-free, while profits above this threshold are subject to a fixed 9% tax rate. There is an added relief measure in place for small and medium-sized enterprises until the end of 2026: companies with revenues up to AED 3 million (around €750,000) can qualify for a corporate tax exemption.
Full exemption from corporate tax is only available for certain qualified activities. These firms must be based in a designated free zone and demonstrate substantial economic activity within the UAE. Companies operating in these sectors can continue to benefit from tax-free status if they meet all regulatory requirements.
Despite the introduction of corporate tax, Dubai remains an extremely tax-friendly location, particularly for individuals. Those who structure their business activities strategically and understand the local regulations can still enjoy numerous tax advantages. With a professional partner like Nexus Pro by your side, you can make the most of these opportunities.
