Tax in Dubai: Guide for Individuals and Businesses
Dubai, the iconic city of the United Arab Emirates, has long been recognized as a destination of choice for individuals and businesses seeking advantageous tax conditions. The historical absence of personal income tax and a highly favorable corporate tax framework have attracted investors and professionals from around the world, including many French citizens. However, Dubai's tax landscape is evolving, and understanding recent changes and current obligations is essential for optimal tax planning.
Personal taxation in Dubai:
Zero income tax for individuals
an attractive personal tax regime
One of Dubai's main attractions is its extremely favorable personal tax regime. Residents of Dubai pay no income tax, regardless of the source of their income, whether generated locally or abroad. This exemption applies to salaries, capital gains, dividends, and most other forms of professional income.
no mandatory social securitycontributions
Furthermore, there are no mandatory social security contributions for employees or self-employed individuals. This represents a significant saving compared to countries such as France, where mandatory payroll deductions can be very high. This absence of income tax and social security contributions is a major advantage for expatriates who wish to maximize their net income and improve their quality of life.
However, it is crucial to distinguish between the absence of income tax in Dubai and any tax obligations that may remain in your country of origin. This is why the issue of tax residency is so important, as we will see later.
Corporate Tax in Dubai:
A recent but advantageous introduction
For many years, companies in the United Arab Emirates were largely exempt from corporate income tax. However, in order to align with international standards, particularly those of the OECD, a corporate income tax was introduced.
Since June 1, 2023, a corporate tax rate of 9% has been applied to corporate profits exceeding a threshold of AED 375,000 (approximately US$100,000 at the current exchange rate). Companies whose annual profits remain below this threshold are fully exempt. This means that a large number of small and medium-sized enterprises (SMEs) can still benefit from a 0% tax regime.
Free zones:
A specific exemption regime
Dubai's free zones continue to offer significant tax advantages. Companies established in these zones often benefit from temporary tax exemptions, which can range from 15 to 50 years and are renewable under certain conditions. These free zones are designed to attract foreign investment and stimulate specific economic sectors. They also offer simplified corporate structures and 100% foreign ownership, which is particularly attractive to international entrepreneurs and investors.
It is important to note that to fully benefit from these advantages, companies in free zones must generally conduct their business activities outside the mainland. For any company with significant activities on the mainland of Dubai, specific rules may apply and the 9% corporate tax rate may become relevant.
VAT in the United Arab Emirates: A moderate rate
Unlike income tax and corporate tax, which are relatively recent, VAT (Value Added Tax) was introduced in the United Arab Emirates on January 1, 2018. The standard VAT rate is 5%, which is significantly lower than in most European countries, including France (where the standard rate is 20%).
Certain specific sectors benefit from exemptions or a zero rate, in particular:
Essential goods
Certain basic food products
may be exempt.
Health and education
Basic health and education services are generally exempt.
International transport
Often subject to a zero rate.
Businesses must register for VAT if their annual taxable turnover exceeds AED 375,000. For those with a turnover between AED 187,500 and AED 375,000, registration is optional. Understanding these criteria is essential for all commercial activities in Dubai.
Other taxes and fees to consider
Although direct taxes are limited, other taxes and fees are in effect in Dubai:
Customs duties
A standard rate of 5% applies to most imports, with exceptions for certain products (e.g., tobacco and alcohol are subject to higher taxes).
Real estate registration fees
When purchasing real estate, a registration fee of 4% of the purchase price is payable to the Dubai Land Department.
Property taxes
There is no general annual property tax in the United Arab Emirates. However, municipal service fees may apply depending on the area and type of property. These fees are generally based on rental income or the estimated value of the property.
Tourist and hotel taxes
Taxes are applied to hotel stays and tourist services.
Tax Residency in Dubai: Conditions and Implications
To be considered a tax resident in Dubai and fully benefit from the advantages of the system,
certain conditions must be met:
Physical presence
Reside in the United Arab Emirates for at least 185 days per year.
Housing
Have permanent accommodation
in Dubai
main living area
No longer having your main place of residence in France
Bank account
Have an active bank account
in the Emirates
Residence visa
Hold a valid
residence visa
professional activity
Not working in
France
economic activity
Not having the center of one's economic activity in France
It is crucial to understand that even if you are a resident of Dubai, your tax obligations in your country of origin may not automatically disappear. France and the United Arab Emirates have signed a bilateral double taxation agreement. This agreement aims to prevent the same income from being taxed in both countries.
However, it is essential to consult a consulting firm, such as Hawk Invest, to understand the implications of this agreement on your personal situation. If you do not meet the criteria for tax residency in France, your French-source income may remain taxable in France, even if you are a resident of Dubai. This is a complex legal issue that requires in-depth expertise.
Developments and regulations:
Staying informed is essential
The United Arab Emirates' tax system is constantly evolving to align with international standards of transparency and anti-tax evasion, particularly those promoted by the OECD. The introduction of corporate tax is a perfect example of this. Laws and regulations are regularly updated, so it is essential to stay informed of the latest developments. For businesses, this includes economic substance rules and transfer pricing regulations. For individuals, the issue of tax residency and double taxation agreements is a dynamic topic. Support from a consulting firm is essential, particularly for your real estate projects and company formations.
Company formation in Dubai with Hawk Invest
Dubai's appeal for business creation is well established. Its favorable tax environment, modern infrastructure, and economic dynamism make it a destination of choice for entrepreneurs from around the world, including France. Whether you are considering launching a start-up, expanding an existing business, or relocating your company, Dubai offers an environment conducive to growth. Hawk Invest is here to support you every step of the way.
The complexity of the process, choosing the most suitable legal structure, and complying with local regulations require specialized legal and tax expertise. Hawk Invest is your go-to consulting and support firm to guide you through this process. Setting up a company in Dubai is a process that can transform your entrepreneurial project. With the support of a firm like Hawk Invest, you benefit from the expertise you need to navigate the United Arab Emirates environment with confidence and maximize your chances of success.
Summary: Why is Dubai's tax system so attractive?
Taxation in Dubai remains very attractive and continues to draw entrepreneurs, investors, and professionals.
There are many advantages:
No income tax for individuals
A major advantage for expatriates and self-employed workers.
Limited corporate tax
A moderate rate of 9% and an exemption for small businesses.
Exemptions in free zones
Considerable opportunities for internationally oriented companies.
Low VAT
A rate of 5% that is competitive on a global scale.
However, the complexity lies in understanding specific tax obligations, tax residency criteria, and how this interacts with the tax system in your home country. Rigorous tax planning is essential to take full advantage of these benefits.
Please do not hesitate to contact us if you have specific questions about your situation or if you would like to learn more about taxation in Dubai and the criteria for successful expatriation. Our consulting firm is at your disposal to provide support for your company formation project.