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Due to incentives for business owners and a low property tax in the UAE, the country has established itself as one of the most attractive regions. Understanding the local laws provides better insight into why this destination is highly sought after by businesspeople, investors, and long-term residents from abroad.
One of the key aspects of the tax system is the absence of income tax in the UAE for foreigners, who also do not need to pay levies on interest, dividends, wealth, luxury items, royalties, and more. This creates favourable conditions for expatriates.
Significant benefits are also available to property owners. The country does not impose taxes on property, gifts, or inheritance, making investments in the Emirates particularly advantageous. An additional benefit is the absence of taxes on rental income for property owners.
As for entrepreneurs, the state has introduced a 5% VAT, which applies to most goods and services. In 2023, a 9% corporate tax was introduced on company earnings from AED 375,000 (USD 102,000) per year. This remains one of the lowest rates in the world.
Taxes for property owners
The UAE’s tax system is distinguished by its favourable conditions. Certain levies are absent here, particularly as property owners are not required to pay annual property taxes, and no capital gains tax is levied upon the sale of property.
Businesses registered in free zones can enjoy additional benefits, including exemption from customs duties.
The Emirates offer unique opportunities for entrepreneurs and investors, driving business growth.
Tax on property purchases
In the UAE, the amount of fees can vary depending on the emirate, the type of property, and its value. For instance, the transfer fee for property in Dubai is 4%, while in Abu Dhabi, it is 2%. There are also other types of costs, which on average amount to 7–10% of the property price.
Let’s calculate the real estate tax in Dubai upon purchase:
| Tax | Amount |
|---|---|
| DLD Fee | 4% of the property price
|
| Registration Fee |
|
| Title Deed Fee | AED 250 (USD 70) |
| Agency Fees – Agent’s assistance in selection and purchase | 2% + 5% VAT |
| Conveyance Fee – Assistance in paperwork | AED 5,000 (USD 1,350) to AED 10,000 (USD 2,700) |
| VAT – Not applicable to residential properties, except for hotel apartments | 5% |
If the buyer uses a mortgage, the following additional fees apply:
| Mortgage Registration | 0.25% of the loan amount + AED 290 (USD 80) |
|---|---|
| Mortgage Arrangement | Usually 1% of the loan amount + 5% VAT |
| Valuation Fee | On average from AED 2,500 (USD 680) to AED 3,500 (USD 950) |
| Life Insurance | 0.3–0.8% |
| No Objection Certificate (NOC) | AED 500 (USD 135) to AED 5,000 (USD 1,350) |
Additional fees for property owners
Does Dubai have property taxes after purchase? No, but there are several fees. We have listed them in the table:
| Service charges: maintenance of the complex and services within it | Depends on the type of property |
|---|---|
| DEWA connection fee for electricity and water supply |
|
| Insurance | Varies depending on the specific property |
Property tax
One of the key benefits of owning property in the country is the absence of property tax. This means that owners are not required to pay annual taxes, significantly reducing maintenance costs. This policy makes investments particularly attractive for international investors looking to minimise tax liabilities.
Please note! There are no gift or inheritance taxes on property in the Emirates.
The UAE tax for non-residents—legal entities and companies—is 9% on income from properties used for investment and business purposes.
Rental income tax
Rental income is exempt from taxation. This means that owners who lease out their property are not required to pay taxes on such income. However, there is an additional tax in Dubai for foreigners and all property owners. This is a municipality fee of 5% of the annual rent, which must be paid by tenants. It is included in the cost of renting the property and is reflected in the monthly DEWA bill.
Capital gains tax on property sales
There is no capital gains tax when selling property. This means that sellers are not required to pay taxes on this profit. However, as with purchases, there is a transfer fee of 4% of the property’s value in Dubai or 2% in Abu Dhabi. This fee is typically split between the buyer and the seller unless otherwise specified in the contract.
Taxes for entrepreneurs
Doing business in the UAE offers numerous advantages, including a favourable tax system that attracts entrepreneurs from around the world.
Value added tax (VAT)
VAT is a tax levied on goods and services at each stage of their production and sale, which is added to the cost of the product and paid by the end consumer. It was introduced in the country on 1 January 2018 and is set at 5%.
VAT applies to the vast majority of goods and services, with some exceptions such as residential buildings, certain financial services, undeveloped land, and local passenger transport that meet specific criteria.
Companies with an annual turnover exceeding AED 375,000 (USD 102,000) are required to register for VAT and regularly submit returns. For companies with a turnover exceeding AED 187,500 (USD 51,000), registration remains voluntary but may be beneficial in certain cases. VAT-registered businesses are entitled to reclaim the tax paid on goods or services related to their business operations.
Corporate tax
This is a new tax in the UAE, levied on the net income of businesses. The rate is set at 9% and applies to companies with an annual income exceeding AED 375,000 (USD 102,000). Businesses with lower profits are exempt from this tax, which encourages the growth of small and medium-sized enterprises.
Corporate tax applies to all businesses registered in the Emirates, as well as individuals conducting business activities. The following are exempt from it:
- Salaries and other employment income;
- Investments in real estate by individuals;
- Interest on bank deposits;
- Income of foreign investors in the form of dividends, interest, capital gains, and other profits from investments and ownership of securities;
- Dividends and capital gains earned by businesses in the Emirates from their shareholdings.
Excise tax
Introduced in 2017, it is applied to goods that may harm health and the environment. The sales tax in Dubai and other Emirates is as follows:
- 50% on carbonated drinks, products with added sugar and other sweeteners;
- 100% on electronic smoking devices and liquids for them, tobacco products, and energy drinks.
The tax is collected at the production or import stage and must be paid by manufacturers or importers. As a result, the cost of the goods increases for consumers.
Taxes in free zones
Free zones offer incentives for entrepreneurs and create a favourable environment for investment and business operations. In these locations, there are no customs duties. As for corporate tax, it is formally set at 0% for those enterprises that qualify as a “Qualifying Free Zone Person” and derive income from specific types of activities. These activities include fund management, asset and investment management, manufacturing and processing of goods, reinsurance services, and holding shares and other securities. In this case, the rates are:
- 0% on income derived from qualifying activities;
- 9% on income from other sources.
Free zones are often located in residential areas, allowing buyers to choose apartments in Dubai close to their workplace.
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Rooms: StudioBathrooms: 1Living space: 49 m²Distance to the sea: 100 m
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Bedrooms: 3Bathrooms: 3Living space: 120 m²Distance to the sea: 100 m
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Bedrooms: 1Bathrooms: 2Living space: 109 m²Distance to the sea: 50 m
Customs duties
The standard customs duty rate is 5% of the value of goods. Higher rates apply to certain categories, such as alcoholic beverages and tobacco products, at 50% and 100% respectively. The following imported items are exempt from duties:
- Personal mobile phones;
- Clothing and toiletries;
- Personal jewellery;
- Pushchairs;
- Wheelchairs;
- Portable computers and printers;
- Sports equipment;
- Telescopes, and more.
Goods imported into free zones are exempt from customs duties.
Licensing and registration fees
In the UAE, companies are required to obtain licences to conduct their business, and this process involves certain fees. The amount depends on the type of business and the jurisdiction in which the company is registered. For instance, fees for establishing a Limited Liability Corporation typically range from AED 22,000 (USD 6,000) to AED 24,000 (USD 6,500), while in free zones, fees start from AED 15,000 (USD 4,100). The cost of a business licence can range from AED 10,000 (USD 2,700) to AED 50,000 (USD 13,500).
