UAE: 4 types of taxes currently imposed, explained

The Emirates does not levy income tax on individuals, but it does have other types of taxes

By A Staff Reporter

Published: Tue 1 Feb 2022, 11:52 AM

Last updated: Tue 27 Feb 2024, 8:45 PM

[Editor's note: This article was originally published on February 1, 2022. It is being reshared after the Ministry of Finance announced a new Dh10,000 fine on February 27, 2024, for those who register for corporate tax late. The new fine will come into effect on March 1, 2024]

The UAE’s Ministry of Finance had on Monday announced a federal corporate tax on business profits from June 1, 2023.

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With a standard statutory tax rate of 9 per cent, the UAE corporate tax regime will be among the most competitive in the world.

A 0 per cent tax rate is applicable for taxable profits up to Dh375,000 to support small businesses and startups. No corporate tax will apply on personal income from employment, real estate and other investments, or on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE.

The UAE does not levy income tax on individuals, but it does have other types of taxes. According to the official UAE Government website, the following taxes are applicable in the country:

Excise tax

It is levied on specific goods which are typically harmful to human health or the environment. Consumers need to pay more to buy such goods. The aim is to “reduce consumption of unhealthy and harmful commodities while also raising revenues for the government that can be spent on beneficial public services”.

The tax is levied on carbonated drinks, energy drinks, tobacco, electronic smoking devices and tools, liquids used in such devices and tools, and sweetened drinks.

Value Added Tax

VAT is a tax on the consumption or use of goods and services. A 5 per cent VAT is levied at the point of sale. Businesses collect and account for the tax on behalf of the government.

“VAT will provide the UAE with a new source of income which will be continued to be utilised to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue,” the official government website states.

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Taxes in tourist facilities

The government website says restaurants, hotels, hotel apartments, resorts etc. in the UAE “might charge one or more of the following taxes:

- 10 per cent tax on the room rate

- 10 per cent service charge

- 10 per cent municipality fees

- City tax (ranging from 6 to 10 per cent)

- 6 per cent tourism fee.

“In Dubai, hotels charge 'Tourism Dirham Fee' per room per night of occupancy (for a maximum of 30 consecutive nights) ranging from Dh7 to 20 depending on the category/grade of the hotel,” says the website.

“In May 2016, it was announced that hotels in Abu Dhabi would charge a new additional fee of 4 per cent of hotel stay bill and Dh15 charges per night per room.”

In Ras Al Khaimah, hotels charge Dh15 tourism fee per room per night.

sahim@khaleejtimes.com