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Posted by webadmin on May 10, 2021

UAE has a tax-free status that attracts many investors and top talent people. Salaries, personal income, inheritance, and capital gains have no income tax but in 2018 a Value Added Tax (VAT) is employed after the oil prices drop. In the country, most products, services, and goods have a standard 5% VAT that results in an increase in basic items cost.

The VAT segment includes asking of costs for services and products so the value on the label reflects the price that should be paid.

Other than VAT, the individual emirates administration has charges for property transfer fees, innovation and knowledge fees, housing fees, and registration fees.
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Excise duty is also charged by the UAE at the national level on items like tobacco, energy drinks, alcohol, etc.

No Income Tax In The UAE

At the end of the month, individuals working on salaries receive their monthly due with no deduction of taxes. This applies to all local people as well as expats.

Similarly, taxes on personal income are not in consideration by the government of UAE.

Nationalities Expat Tax

UAE ensures that citizens must not pay the same taxes in different countries, therefore, there are 115 DTA (Double Taxation Agreements) with trade partners. Thus, expats who are not residents in their own country enjoy 0% tax on their pay within Dubai and reduce taxes on profits in relevant places.

For qualifying non-residency, criteria vary according to different countries that are generally reliant on no continuous years spent in another country, no days spent in another country in a single year, or property ownership in the homeland. As many countries demand expats to pay taxes on the basis of their homeland income.

The ex-pats of the US and South Africa might be facing taxes on their income of UAE. Like, South African expats in UAE, from March 2020 onwards should settle up to 45% tax on their coming income surpassing AED 260,000 yearly. In the same way, green card holders and US citizens are also applicable to pay taxes if their income increases up to a specific point and this is strictly imposed on them by the US government as they have all details of taxpayers in UAE.

Around the world, tax laws are updated frequently due to which having the latest information is very essential about expat taxes in their homelands.

 (VAT) Value Added Tax In The United Arab Emirates

In 2018, the United Arab Emirates and neighboring Saudi Arabia implemented a Value Added Tax; in 2019 other GCC countries were likely set to follow. The tax is designed to expand the government’s revenue sources and reduce the government’s dependence on hydrocarbon and oil revenues.

At flat rate of 5% VAT has been in place since January 1, 2018. Most services and goods in the UAE are taxed at 5%, while others are taxed at 0% or are entirely excluded from VAT. The national government agency called Federal Tax Authority oversees all VAT matters.

The following categories are VAT-free. They are not needed to get registered for VAT and are unable to recover VAT paid on relevant products or services:

  • There are certain economical services, such as life insurance, that are available.
  •  Residential real estate
  •  Undeveloped land
  •  Passenger transportation on a local level

VAT will be priced at 0% in the following categories. They are entitled to recover the VAT charged to suppliers:

  • Associated supplies and International shipping
  •  Supplies of some air, land and sea modes of transportation
  •  Exports of goods and services outside the GCC (e.g., aircraft and ships)
  •  Some investment-grade metals from the past
  •  For the first time newly, built residential real estate are offered (for rent or sale) within three years of completion
  •  Provision of specific educational facilities, as well as related products and services
  •  Provision of specific healthcare facilities, as well as related products and services

For VAT purposes, goods piled up in warehouses in specified places are imagined to be outside the UAE. They are considered imports and subject to VAT once they come in free circulation in the United Arab Emirates.

UAE citizens may recover VAT acquired through the building of their residences as an exception to the above. This should be done in six months of coming in or getting the completion certificate, whichever comes first.

‘Pay As You Go’ Fees

Fees In addition to VAT, and even before it was implemented, locals and ex-pats should pay fees for particular facilities that they use.

  • 5% Housing Rent Charge in Dubai (only for foreigners) – form the annual rent value 5% fee is charged for tenants, split into twelve months, and added to the monthly DEWA bill. On the housing fee, there is no additional VAT.

Emiratis have access to subsidized electricity and free water.

  • A ten percent Dubai Municipality tax is levied on hotels; this fee also extends to restaurants inside hotels. Foreigners usually pay this charge since most restaurants that are allowed to provide alcohol are situated inside hotels.
  • 100% excise tax on cigarettes, 100% excise duty on energy drinks, and 100% excise duty on carbonated beverages (50 percent ). A fee of 30% on alcohol sold in stores in the emirate is charged by Dubai Municipality; to legally buy a drink, a certificate is required, which overheads AED 270 per year.
  • For using government facilities, there is an AED 10 Innovation Fee and AED 10 Knowledge Fee. This fee is often charged when applying for documents such as driver’s licenses, visas, and business licenses.
  • Departure fee of AED 35 for flights departing from Dubai airports. All travelers, adding the transit passenger’s as well, are subject to this charge. This fee is refunded for children under the age of two, pilots, and cabin crew.

Annual vehicle registration fees, relatively high mobile plans, relatively high home internet plans, and monthly air conditioning or “chiller” fees for a 1–2-bedroom apartment (can vary from a few hundred AED each month in winter to upwards of AED 1,000 each month in summer) are all typical expenses for ex-pats.

Emiratis are eligible for discounted home internet, telephone, and television connections, as well as discounted mobile plans.

Other Financial Factors To Think About

The list above highlights the fees and expenses that ex-pats in Dubai are likely to face. Two additional costs may be applicable.

  1. The price of a will written and notarized. In the absence of choice, local Sharia laws will apply, requiring that a person’s assets be allocated in particular amounts to their parents, spouse, and children. If a disagreement arises, assets will be frozen before a solution is found. If the deceased is a man with children, the paternal grandfather will automatically inherit custody of the children. Ex-pats with children are more likely to invest in drafting a local will to ensure that their properties are divided according to their wishes. That custody of their children is granted to the mother in the event of an untimely death.
  2. A freelancer/influencer license’s price. A freelancer license is required for ex-pats who choose to freelance as their primary source of income or on the side. This license gives them the liberty to operate, advertise their services, escape fines, open business bank accounts, withdraw money from PayPal accounts, and provides legal cover in the event of client disputes. The price of the license is purposeful for the type of service offered. To operate lawfully, social media influencers who earn payment for their content must also obtain permission.

While ex-pats in Dubai are becoming more aware of the cost of living in the emirate, the majority have grown accustomed to the numerous fees and 5% VAT. The lack of income tax and the high salaries available in Dubai continues to be attractive to many ex-pats and investors.

Company and property owners would incur additional costs.

Businesses Registration For VAT

Businesses that receive more than AED 375,000 in taxable products or services per year must file for VAT. Businesses earning more than AED 187,500 per year have the option of registering for VAT. Smaller businesses usually choose to register for VAT because larger companies may require their vendors to have a Tax Registration Number (TRN).

VAT-registered businesses receive it from consumers and remit it to the government and recover the VAT charged to suppliers. It simply means that if a company has paid more VAT than it has been accused of, it will retrieve the difference. Businesses are expected to register their revenue, expenditures, and VAT charged for clarifying and determining if it is paid correctly. This is to avoid VAT from being added several times to the same product or service. VAT returns must be filed up within 28 days of the end of the business’s “tax season.” The regular tax year runs from January 1 to December 31.

  • For businesses with a yearly turnover of less than AED 150 million, quarterly; for companies with an annual turnover of AED 150 million or more, monthly

Visit the Federal Tax Authority’s website for more information on VAT.

VAT On Residential Real Estate

Residential properties are, for the most part, VAT-free. This means the owner is exempt from VAT registration and will not owe VAT on rent or sales. The owner is therefore not entitled to a refund for any VAT paid in this regard.

Residential properties are excluded from VAT if they meet the following criteria:

  • Serviced and unserviced villas and apartments
  • Housing for students and laborers • Housing for the armed forces and police
  • Orphanages, rest homes, and nursing homes

Services such as maintenance, owners’ associations, utilities, and real estate brokerage, on the other hand, are subject to a 5% VAT.

Within the first three years of construction, the first supply of a new residential property would be zero-rated or with no VAT. This allows for the VAT to be reclaimed. Both future deliveries, even if made within the first three years, would be excluded.

Vat For Commercial Properties

  • Value-added tax is also applied on Business properties, like:
  • Buildings of hospitals and clinics
  • Buildings of educational institutions
  • Offices
  • Short lets
  • Serviced flats
  • Warehouses
  • shops

When a commercial owner rents his property, he must register and charge VAT about 5%. Owners can recollect VAT on commercial rental business expenses.

Application of VAT is dependent upon various factors like the customer is a taxable person or not, the building is uninhabited at the time of selling or not, and the worth of a sale.

  • VAT is also applicable to a non-rented property.
  • VAT will be applicable on selling the rented property to a nontaxable person for a worth less than AED 375,000 AED.
  • VAT is not applicable on selling a partially or fully rented property to a taxable person.
  • Special terms will be applicable on selling a building over AED 5 million AED.
  • On selling freshly developed properties, 0% VAT is charged and VAT expenses during construction can be reclaimed.

“Pay As You Go” Fees For The Owners Of The Property.

  • In addition to VAT, Expats and local residents have to pay the expenses of special services from which they gain benefit before getting introduced to VAT.
  • Expats have to pay a 5 % housing fee in Dubai charged by Dubai Municipality. The fee is charged for the sewerage, irrigation, and housing facilities and is received through Dubai Electric and Water Authority (DEWA). For inhabitants, the fee is 5% of their annual rental dues and for property owners, it is 0.5% of the worth of property. The fee is charged monthly by dividing the total annual fee by 12 and adding it to the DEWA Bill. The housing fee is unbound to additional VAT charges.

No fee will be applied if the building is uninhabited and no DEWA service is in use.

Water facility is free for Emiratis and also a subsidy is provided for electricity.

When dealing in property with the Dubai Land Department, an administration fee and property transfer fee of 4% is charged.

2 thoughts on “DUBAI TAXES AND FEES

  • דירות דיסקרטיות בירושלים
    on May 13, 2022

    Everything is very open with a precise clarification of the issues. It was truly informative. Your site is extremely helpful. Many thanks for sharing!

  • on August 5, 2022

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