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Taxation System in the UAE

Tax-free Environment for Foreign Citizens and Residents of the UAE

When starting a business, each law complying entrepreneur has to be prepared to pay taxes according to the legislation of a country he’ll will be living in. Taxes depend on profit, vary from country to country and are mandatory. There are various types of taxes the most common ones being corporate income tax, personal income tax, dividends tax and property tax.

A Brief Look at the Main Types of Taxes

Personal income tax is a tax which depends on the profit and is imposed by the government on individuals living in the country. The base for calculation of this tax is your income earned from your business activities, interest or dividends.

For the ones who are employed – they pay the tax on their income received as the salary. Tax on income in the form of salary is calculated on the basis of the yearly salary received by an employee including all the additional paid benefits.

Tax-free Environment in the UAE for foreign citizens

The oil-rich United Arab Emirates offers a number of undeniable benefits to a potential businessman and employees which decide to move to this country. For a goal-oriented, aspiring and ambitious entrepreneurs and managers this is a paradise on earth. One of its unquestionable advantages is its taxation system. What is very important - these benefits are available not only for the citizens of the country but also for foreigners who reside in this country are willing to do business in Dubai and work under Dubai taxes regulations.

So what makes the UAE and its taxation system so attractive for foreign citizens?

Let’s have a look at some important facts.

  • The taxation system is one of the most lenient in the world with no applicable taxes of on personal income of country’s residents.
  • The UAE does not make any difference in taxation if are a foreigner or a native person. There is no difference in taxation system for foreigners operation in Dubai and the UAE citizens, so it doesn’t actually make a difference if you are a Foreign citizen or an innate of the UAE.
  • There is no interest tax or dividend tax, no royalty, no income tax and no inheritance tax.
  • Another helpful feature you might use in combination with your personal residency in the UAE is registering your company in one of the country’s free-trade zones. This way you will be exempt from import and export taxation also on the corporate level.
  • On buying and selling property tax is levied once (4% of the property price) whereby the country does not make any distinction between foreigners and citizens of the country in terms of taxation regime.

Please, not that if you earn a living in Dubai and work under Dubai taxes but reside some place elsewhere, you might be expected to pay taxation on your income in that specific county. This is because you are most likely to be a subject of taxation within the country of your permanent residence. Thus, if you are a foreign citizen, to be able to enjoy the tax-free environment of Dubai, you also need to comply with the regulations of the country of your previous residency.

As to US citizens and taxes they have to pay in Dubai, according to Revenue Internal Service, if you are the US citizen you are obliged to pay the same taxes as citizens residing within the country. This means that you are still fully subject to US income tax.

Conclusion

Foreign citizens in the UAE are fully exempt from income taxes, value-added tax, taxes on capital gains, taxes on dividends and interest, royalties, import and export taxes as well as taxes on assets.

Along with the ease of doing business, facilitating investment environment and free trade zones the UAE and Dubai, in particular, become the perfect place for doing business and living for a foreign citizen who is able to enjoy the benefits concerning tax-free environment of the UAE residents.


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