Dubai and the other regions of the United Arab Emirates (UAE) do not impose federal income tax, property tax, or capital gains tax. However, there are import duties, taxes on real estate rents, and social security taxes for local citizens. Corporate income tax is not charged for most businesses, but foreign banks and oil companies are taxed. The UAE has 18 free zones, offering economic incentives and tax exemptions for companies. The UAE was formed in 1971 and has been wealthy due to oil revenues, but the IMF recommends diversifying revenue sources.
Dubai, one of the seven regions that make up the United Arab Emirates (UAE), is well known for its tax-free living. In fact, none of the UAE’s seven regions impose a federal income tax, even though they are legally entitled to do so. In the Arab world, it is considered haram or forbidden to take rents, which are considered taxes. There is not even a property tax in Dubai. There are, however, social security taxes that local citizens must pay and some corporate taxes.
Individual taxes
Individuals living in Dubai pay no income, property or capital gains taxes. However, that doesn’t mean there are no taxes at all; import duties are charged, i.e. taxes on goods imported from abroad, taxes on real estate rents and certain hotel and entertainment services. Local citizens contribute a small percentage of their income to social security. There are no sales taxes, but there are high taxes on alcohol and other products that are considered haram. Although Value Added Tax (VAT), a consumption tax similar to sales tax, is not charged, the International Monetary Fund (IMF) has recommended that the UAE consider implementing such a system.
Corporate taxes
There is no corporate income tax for most businesses located in the UAE; however, Dubai taxes the income of foreign banks and oil companies. The region also contains a number of economic free zones, which offer economic incentives to encourage investment and commercial development. While these free zones aren’t entirely tax-free, the incentives offered there bring them a lot closer. Companies operating within free zones benefit from some tax exemptions for at least 15 years, after which they can apply for an exemption for another 15 years. Also, there are no import or export taxes in free zones.
Dubai Free Zones
As of 2011, there were 18 free zones in the region, including Dubai Aid and Humanitarian City, Dubai Airport Free Zone, Dubai Internet City, Dubai Silicon Oasis, Jebel Air Free Zone and Dubai Media City. The Jebel Ali Free Zone, created in 1985, was the first such economic zone. The government has since invested billions of dollars in infrastructure and programs to attract foreign investors to the region.
In the 1990s, Dubai Internet City and Dubai Media City were created. These zones offer many of the same benefits as other free zones, but cater directly to media and communications companies. In these areas, tax exempt status is initially granted for a period of 50 years. The Dubai International Financial Center was created in 2004. This zone is completely tax-free for companies operating within its borders, with no constraints on how long they can maintain that status.
About the UAE
While Dubai itself isn’t completely tax-free, it may be as close to tax-free as you can get. The UAE was formed in 1971 when the UAE gained its independence from the United Kingdom, and has been a prominent and wealthy nation ever since. Oil revenues allow the government to operate tax-free, although the IMF has encouraged the country to diversify its sources of revenue.
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