Dubai is really Tax free? How much tax you pay in Dubai? Let’s clarify…
Dubai is a fantastic oasis in the desert. The city where everything is possible. Dubai is the city of the new riches and where all the entrepreneurs are moving to. By why is this? And is it true that you pay no tax in Dubai? If not, how much tax you pay in Dubai?
Let’s start analysing the city ecosystem in terms of business and fiscal procedures. The city is build around the free trade zone. This zones are spread around the city and offer big incentives for everyone who wants to create or establish a business in Dubai.
In fact, every different free zone has a specific scope and targets different industries.
There is the Media city free zone, targeting all businesses in the media space. The Dubai aviation zone, targeting all te companies in the aviation space. There is Internet city free zone, there is financial free zone (DIFC), there is the silicon oasis free zone for startups and so on.
There is really a huge list of different zone, everyone focusing on a specific niche. If you need to open a new company and you have questions about which free zone is the best for you we got you covered. You can apply at this link and we get you in contact with an expert to assist you with a free consultation: apply here.
So why opening a company in a free zone?
There are many incentives to do so and, without analysing all of them, we can focus on the main one. You can own the company 100%. In fact, if you want to open a company outside the free-zone, in the mainland, you need to have an Emirati citizen partner. The partner needs to have at least 51% of the company. Therefore, you don’t have the majority of the company.
If this is the main incentive, on the other hand, having the company in a free zone means that you can conduct physical business only within the free zone. Therefore, if you want to open a shop or moving goods, you can but only within the borders of the free zone. Of course, if you have a digital activity or a service, you can conduct it wherever you want anyways. However, even if you have a service business, your physical office has to be in the free zone.
You cannot have an office in mainland if you have a free zone company.
Having said this, let’s discuss in deep if you need to pay tax. Let’s start saying we need to differentiate between:
- Personal Tax
- Company Tax
- VAT
The personal tax is the tax you need to pay on your income. It is the tax on you salary or on your dividends. It is the tax on the capital gains. This tax is easy in Dubai. If you are a resident (not a citizen, meaning you hold a residence VISA) THERE IS NO PERSONAL TAX! So you don’t have to declare anything and you pay 0 on your salary, you pay 0 on dividends. and Moreover:
There is no capital gains tax in Dubai.
Regarding the Company tax, this is the tax companies have to pay on their profit. It used to be zero as well. However, starting from 2023, companies have to pay 9% tax on the profits (revenue minus expenses) of all businesses which generate over 375,000 AED (about USD $100,000). If you do not generate over 375.000aed in Profits, your company does NOT need to pay tax.
Last but not least, the Value Added Tax, or VAT, broadly based consumption tax assessed on the value added to goods and services. VAT in Dubai is 5%. Whatever you buy as a personal, either a product or a service, has the total cost plus 5% of VAT on top to be paid. As a company you are required to add tax to your services or products if they are sold within the country. If you are providing a service for a client abroad, you do NOT need to add VAT.
As a company you need to register at the Federal Tax Authority and declare your VAT revenues and cost every quarter.
We know it might be confused, but it is actually more simple than a lot of other countries. however, we offer you a FREE consultation, you just need to apply clicking here.
If you want to expand your new business we suggest you this article: how to network with interesting people in dubai!
