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Is Dubai Really Tax-Free?
Dubai, one of the seven regions which comprise the United Arab Emirates (UAE), is well known for its tax-free living. In fact, none of the seven regions of the UAE impose a federal income tax, even though they are legally within their rights to do so. In the Arab world, it is considered haram or forbidden to take unearned income, which taxes are considered. There is also no property tax in Dubai. There are, however, social security levies that local citizens must pay and some corporate taxes.
Individual Taxes
Individuals who live in Dubai pay no tax on income, property, or capital gains. This does not mean that there are no taxes at all, however; import duties, which are taxes on goods imported from outside the country, are charged, as are taxes on property rental payments and some hotel and entertainment services. Local citizens contribute a small percentage of their income to social security. There is no sales tax, 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 does tax the income from 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 are not entirely tax free, the incentives offered there make them come very close. Companies which are run within free zones are given certain tax exemptions for at least 15 years, at the end which they may request an exemption for another 15 years. In addition, there are no import or export taxes in the 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 of these economic zones. The government has since invested billions of dollars into infrastructure and programs to coax 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 of other free zones, but cater directly to media and communications companies. In these zones, tax free status is initially granted for a 50 year period. The Dubai International Financial Centre was created in 2004. This zone is entirely tax free for corporations operating within its borders, with no constraints on how long they can maintain that status.
About the UAE
While Dubai itself is not entirely tax free, it might be as close to tax free as a person can get. The United Arab Emirates was formed in 1971, when the UAE gained independence from the United Kingdom, and it has been an important and wealthy nation ever since. Oil revenues allow the government to operate without depending upon taxes, although the IMF has encouraged the country to diversify its revenue sources.
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![Skyscrapers in Dubai.]()
By: ChantalSSkyscrapers in Dubai. -
![Palm Islands in Dubai.]()
By: Haider YousufPalm Islands in Dubai. -
![The Burj al Arab, an iconic hotel on the waterfront in Dubai.]()
The Burj al Arab, an iconic hotel on the waterfront in Dubai. -
![There are no property taxes in Dubai.]()
By: emiliezhangThere are no property taxes in Dubai. -
![Taxes are considered haram, or forbidden, by Islamic law.]()
By: Orhan ÇamTaxes are considered haram, or forbidden, by Islamic law.
Discussion Comments
The Dubai rulers are some of the most intelligent in the world. They know exactly that taxes kill business. Why is the so called western model of the welfare state bankrupt? Interestingly enough, the states doing the worst are these with high taxes. I hope sincerely that UAE Rulers will never follow IMF or OECD (bunch of ignoramuses or cleptokrats) advice. --An EU ex-pat
There is no tax on earnings and also any money payable to the government is fixed and so we call this money fees.
You westerners should have UAE's inflation. You don't want people to enjoy their life here, so you are creating propaganda that UAE will impose taxes and this once again fails because the deputy ruler and the crown prince of Dubai, HH Sheikh Hamadan Bin Mohammad Bin Rashid Al Maktoum clearly said that there is no tax for 2012 and also for the coming years.
Of course, there will be inflation if UAE imposes a tax and this is well understood by the rulers and so they will not impose taxes.
You don't need the goodwill of UAE and don't create your propaganda here.
The same applies in the country of Brunei Darussalam.
-Derek T.
In all Dubai you'll get:
0 percent sales tax
0 percent income tax (due to exemptions)
5 percent for duties.
Compare it with Peru (South America):
19 percent sales tax
30 percent income tax
12 percent for duties (may vary but applied for most imported goods).
Dubai is not the only state in the United Arab Emirates that has tax free zones. I read a report in the Economist about Dubai's debt crisis. It mostly talked about Dubai's financial free zone, and how the nation (city state?) is trying to make it a major financial center like London, Tokyo, Sydney, and New York. Dubai has a debt crisis because they are one of the Emirates without any oil riches, so they borrow from the other emirates for their major projects.
Any way Abu Dhabi also has a financial free zone and the nation is trying to create a regional financial center. It should be noted though, that even though these regions are tax free, there are still dangers of doing business in these regions. There is no system for handling bankruptcies like there is in the other major financial centers of the world, so foreign investors may have trouble recouping their losses when a company goes under.
NPR did an extended program on Dubai and its tax incentives. Very interesting. Apparently the incentives are so great there's a large expatriate population there.... Money does have it's benefits, especially when where you are from is experiencing an economic slump! I believe in the UAE and Dubai, there's no income tax levied, but there is a small (something like 5%, I think) contribution for social security.
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