Dubai's enormous oil revenues mean that the government
has no need to raise income through direct taxation.
Accordingly Dubai is a "no tax" emirate characterized
by an almost complete absence of taxation. There are
no withholding or capital taxes.
Speaking in November 2005, the late Sheikh
Mohammed bin Rashid Al Maktoum, then Crown Prince of
Dubai and the Defence Minister of the United Arab Emirates
sought to quash speculation regarding the possible introduction
of an UAE sales tax.
It had been suggested in August of that
year that the United Arab Emirates was mulling the introduction
of a national sales tax, and reports suggested that
the International Monetary Fund had been asked by the
UAE authorities to help develop a value added tax system
in an attempt to widen the country's tax base.
The IMF also reportedly urged the UAE
to introduce a property tax and widen the corporate
tax net across all sectors, warning that state budget
surpluses, which have been dependent on high oil prices
in recent times, are unsustainable without longer-term
sources of tax revenues.
The reports were seemingly confirmed
when Sheikh Hamdan bin Rashid Al Maktoum, then-Deputy
Ruler (now Ruler) of Dubai and UAE Minister of Finance
and Industry stated that: “We are (still) under
discussion (and) we have not decided yet. They are just
bringing the idea (of levying tax).”
Moreover, the revelation by Shaikha Lubna
Al Qasimi, the UAE's Minister of Economy and Planning
that the government was studying a plan to introduce
sales tax on tobacco and alcohol from 2006 fuelled the
speculation still further, with many observers interpreting
the decision as a first step towards more general forms
However, the former Dubai ruler's words
were taken to suggest that the emirate will at least
remain free from income taxes for non-oil firms and
individuals for the foreseeable future.
The introduction of a value added tax
system in the United Arab Emirates (UAE) looks set to
go ahead but later than planned. The UAE has been studying
the possible introduction of VAT for some time, and
a recent report by Dubai Customs suggested that the
levy could have been introduced as early as 2009. However,
it is becoming more apparent that the GCC member states
want to roll out VAT simultaneously to replace revenues
derived from trade taxes, which are due to be phased
out as a number of free trade agreements signed by the
GCC, including one with the EU, become effective.
One expert advising the UAE government
told a tax conference in April 2010 that the countries
of the GCC could have a regional value-added tax (VAT)
in place as early as 2012, although this target date
is looking increasingly unlikely to be achieved with
some member states making faster progress than others
in preparing for the tax.
Ehtisham Ahmad, an adviser in the Office
of the Prime Minister of the UAE, and a senior fellow
at the Centre of Economic Research at the University
of Bonn, told a tax conference in Dubai that a 2012
deadline would be achievable, although he admitted it
would be "very tight." An implementation date
in 2013 would be more feasible, he said, but still difficult
With the exception of banks and oil companies
no corporate income tax is payable by businesses in
Dubai. Oil companies pay up to 55% tax on UAE sourced
taxable income whereas banks pay 20% tax on taxable
income. The taxable income of banks is as per the audited
financial statements whereas that of oil companies is
as per the concession agreement. Oil companies also
pay royalties on production.
Dubai Customs Duties
Imports into Dubai can only be undertaken
by those importers who have the appropriate trade licence.
Import duties have been largely standardised at 4%,
but there are many exemptions, including food, building
materials, medical products and any item destined for
the three free zones: Jebel Ali Free Zone, Dubai Internet
City and the Dubai International
Financial Centre. Food products must carry dates
of manufacture and expiry and meat for the local market
must have a certificate to prove compliance with Islamic
Dubai (as part of the UAE) and under an
agreement with the GCC (Gulf Cooperation Council) is
required to levy 10% duty on all luxury goods.
By law 70 goods have been exempted from
tariffs (at the time of writing), including medicines,
agricultural machinery, pesticides, fertilizers, periodicals,
wood, unstrung pearls, un-worked silver and gold, iron
and steel for use in construction, and raw or partially
worked materials for use by local manufacturers. Goods
produced within the GCC are also exempt from duties
as are goods destined for the Jebel Ali Free Zone.
Cigarettes are the exception to the general
rule with the federal government approving a 100% tax.
A 50% tax is levied on alcohol.
On January 1, 2003, the unified customs
area of the Gulf Co-operation Council came into effect,
covering Kuwait, Qatar, Oman, Saudi Arabia, Bahrain,
and the United Arab Emirates (including Dubai).
In April 2005, the 15th Joint Council
and Ministerial Meeting between the European Union and
the six member states of the Gulf Cooperation Council
in Bahrain took place, focusing on the state of the
free trade agreement negotiations between the European
Union and the Gulf Cooperation Council.
The two parties agreed that rapid progress
was needed on a number of outstanding trade issues,
particularly on services, industrial tariffs and public
procurement, and noted the importance of a rapid conclusion
of the negotiations on human rights, terrorism, weapons
of mass destruction and migration issues.
A further round of talks on the matter
took place in June 2005. The talks dragged on through
2010 without agreement. Despite the lack of an agreement,
trade between the EU and GCC reached nearly EUR90 billion
An appeals desk has been established at
the federal customs directorate to hear claims from
customs importers for goods to be classified as duty
free. The Dubai port authority offers long-term storage
at concessionary rates. Temporary imports are allowed
with duty payable only on goods which remain in the
UAE after six months.
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Dubai Business Properties Tax
Business properties pay a municipal tax set at 10%
of annual rental value.