The absence of personal income tax in the UAE is one of the compelling reasons for international companies to expand there. The UAE’s success is built on holding 10% of global oil supplies and 20% of natural gas reserves, but in recent years has targeted greater diversification away from a labour-intensive economy. Tourism, renewable energy, aluminium production, aviation, telecommunications and advanced technologies are coming to the fore, while world-class airlines such as Etihad and Emirates have added to the international prestige.
Bradford Jacobs has over two decades of experience among front-line payroll providers worldwide, and we ensure our clients comply with every aspect of legislation wherever they operate. Our local ‘know-how’ plus international expertise is essential for international companies expanding into the UAE and further afield throughout the Middle East and Asia. Dealing with payroll and employment regulations for your staff from overseas always poses complications that demand top-rated guidance – and this certainly applies to the federation of the UAE, which comprises the seven Emirates of Abu Dhabi, the capital, Dubai, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain.
Foreign companies must establish a legal entity in the UAE to hire staff and run their payroll. They typically choose to open a limited liability subsidiary, which the Commercial Companies Law regulates. Bradford Jacobs’ dedicated specialists remove the burden of worrying about any complications while you focus on building your business in a new territory. From locating the brightest talent to running your payroll, our Professional Employer Organisation (PEO) and Employer of Record (EOR) specialists will guide you every step of the way!
Personal Income Tax (PIT):
There is no personal income tax in the UAE, removing the need for registration, reporting, residence qualifications or filing.
Social Insurance Taxes:
These apply to UAE and Gulf Cooperation Council citizens, not expatriate workers. In the UAE, contributions are employers 12.5%, employees 5%, and the government 2.5%. In Abu Dhabi, employers contribute 15%, the government 6%, and employees 5%. Employers deduct 5% of employees’ remuneration and remit to the General Pension & Social Security Authority (GPSSA). Foreign companies and their employees do not contribute.
Corporate Income Tax:
A 9% corporate tax rate will be introduced for all business and commercial activities in the Emirates from June 1, 2023, on companies with taxable profits exceeding AED 375,000 (€97,770, US$102,100). Foreign oil companies can attract CIT at the Emirati level at progressive rates of up to 55% on upstream petroleum activities. A flat rate of 20% applies to branches of foreign banks, and these rates will continue to apply after June 2023. Tax is not applied to income earned outside the UAE.
Value Added Tax (VAT):
Tax is added to goods and services at 5%. Companies must register for VAT when taxable profits exceed AED 375,000 (€97,770, US$102,100). Optional registration is permitted once taxable profits exceed AED 187,500 (€49,100, US$51,050). Zero-rated categories include exports to nations outside the GCC, international passenger transport, import of precious metals, and publicly provided education.
Customs and Excise Duties: No levies apply to trade between GCC nations. Otherwise, 5% applies to the cost, freight and insurance value of imports. Excise duty of 100% applies to tobacco products and all devices and materials associated with vaping. Carbonated and sweetened drinks are subject to 50%. There are no payroll, withholding, or separate capital gains taxes in the UAE.
There are no payroll taxes, withholding taxes or separate capital gains taxes.
Corporate Deductions and Allowances:
These are assessed individually by the Emirates and will fully come into consideration on June 1, 2023, when a corporate tax rate of 9% is due to be imposed.
There is no personal income tax in the UAE, either at the federal or Emirati level. Consequently, no requirements apply to filing, residence qualifications or deductions.
Social insurance contributions apply to citizens of the UAE and other Gulf Cooperation Council (GCC) nations (Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia). These employees must be registered with the General Pension & Social Security Authority (GPSSA) within one month of starting work.
Other registration requirements include the following:
Employers contribute to the health and social insurance program that is mandatory for United Arab Emirates (UAE) citizens and those from other countries of the Gulf Cooperation Council (GCC). In the UAE, employers contribute 12.5%, with 15% applying to companies operating in Abu Dhabi.
Employers deduct 5% of employees’ remuneration and remit to the General Pension & Social Security Authority (GPSSA). Foreign companies and their employees do not contribute.