UAE Individual Tax Guide

United Arab Emirates

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Dubai GMT +4

Ernst & Young Street address:

Mail address: ICD Brookfield Place P.O. Box 9267 Al Mustaqbal Street

Dubai Dubai International Financial Centre United Arab Emirates Dubai United Arab Emirates

Executive and immigration contact

Roman Gusev +973 1753-5455 (resident in Manama, Bahrain) Email: roman.gusev@bh.ey.com

A. Income tax

No personal taxation currently exists in the United Arab Emirates (UAE).

Laws covering corporate tax exist in all the individual emirates but, in practice, taxes are enforced only on the following entities:

• Foreign oil and gas producing companies (oil/hydrocarbon com panies with actual production in the Emirates) at rates set forth in their government concession agreements (which are confi dential)

• Branches of foreign banks at rates fixed by decree or in agreements with the Rulers of the Emirates where the banks operate

On 31 January 2022, the Ministry of Finance of the UAE con firmed that the UAE will introduce federal corporate tax (CT) for financial years starting on or after 1 June 2023.

The CT law has not yet been issued, but the Ministry of Finance has publicly communicated key elements of CT policy and design through a Frequently Asked Questions document. CT will apply to all persons (individual and corporate) carrying out business activities under a commercial business license in the UAE.

The CT rates will be 0% for taxable income up to AED375,000, 9% for taxable income above AED375,000, and a “different tax rate” for large multinationals that meet specific criteria.

B. Other taxes

No capital gains tax is imposed in the UAE. Capital gains are taxed as part of regular business profits. The UAE does not impose net worth tax or estate and gift tax. Value-added tax at a rate of 5% was introduced in the UAE, effective from January 2018.

C. Social security

The UAE does not impose social security taxes on foreign nation als. UAE-national employees and nationals from the other Gulf

Cooperation Council (GCC) countries contribute to retirement and pension funds in accordance with specific regulations.

D. End-of-service benefits

In February 2022, a new Labor Law came into force in the UAE, introducing several changes, including updates on end-of-service benefits.

National employees are entitled to end-of-service benefits in accordance with the legislation regulating pensions and social securities.

End-of-service benefits for foreign employees is calculated in accordance with the rules discussed below.

A foreign employee who has completed a year or more of con tinuous service is entitled, at the end of his or her service, the following benefits calculated according to the basic wage:

• A wage of 21 days for each year of the first five years of service

• A wage of 30 days for each year exceeding such period

A foreign employee shall be entitled to a benefit for parts of the year in proportion to the period spent at work, provided that he or she completed one year of continuous service.

Unpaid days of absence from work are to be included in the cal culation of the service term.

The end-of-service benefits are calculated according to the last basic wage of the employee.

The end-of-service benefits for foreign workers cannot exceed two years’ wages.

The employer shall pay to the employee, within 14 days from the end date of the contract term, his or her wages and all other entitlements.

If the employee owes any money to the employer, the employer may deduct the amount from the employee’s gratuity.

E. Wages Protection System

The UAE Ministry of Human Resources and Emiratisation requires all registered employers to use the Wages Protection System (WPS) for the transferring of wages to employees.

The WPS is an electronic salary transfer system that allows insti tutions to pay workers’ wages through authorized banks, bureaux de change (currency exchanges) and financial institutions in the UAE. The UAE Central Bank regularly issues an updated list of financial institutions that are authorized to offer wage payment services through WPS agents. WPS enables the Ministry of Human Resources and Emiratisation to create and maintain a database of wage payments in the private sector.

In practice, this requirement is not enforced in all Free Zones in the UAE.

F. Temporary permits

All foreign nationals wishing to visit the UAE on business must have a valid visa status to enter the UAE, with the exception of nationals of GCC countries. Foreign nationals may enter the UAE for business purposes under a company-sponsored visit visa or free visa on arrival. In addition, transit visas of up to 96 hours are possible.

Passport holders from certain jurisdictions (see list below) do not need to apply for a visa in advance. On entry, they receive a free visa on arrival enabling them to stay in the UAE for an allowable period. The only documentation required for such individuals is their passport, which must have validity of six months.

A paid 14-day visa on arrival can be granted to Indian nationals who hold a visa status issued by the European Union (EU), the United Kingdom or the United States. The EU, UK or US visa must be valid for a minimum of six months at the time of arrival in the UAE.

Citizens of the following jurisdictions are granted a single-entry, 30-day free visa on arrival.

Andorra Japan San Marino Australia Kazakhstan Singapore

Brunei Macau SAR Ukraine

Darussalam Malaysia United Canada Mauritius Kingdom

China Mainland Monaco United States

Hong Kong SAR New Zealand Vatican City Ireland Russian Federation

Citizens of the following jurisdictions are granted a multipleentry, 90-day free visa on arrival, which is valid for six months from the date of issuance, for a stay of a total of 90 days.

Argentina Germany Peru Austria Greece Poland Bahamas Honduras Portugal

Barbados Hungary Romania

Belgium Iceland Russian Brazil Italy Federation

Bulgaria Kiribati St. Vincent and Chile Korea (South) the Grenadines

Colombia Latvia Serbia

Costa Rica Liechtenstein Seychelles

Croatia Lithuania Slovak Republic

Cyprus Luxembourg Slovenia

Czech Republic Maldives Solomon Islands

Denmark Malta Spain

El Salvador Montenegro Sweden

Estonia Nauru Switzerland

Finland Netherlands Uruguay France Norway

Individuals holding Mexican passports are eligible for a multiple-entry 180-day visit visa, which is valid for 6 months from the date of issuance and for a stay of 180 days in total.

Business activities allowed under company-sponsored visit visas or free visas on arrival are generally restricted to training, confer ences, meetings, seminars and similar activities. The above list may change slightly from time to time, and it is therefore sug gested that applicability of the free visa on arrival be confirmed with the local UAE representation or chosen airline prior to travel. In addition, certain Free Zones require a temporary access pass to be provided by the host entity to the business visitor in addition to the company-sponsored visit visa or free visa on arrival. Some Free Zones allow limited work activities with such a temporary access pass, while in others it is used as a gate pass to the premises of the Free Zone.

G. Work and residence permits and self-employment

Companies wishing to sponsor foreign national employees must apply for employment residence permits for the individuals, unless they are eligible for a non-sponsored labor or Free Zone identification card. Companies must be eligible to sponsor foreign nationals and have available quota. For companies located in Mainland jurisdictions, the applications go through the Ministry of Human Resources and Emiratisation and the General Directorate of Residency and Foreigners Affairs (GDRFA). For companies located in Free Zone jurisdictions, the applications go through the Free Zone authority and the GDRFA.

The application by the sponsoring company must include, among others, the following documents:

• A copy of the prospective employee’s passport

• Passport photos of the prospective employee

• A legalized university diploma (for professional roles)

The overall process for a UAE employment residence permit should take four to six weeks. In Free Zone and Mainland juris dictions, work can begin when the employment residence permit is stamped within the employee’s passport.

If a company wants to hire a GCC national or a woman who is sponsored under her husband’s or father’s sponsorship, it can seek a non-sponsored labor identification card for the individual. This is an alternative way for an individual to become authorized to perform work-related activities, without the need of sponsor ing the individual’s UAE employment residence permit. As of recently in the UAE Mainland jurisdictions, this option is also available to non-GCC male employees.

Individuals who want to pursue self-employment, establish a business, invest in property or set up a foreign subsidiary in the UAE should seek analysis and advice on a case-by-case basis.

H. Family members

Residence permits are granted to dependents of foreign nationals who have residence permits sponsored by a UAE company and who satisfy certain income and status conditions. The foreign national is considered the sponsor.

Dependents of a holder of a residence permit do not automati cally receive a residence permit. The sponsor must file an application independently.