Taxes in Dubai: what you pay and what you don't

“Do you pay taxes in Dubai?” is one of the first questions anyone asks when considering living in the Emirates or opening a company there, and the answer you hear most often is that there is no tax in Dubai. The short answer is different: yes, there are taxes in Dubai, just not the ones you expect. There is no personal income tax, so your salary is not taxed in the UAE. What you do pay is VAT, a Corporate Tax for companies, excise taxes on certain products and a series of local fees.

This guide goes through the taxes in Dubai one by one, using data from official sources: what is paid, how much and who pays it. And it ends with the question that really matters if you are a Spanish tax resident: not paying taxes in Dubai does not mean you stop paying them in Spain.

Summary: what taxes are there in Dubai

Here are Dubai’s taxes at a glance, with their rate and who they affect:

Individuals: no personal income tax

The official portal of the UAE Government puts it plainly: the UAE does not levy income tax on individuals. For a resident, this means that the salary, interest or dividends they receive personally are not taxed in the Emirates.

The exception comes when the individual does business. According to the Federal Tax Authority (FTA), an individual only becomes subject to Corporate Tax if two conditions are met at the same time:

1. They carry on a business activity in the UAE.
2. The turnover from that activity exceeds AED 1 million in the calendar year (January to December).

And there are three types of income that are not considered business activity, whatever the amount:

• Salaries.
• Personal investment income.
• Real estate investment income of the individual.

In practice, a freelancer invoicing less than AED 1 million neither pays Corporate Tax nor has to register for it, and someone who personally rents out a home they own in Dubai is not taxed on that rental income in the UAE either.

Companies: 9% Corporate Tax

Since 2023, the UAE has had a federal Corporate Tax, governed by Federal Decree-Law No. 47 of 2022. It applies from the first financial year starting on or after 1 June 2023 to all companies and individuals carrying on business activities under a commercial licence in the UAE, and to foreign entities and individuals doing business in the country on a continuous or regular basis.

There are two rates:

An example: a company that does not apply Small Business Relief (covered just below) with taxable profit of AED 500,000 pays 9% on the AED 125,000 above the threshold, that is, AED 11,250. The first AED 375,000 is taxed at 0%.

Small Business Relief: below AED 3 million in revenue, no tax is paid

In practice, most small businesses pay no Corporate Tax thanks to Small Business Relief. Resident companies whose revenue does not exceed AED 3,000,000 can elect it and, if they do, they are treated as having no taxable income for that financial year: they pay no Corporate Tax even if they make a profit. The threshold is measured on revenue (what is invoiced), not on profit.

The Ministry of Finance has extended it through Ministerial Decision No. 131 to financial years ending on or before 31 December 2029. The conditions worth being clear about:

• It must be elected every financial year: it does not apply automatically.
• Revenue must be AED 3 million or less in the current financial year and in all previous ones: if the threshold is exceeded in one year, the relief is lost for the following years.
• It is incompatible with other exemptions, reliefs and deductions during the financial year in which it is applied.
• Excluded, among others, are companies in multinational groups with consolidated revenue of more than AED 3,150 million.

A low rate does not mean there are no obligations: the company must register, keep accounting records and file its annual return with the FTA even when no tax is due. That is the part we cover in accounting and finance.

5% VAT

VAT (value added tax) is a 5% consumption tax applied at each stage of the supply chain and ultimately borne by the consumer. For businesses, the key lies in the registration thresholds published by the FTA:

Registering on time matters: the Tax Registration Number (TRN) is what allows you to invoice with VAT and recover input VAT. We handle it through our VAT registration service.

Excise taxes and everyday fees

Beyond the major taxes, there are charges a resident notices in daily life:

• Excise tax: in place since 2017, it applies to products considered harmful to health. Tobacco and tobacco products, vaping devices and their liquids, and energy drinks are taxed at 100%. Sweetened drinks are taxed according to their sugar content: AED 1.09 per litre if they contain 8 grams or more per 100 ml, AED 0.79 per litre between 5 and 8 grams, and nothing below 5 grams or if they only contain artificial sweeteners. Carbonated drinks are no longer a separate category: they are only taxed if they qualify as sweetened drinks.
• Buying a home: registering a sale and purchase contract with the Dubai Land Department (DLD) carries a fee of 4% of the value of the transaction. The other costs and the tax treatment of the investment are explained in Dubai real estate tax.
• Hotels: Dubai hotels charge the Tourism Dirham, from AED 7 to 20 per room per night depending on the category of the establishment.

If you are a Spanish tax resident: tax residence decides everything

The fact that Dubai has no personal income tax does not mean your income stops being taxed. If you remain a tax resident in Spain, the Spanish tax authorities tax your worldwide income: Spanish personal income tax (IRPF) applies to the whole of your income and your capital gains and losses, regardless of where they arise.

Under the Spanish Personal Income Tax Law (Ley del IRPF), you are a tax resident in Spain if any of these circumstances applies:

• You spend more than 183 days of the calendar year in Spanish territory. Sporadic absences count as days in Spain, unless you prove your tax residence in another country.
• The main centre or base of your activities or economic interests is in Spain, directly or indirectly.
• In addition, you are presumed to be resident, unless proven otherwise, if your spouse (not legally separated) and your dependent minor children habitually reside in Spain.

That is why the right order is the reverse of the usual one: first you plan your exit from Spanish tax residence and your UAE tax residency, and only then do you take advantage of Dubai’s tax framework. Doing it the other way round can end with you being taxed in both countries or facing a review by the Spanish tax authorities.

At LorcaBase we advise you, with bilingual support, on both sides: tax in Dubai for your company and your income, and the change of tax residence from Spain.