United Arab Emirates Personal 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 com­panies with actual production in the Emirates) at rates set forth in their government concession agreements (which are confi­dential)
  • Branches of foreign banks at rates fixed by decree or in agree­ments with the Rulers of the Emirates where the banks operate

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% will be introduced in the UAE in 2018.

Social security

The UAE does not impose social security taxes on foreign nation­als. UAE-national employees and nationals from the other Gulf Cooperation Council (GCC) countries contribute to retirement and pension funds in accordance with specific regulations. UAE nationals working in the Emirate of Abu Dhabi contribute only to the Abu Dhabi Retirement Pensions and Benefits Fund.

End-of-service benefits

A foreign employee who is not a national of a GCC country and who completes a period of continuous service that is longer than one year is entitled to a gratuity as described below.

Unlimited employment contracts. The end-of-service gratuity for individuals on unlimited Ministry of Human Resources and Emiratisation employment contracts must be calculated in accor­dance with the following formula:

  • Less than one year of service: employee is not entitled to any gratuity pay
  • Between one year and three years of service: employee is enti­tled to one-third of the 21 days of gratuity pay
  • Between three years and five years of service: employee is entitled to two-thirds of the 21 days of gratuity pay
  • Five or more years of service: employee is entitled to the full 21 days of gratuity pay

The total gratuity may not exceed the remuneration of two years (24 months).

Limited employment contracts. The end-of-service gratuity for individuals on limited Ministry of Human Resources and Emiratisation employment contracts must be calculated based on the following formula:

  • Less than one year of service: employee is not entitled to any gratuity pay
  • Between one year and five years of service: employee is enti­tled to the full 21 days of gratuity pay
  • Five or more years of service: employee is entitled to the full 30 days of gratuity pay

The overall gratuity may not exceed the remuneration of two years (24 months).

The gratuity is calculated based on the last basic wage paid to the employee. It is payable on the termination or expiration of the employment contract. The employee is entitled to a gratuity for any fraction of a year of service if the employee has completed at least one year of continuous service.

The above end-of-service benefit regulation applies to entities established in Mainland UAE (areas outside the Free Zones). Each Free Zone in the UAE may have different end-of-service benefit regulations. The calculation can vary further depending on the circumstances of termination or cessation of employment.

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 insti­tutions 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.

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 and passengers in transit who do not leave the airport. Foreign nationals may enter the UAE under a company-sponsored visit visa or a free visa on arrival. All visit visas should be sponsored by the related local UAE company.

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 30 days (90 days for individuals from Schengen Zone countries). The only documentation required for such individuals is their pass­port, which must have validity of six months.

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

Andorra                           Japan                         San Marino

Australia                          Korea (South)           Singapore

Brunei Darussalam          Malaysia                   United Kingdom

Hong Kong SAR            Monaco                     United States

Ireland                             New Zealand             Vatican City

Citizens of the following jurisdictions are granted a multiple-entry, 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.

Austria                           Greece                        Norway

Belgium                         Hungary                       Poland

Bulgaria                         Iceland                          Portugal

Croatia                           Italy                              Romania

Cyprus                           Latvia                           Seychelles

Czech Republic              Liechtenstein                Slovak Republic

Denmark                        Lithuania                      Slovenia

Estonia                           Luxembourg                 Spain

Finland                          Malta                            Sweden

France                            Netherlands                  Switzerland

Germany

Business activities allowed under all of the visas mentioned above are generally restricted to training, conferences, meetings, seminars and similar activities. The above list may change slightly from time to time, and it is therefore suggested that appli­cability of the free visa on arrival be confirmed with the local UAE embassy or consulate.

Work and residence permits and self-employment

Companies wishing to sponsor foreign national employees must apply for employment residence permits for the individuals. 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 jurisdictions, work can begin when the employment residence permit is stamped within the employee’s passport. For mainland jurisdictions, work can begin when an individual has entered the UAE on an employ­ment entry permit or has undergone a local status amendment.

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

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 automati­cally receive a residence permit. The sponsor must file an appli­cation independently.