Dubai Taxes and Tax System: A Guide for Foreign Investors (2025)

Key Features of Dubai's Tax System:

• Corporate Income Tax (CIT):
  • While a federal corporate tax has been introduced, it is important to know how it applies.
  • A 9% corporate tax rate applies to taxable profits exceeding AED 375,000.  
  • Crucially, it is important to know that there is 0% corporate tax for taxable profits up to AED 375,000.  
  • Certain free zone entities may continue to benefit from tax exemptions, provided they meet specific conditions, so always check the regulations related to the freezone you are interested in.  
• Personal Income Tax:
  • Dubai does not levy personal income tax on salaries and wages. This is a major attraction for expatriates.
• Value Added Tax (VAT):
  • VAT is levied at a standard rate of 5%.  
  • Certain goods and services are zero-rated or exempt.  
  • Businesses with a taxable turnover exceeding a certain threshold must register for VAT.
   
• Withholding Taxes:
  • The UAE is implementing Withholding Tax, so it is important to follow news coming from the ministry of finance regarding this.
   
• Free Zones:
  • Dubai's numerous free zones offer significant tax advantages, including:
    - 100% foreign ownership
    - 100% repatriation of profits
      - Potential corporate tax exemptions (subject to conditions)
    - Import and export duty exemptions
    
• It is very important that you confirm the regulations in the specific free zone that you are looking at.
• Double Taxation Treaties:
  • The UAE has an expanding network of double taxation treaties, which helps to avoid double taxation for foreign investors.  

Key Advantages for Foreign Investors:

• Tax-Efficient Environment: Dubai's tax system is designed to be highly competitive.  
• Strategic Location: Dubai's location as a global trade hub provides access to markets in the Middle East, Africa, and Asia.  
• World-Class Infrastructure: Dubai boasts state-of-the-art infrastructure, including airports, ports, and telecommunications.  
• Business-Friendly Regulations: Dubai has streamlined business regulations and a proactive government.  
• Diversified Economy: Dubai's economy is diversified, with strong sectors in trade, logistics, tourism, finance, and technology.

Important Considerations for Foreign Investors:

• Free Zone Regulations: Carefully review the regulations of the specific free zone you are interested in.
• VAT Compliance: Ensure compliance with VAT regulations to avoid penalties.
• Economic Substance Regulations: The UAE has economic substance regulations that businesses must comply with.  
• Professional Advice: Seek professional advice from tax and legal experts in Dubai.
• Corporate Tax implementation: Stay updated with the federal corperate tax rules and regulations.

Key Takeaway:

• Dubai offers a highly attractive tax environment for foreign investors.  
• Free zones provide significant advantages, but it is vital to check their individual rules.
• Keeping up to date with the newly introduced corporate tax laws is essential.