UAE Tax System in 2025: Individual, Property & Corporate Taxes

Updated: 26 February 2025, 08:24 am

UAE Tax System

Did you know the UAE offers a tax-friendly environment? Personal income, inheritance, and gifts are virtually tax-free! But what about businesses? The UAE has recently introduced a 9% corporate tax on certain profits, a major shift in its tax structure.

In this blog, we will break down the key details of the UAE tax system and how it drives economic growth. 

UAE Tax Types You Need to Know

There are two tax categories in the UAE: Direct taxes and indirect taxes. Here is  a list of what each category encompasses: 

Direct Taxes UAE

Direct taxes are paid straight to the government by individuals or organizations. These taxes can include income tax, property tax, and taxes on assets or personal property. In the UAE, however, direct taxes are minimal, as the country is known for its tax-friendly environment.

Individual Tax in the UAE

In the UAE, there is no income tax on individuals. Unlike many other countries, the UAE does not levy tax on personal income, making it an attractive destination for individuals seeking to maximize their earnings.

Read more: 

• Countries with no income taxes
• Tax-friendly destinations: Guide to the lowest taxes in the world 

Corporate Tax in the UAE

Corporate tax is a direct tax applied to the net income or profits earned by companies and other entities through their business activities. It may be referred to by different names in various countries, such as Corporate Income Tax or Business Profits Tax.

Historically, the UAE was a zero-tax jurisdiction for corporate profits, with corporate tax only applying to oil and gas companies and foreign bank branches. However, in recent years, the UAE introduced a 9% federal corporate tax, which is now applicable to businesses meeting certain criteria.

Who should pay corporate tax in the UAE?

Not all businesses are included in the corporate tax law. It is restricted to companies whose taxable profit exceeds 375,000 AED.  These businesses are required to pay 9% of their net (taxable) profit as corporate tax. Any company that makes less than that is exempt from corporate tax.

Types of Income Excluded from Corporate Tax in the UAE

• Dividends and Profit Distributions: Dividends from Emirati companies and certain foreign companies with significant ownership are exempt from tax.
• Capital Gains: Gains from selling shares or securities are tax-exempt if they meet the required conditions.
• Income from Foreign Branches: Income from foreign branches or permanent establishments is exempt if the correct election is made under the law.
• Non-Resident Income: Non-residents earning income from international transportation (aircraft or ships) may be exempt from tax under certain conditions.
• Investment Funds: Income from qualifying investment funds is exempt once an exemption is applied.
• Public Benefit Entities: Certain public benefit entities are exempt if they meet the required criteria.
• Government Entities: UAE federal and emirate governments, along with government departments, are automatically exempt.
• Natural Resource Businesses: Businesses involved in the extraction of natural resources may also qualify for tax exemptions.

How is corporate tax in the UAE calculated?

The corporate tax in the UAE is 9% of the net profit (taxable profit) as stated in the company’s financial statements. This 9 % corporate tax only applies to companies whose net profit exceeds AED 375,000. To illustrate this in an example, if a company’s net profit for this year is AED 500,000, the corporate tax to be paid is AED 11,250 (500,000-3,75,000 X 9/100).

Benefits of Corporate Tax in the UAE for Companies and Businesses

Indirect Taxes in the UAE

Indirect taxes are applied to goods and services before they reach the customer and are paid as part of the purchase price. In the UAE, the most common indirect taxes include VAT, excise tax, property tax, and tourism and hospitality tax.

Value-Added Tax (VAT)

Introduced in January 2018, VAT in the UAE is set at 5% on most goods and services. Companies with earnings exceeding AED 375,000 must register for VAT, while registration is voluntary for companies earning between AED 187,500 and AED 375,000.

Excise Tax

Excise tax is levied on products considered harmful to public health or the environment, such as:

• Tobacco products (100% tax)
• Energy drinks (100% tax)
• Carbonated beverages (50% tax)

Property-Related Tax

Property tax applies to real estate ownership in the UAE and varies by emirate and property value. Dubai, known for its reliance on oil and trade, imposes a “housing fee” and a 4% property transfer fee, rather than a direct property tax.

Tourism and Hospitality Tax

This tax applies to tourist services and accommodations like hotel stays and vacation rentals. It is typically included in the total cost of bookings.

Tax Exemptions for Companies in the UAE

The UAE’s tax system is a major draw for investors and entrepreneurs, particularly due to the benefits offered by free zones. These include:

1. No corporate tax for 15-50 years after company registration.
2. Exemption from VAT.
3. No customs fees.
4. No tax on revenue from international businesses.
5. 100% foreign ownership.

Benefits of the UAE Tax System

Despite the introduction of corporate tax, the UAE remains an attractive destination for international businesses. With low taxes, free zone incentives, and a business-friendly environment, the UAE’s tax system supports efforts to:

• Diversify the economy
• Reduce dependence on oil revenues
• Strengthen public services and infrastructure
• Boost spending on key sectors like education and healthcare
• Attract foreign direct investment
• Align with global tax standards
• Enhance economic resilience

How Migrate World Helps You by Providing Guidance on UAE Taxation

At Migrate World, our expert legal team provides clear guidance on UAE tax laws. From business setup in the UAE to tax compliance and strategic advice, we help you navigate the complexities of corporate tax requirements and maximize available benefits, ensuring your business thrives in the UAE. Additionally, our services can assist you with the UAE Golden Visa, offering long-term residency options for investors, entrepreneurs, and skilled professionals looking to establish a strong presence in the UAE.

Frequently Asked Questions

1. Is there a car tax in Dubai?

Dubai tax regime does not stipulate a direct road tax. Fees for registration, annual renewals, and Salik (tolls) are charged.

2. What is a permanent establishment in Dubai?

A permanent establishment is foreign companies that conduct business or own real estate in Dubai. If a company has a branch in Dubai; then it will be taxed and must have a business address in Dubai.

3. Do I have to pay taxes in Dubai?

Dubai has a tax-free business environment. Individuals do not pay income tax. A VAT of 5 % applies to certain goods and services. A corporate tax of 9 % is paid by companies making over AED 375,000 in net income.

 4. How does Dubai finance itself without taxes?

The oil sector constitutes an important source of revenue for the emirate of Dubai, although it is less dependent on oil compared to other emirates.

5. What taxes do I have to pay in Dubai?

While individuals do not pay any income tax in Dubai, other taxes are levied including value-added tax (VAT), corporate tax, property tax, tourism tax, tolls (Salik), and stamp duty or other taxes.