United Arab Emirates-Other taxes and levies

Other taxes and levies

Taxation of international executives

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Social Security

Local taxes

VAT/sales tax

Customs duty

Municipal taxes

Wage protection system

Are there additional taxes in the UAE that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.

Social Security

  • Not imposed on expatriates
  • An employer of a UAE national must make monthly social security and pension contributions
  2014 2015
Private Employer’s Contribution 12.5% of basic salary and allowances 12.5% of basic salary and allowances
Public Employer’s Contribution 15 % of basic salary and allowances 15 % of basic salary and allowances
Employee’s Contribution 5% of basic salary and allowances 5% of basic salary and allowances

 

Social security contribution would not be relevant to International assignees travelling to UAE.

Local taxes

The zakat (an Islamic tax on property and income) is not officially levied in the UAE. There are municipal taxes on rentals which are levied by few of the individual emirates which are discussed below. A 5 percent tax is also imposed on hotel services and entertainment and there are sundry small taxes, such as carrier tax, on cinema tickets, and so on.e not available in the public domain.

VAT/sales tax

There is currently no sales tax or VAT on any goods or services except for sales tax on alcohol. However, the UAE, along with the other GCC countries is actively considering the introduction of VAT in the near future the timelines of which are not available in the public domain.

Customs duty

With effect from 1 January 2003, the countries of the Gulf Cooperation Council (GCC) formed the GCC Customs Union which uniformly imposed 5 percent duty on the majority of goods entering the GCC.

This duty is charged at the first point of entry into the GCC and the goods on which the duty has been paid may then move freely between member states without payment of any further duty.

The GCC countries include the UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain.

Municipal taxes

Some of the emirates levy municipal taxes on rentals and on hotel services. Various municipal taxes are listed below:

Municipal tax on Rentals

  • The tax rate is 5% (residential rentals) of the annual actual rentals payable by the tenant. As per the information received, the emirate of Dubai levies a tax of 5%, the emirate of Sharjah levies a tax of 2% and the emirate of Abu Dhabi in practice does not collect this tax. Current information is not available in respect of other emirates.
  • Applicable to all tenants irrespective of the nationality and is payable to the municipality of the emirate. 
  • Collected at the time of the registration of the tenancy contracts with the respective municipality of each emirate. 
  • The tax rate for commercial rentals is 10%. 

Municipal tax and service charge on Hotels

  • It should be noted that there is certain municipality fee and service charge that is charged for accommodation in hotels based in the UAE. These charges vary for each of the Emirates (i.e. Dubai, Abu Dhabi, Ras Al Khaimah, Ajman, Sharjah, Fujairah and Umm al Quwain).
  • A Municipality fee is charged on the hotel establishment for their sales and the tax rate in the emirate of Sharjah and Dubai is 10% which is paid by the customer.
  • A service charge of 10% is also applicable in the emirate of Dubai and Sharjah.
  • In addition, a nominal fee called as “tourism dirhams” is charged per occupied room per night (eg. around AED 20 per occupied room per night for five star hotels) in the emirate of Dubai and Sharjah.
  • For Abu Dhabi 10% Service charge and 6% Tourism Tax is applicable on the total billing for hotel accommodation.

Wage protection system

The UAE Ministry of Labour (MOL) has recently introduced a system for payment of wages by companies registered with them. The system known as Wage Protection System (WPS), allows MOL to create a database that records wage payments in the private sector to guarantee timely and full payment of wages. All the companies in the UAE are mandated to implement the WPS except for companies located in the Free Trade Zones in the UAE. 

Under the WPS, all salaries and wages for employees must only be paid from a local bank account and in the local currency such as UAE Dirham (AED). The companies that default from adhering to WPS will not be eligible for new work permits.

© 2016 KPMG, a United Arab Emirates partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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