Tax in the United Arab Emirates

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% was introduced in the UAE from January 2018.

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.

The UAE issued a ruling on determining tax residency under domestic legislation that came into effect in March 2023.

An individual will be considered a UAE tax resident under domestic legislation and can obtain a corresponding tax residency certificate (TRC) if any of the following conditions are met:

• If their usual or primary place of residence and the centre of their financial and personal interests are in the UAE, or they meet the conditions and criteria determined by a decision from the Ministry of Finance. This requires the strongest proof of financial and personal interests
• If they have been physically present in the state for 183 days or more within the relevant 12-month period
• If they have been physically present in the state for 90 days or more within the relevant 12 consecutive months (but less than 183 days), and they are a UAE national, hold a valid residence permit in the state or hold the nationality of any Member State of the Gulf Cooperation Council (GCC), and meet either of the following conditions:
  
  - They have a permanent place of residence in the UAE
  - They carry on employment or business in the UAE

In addition to the domestic TRC conditions outlined above, individuals are also eligible to obtain TRCs under the corresponding double tax treaties.

Foreign employees are entitled to end-of-service benefits, in accordance with the legislation regulating pensions and social securities. The benefits are calculated in accordance with the following rules:

• A foreign employee who has completed a year or more of continuous service is entitled, at the end of his or her service, to the following benefits calculated according to the basic wage:
  
  - A wage of 21 days for each year of the first five years of service
  - A wage of 30 days for each year exceeding such period
• A foreign employee shall be entitled to a benefit for parts of the year in proportion to the period spent at work, provided that he or she completed one year of continuous service
• Unpaid days of absence from work are to be included in the calculation of the service term
• The end-of-service benefits are calculated according to the last basic wage of the employee
• The end-of-service benefits for foreign workers cannot exceed two years’ wages
• If the employee owes any money to the employer, the employer may deduct the amount from the employee’s gratuity

The employer shall pay to the employee, within 14 days from the end date of the contract term, his or her wages and all other entitlements.

In November 2023, the UAE introduced an optional end-of-service benefits scheme called the Voluntary Alternative End-Of-Service Scheme. If employers decide to enroll in the new alternative scheme instead of the traditional end-of-service scheme.

For all employees selected by their employer, participation is mandatory. At the end of their service, employees will receive the cumulative earnings: under the old scheme up to the date of enrollment into the new scheme, and under the new scheme up to the date of termination.

Under the new scheme, employers need to make a mandatory contribution to the plan, and the minimum contribution amounts depend on the following lengths of service:

• For members with less than five years of service: 5.83% of the basic monthly salary
• For members with five years of service or more: 8.33% of the basic monthly salary

Employees also have the option to make additional voluntary contributions, up to 25% of their total annual salary.

The Dubai International Financial Centre (DIFC) decided to move away from the-end of-service benefit and introduced the DIFC Employee Workplace Savings (DEWS) Plan, which is a progressive end-of-service benefit program. This DEWS planwas introduced within the DIFC to restructure the currently defined employee benefit plan into a funded and professionally managed, defined contribution plan.

Employers need to make a mandatory contribution into the plan, and the minimum contribution amounts depend on the length of service.

The minimum contribution rates as a percentage of basic salary are the following:

• For members with less than five years of service: 5.83%
• For members with five years of service or more: 8.33%

Each member’s tenure is calculated from the day they start employment.

While DEWS is a mandatory scheme, if a DIFC employer wishes to use a scheme other than the framework DEWS plan, the company can apply to the Dubai International Financial Center Authority (DIFCA) for a Certificate of Compliance in order for a different scheme to be certified as a Qualifying Scheme. A Certificate of Compliance is issued by the DIFCA only if the scheme satisfies certain key requirements of a Qualifying Scheme.