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United Arab Emirates-Other taxes and levies

Other taxes and levies

Taxation of international executives


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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.

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.

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.

On 24 October 2016, the President of the UAE issued a decree to set up a new authority, the Federal Tax Authority (“FTA”), responsible for maintaining records on taxpayers and on taxes paid, as well as issuing necessary guidelines and clarifications to taxpayers on matters related to federal taxes and related fines.

The above action was in continuation to a media report by the UAE Ministry of Finance on 18 August 2015 confirmed that the UAE is contemplating introducing both VAT and a federal CIT regime. The VAT regime is going to be implemented by the UAE under a GCC level framework agreement in conjunction with other GCC member states (Saudi Arabia, Kuwait, Oman, Qatar and Bahrain). An immediate announcement will be made once agreement is reached between the GCC member states.

The federal CIT regime is an internal tax paradigm shift for the UAE and the new regime is being proposed to supersede all the Emirates level tax decrees when implemented. We understand from the MoF that the draft CIT law is still under study. The MoF also confirmed that UAE businesses will be given no less than a year after the law is approved to prepare for CIT.

Based on all the media reports/updates by the MoF, the introduction of both VAT and a CIT regime now seems more certain. Therefore, companies should immediately start assessing theWith regard to VAT, the MoF has suggested that VAT will probably not be applied to education, healthcare and social services – or to 94 food staples.

The VAT rate is likely to be introduced from 1 Jan 2018 at 5% of the value of the goods and services. It should also be noted that the impact of the introduction of a VAT and the federal CIT regime in the FTZs is currently unknown and unavailable in the public domain.

The UAE is also contemplating to introduce a selective excise tax applicable on soft drinks, energy drinks, alcohol and tobacco products. The selective tax regime is going to be implemented by the UAE under a GCC level agreement and will be introduced from 1 January 2017. The selective tax rate is likely to be 100% on energy drinks and tobacco and 50% on soft drinks. impact of these taxes on their business model and begin preparing for implementation.

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

With regard to municipal fee in Dubai, the authorities charge a flat 5% charge [residential rentals] on the annual actual rentals payable by the tenant. The emirate of Sharjah levies a fee of 2% and the emirate of Abu Dhabi levies a fee of 3%. Current information is not available with respect to other emirates.

The fee is applicable to all tenants irrespective of the nationality and is payable to the municipality of the emirate. The fee is either collected at the time of registration of the tenancy contracts with the respective municipality of each emirate or collected in equal monthly installments via utility bills. The municipal fee rate for commercial rentals is 10% in Dubai.

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.

© 2021 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.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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