Is Dubai Really Tax-Free? | Myths & amp; Reality

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Dubai Metropolis is known for its extravagant wealth, glitzy malls, flashy skyscrapers, luxury hotels, and restaurants. One of the most famous aspects of Dubai is tax-free shopping.  So, it swiftly becomes a hotspot for foreigners looking to save some money. The question that resonates in every mind is “Is Dubai Really Tax Free?”

The straight and short reply is “Not really”. At present individuals have to pay no income tax at all, but the businesses with an exceeding taxable profit of AED 375,000 are subjected to 9% tax.

As of June 1, 2023, the UAE has introduced a federal corporate tax of 9% for companies. This means that while Dubai is still tax-free for individuals in terms of personal income tax, there is now a corporate tax for companies operating in the UAE, including Dubai.

There are numerous forms of taxation such as customs duties, value-added tax (VAT), and other fees that are subject to payment. But small-to-medium-size businesses and individuals registered in the UAE can enjoy a tax-free life.

What Makes Dubai Truly Tax-Free? 

Dubai is maintaining an attractive environment for skilled experts and companies from around the world to come and make their investments. And the non-taxation of a territory creates an incentive for it to attract businesses. Also, Dubai is an Islamic country and religion strictly prohibits charging interest or tax collected to increase money. Another reason for low taxes is that the UAE is mainly dependent on the export of oil, a highly profitable business. 

Although it sounds like an appealing concept, still there are some businesses that are heavily taxed in the city. Because to run an economy smoothly with a lot of privileges you need income. So, the myth is not true that Dubai is a tax-free city. The important thing here is to know what businesses are obliged to pay tax and which are exempted from tax.

Tax-free Business in Dubai:

These are 5 businesses that are Tax-Free In Dubai

  1. Most government projects or government-controlled entities are free of taxation in the UAE. This is due to the fact that these projects are very profitable for Dubai without requiring huge investments.
  2. People or businesses involved in extracting natural resources in the UAE are not charged with a tax on their earnings. This is because of the fact that the UAE is one of the top exporting countries in the world.
  3. Investment funds are exempted from paying taxes on their income that meet certain conditions. For instance, the investment fund must be based in the UAE and regulated by the competent authority and must trade in the recognized stock exchange.
  4. Businesses related to public benefits are also exempted from paying taxes in the UAE. Such businesses include education, healthcare services, and charitable services.
  5. Public pension plans and social security schemes are also free of taxation in Dubai.

Highly Taxable Businesses In Dubai:

These are the businesses that are highly taxed in Dubai:

  1. Entertainment-related businesses are heavily charged in Dubai. It includes entertainment centers and restaurants that are related to entertainment. Every restaurant in Dubai is liable to pay 10% service charges on the total bill. All the restaurants are liable to pay this bill to the government. Other than this, all boarding and lodging services are also taxed in the UAE.
  2. Therefore the hotel industry in Dubai is heavily charged by the government so the myth of tax-free Dubai is wrong for this business.
  3. Oil businesses are heavily taxed in Dubai. A whopping 55% of the total profit of a company is taxed in this case. This shows the dependency of the country on oil.
  4. Products that violate Islamic rules such as alcohol are heavily charged by the government. On the import of alcohol, a 50% tax is applicable and 30% on the sale. Similarly, cigarettes and tobacco are also heavily taxed in Dubai.
  5. Foreign banks are also charged 20% tax on average. Many banks and financial institutions working in Dubai pay heavy taxes to the government.

Do Companies Pay Taxes in Economic-Free Zones?

Although it is a fact that countries use the tax revenue for the welfare of their people. But for the economic growth of the country, it is important to promote foreign investments. So that’s why several countries established economic zones in their territories for companies to make profits. Also, companies pay little or zero portion of the tax to the government.

For example, Dubai has 18 economic free zones such as Dubai Silicon Oasis Authority, Dubai Airport Zone, Dubai Internet City, and Jebel Ali Free Zone etc. As a result, several companies are based in these free zones. At the same time, these companies are exempted from paying taxes on their profits. It is clearly stated in the UAE economic zone regulations that companies based here are not liable to pay taxes as long as they meet certain conditions.

Do Individuals Pay Tax In Dubai?

Dubai is blessed with natural resources of wealth, making it a highly prosperous and attractive destination for foreign investors. But at the same time, Dubai needs to maintain a standard lifestyle for its residents. Citizens are not liable to pay taxes in Dubai for their income or property. But at the same time if they import things or rent a property then they need to pay tax. Additionally, products violating religious boundaries are heavily taxed.

Do Corporations or Firms Pay Taxes In Dubai?

Dubai is the hub for numerous firms and corporations from around the world. It is a blessing for a company to be based in this city as it provides all the facilities that any company needs. And at the same time, these companies are exempted from paying corporate taxes. Also, firms in free economic zones are exempted from taxes.

See Also: Reduction in Corporate Taxes for Small Businesses.

However, there are certain cases in which you need to pay taxes for certain businesses. Such as foreign banks and oil businesses on their net profit. The time period for tax payment is normally 15 years after the company has to submit a renewal application.


Dubai is not a fully tax-free country. In fact, there are no fully tax-free countries in the world. Every country has some kind of tax that citizens have to pay. So, the myth about Dubai really being a tax-free city is completely wrong. In fact, Dubai has low taxes for certain businesses so that industries and businesses can make profits and inevitably contribute to government revenue.

On the other hand, it is clear that this city is heavily taxed for those business activities which are not allowed in religion. In order to attract more companies and individuals to Dubai and to maintain its standard lifestyle, the government provides a business-friendly environment to foreigners.

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