Social Security Contributions

In the United Arab Emirates, the social security scheme applies exclusively to UAE national employees and those from other member countries of the Gulf Cooperation Council (GCC) who meet the corresponding requirements. Non-national employees of the GCC are not subject to social security provisions in the United Arab Emirates.

For UAE domestic employees, social security contributions are calculated based on 20% of the employee's gross compensation, as stipulated in the local employment contract. Of this total, 5% corresponds to the worker, 12.5% to the employer, and the additional 2.5% to the State. In the emirate of Abu Dhabi, a higher rate of 26% applies, distributed as follows: 15% by the employer, 6% by the government, and 5% by the worker.

For employees from other GCC countries working in the United Arab Emirates, social security contributions are determined in accordance with the social security regulations of their home country.

It is the employer's responsibility to withhold and remit the employee's corresponding social security contributions.

At the Dubai International Financial Center (DIFC), the DIFC Workplace Employee Savings Plan (DEWS) has been introduced, which replaces the End of Service Gratuity Provision (EOSG). This new plan, effective February 1, 2020, aims to protect employees' long-term savings. Instead of paying a bonus at the end of the employment relationship, employers must make monthly contributions to DEWS or to a regulated alternative plan that meets established requirements. The mandatory monthly contribution to the DEWS scheme is 5.83% or 8.33% of the employee's base salary, depending on their seniority.

Unemployment Insurance Scheme

The unemployment insurance scheme, established by Federal Decree Law No. 13 of 2022, applies to Emirati and foreign workers and came into force on January 1, 2023. This scheme provides financial assistance to individuals who meet requirements in the public and private sectors in the event of unemployment.

Taxpayers can be differentiated into two categories based on the monthly base wage:

1. Category I: Workers with a monthly base wage of 16,000 AED or less. These workers must pay a monthly fee of 5 AED.
2. Category II: Workers with a monthly base salary of more than 16,000 AED. These workers must pay a monthly fee of 10 AED.

In this initial stage, the responsibility for deducting and remitting the monthly fee falls on the employee. Additional details are being expected on the implementation of the regime, given that it is a recent regulation.

Although the law is mandatory for all Emirati and foreign workers in the public and private sectors, it does not apply to the following groups:

• Investors.
• Domestic workers.
• Temporarily hired employees.
• Under 18 years of age.
• Retired people who already receive a pension and have rejoined a new company.

Capital Gains Taxes

In the United Arab Emirates, there is no personal income tax. Consequently, there is no specific capital gains tax that affects individuals, whether they are nationals or residents.

Consumer Taxes

Value Added Tax (VAT) was implemented in the United Arab Emirates on January 1, 2018.

For additional information, see the “Other Taxes” section of the Corporate Tax summary.

Net Worth Taxes

There are currently no wealth taxes in the United Arab Emirates.

Inheritance, Wealth and Gift Taxes

Currently, in the United Arab Emirates, there are no inheritance, or gift taxes for individuals.

Municipal or Property Tax

Most Emirates impose a municipal property tax, which is generally calculated based on the annual rent value. Tenants are usually responsible for paying this tax, although in some cases both tenants and landlords must pay separate fees.

For example, in the emirate of Dubai, the municipal property tax is divided into two categories:

• Market Rates: A 5% tax applied to the annual rental value of commercial real estate, which is paid by landlords.
• Housing Rates: A 5% tax applied to the annual rent value of residential properties, which is paid by tenants.

In addition to rent taxes, registration fees may apply to the transfer of ownership of land or immovable property. In Dubai, a registration fee of 4% is charged on the fair market value of the property on any sale to third parties. This cost is generally divided between the buyer and the seller and must be paid to the Dubai Land Department. The registration tax in Dubai as well

can be applied to the direct or indirect transfer of shares in an entity that owns real estate.

The administration and enforcement of these levies varies between different Emirates.

Luxury Taxes

Currently, there are no luxury taxes in the United Arab Emirates.

Special Taxes

On October 1, 2017, the United Arab Emirates implemented a special tax on the following products:

• Tobacco and tobacco products
• Carbonated drinks
• Energy drinks

Subsequently, on December 1, 2019, the scope of application of the special tax was expanded to include:

• Sugary drinks
• Electronic devices and tools for smoking
• Liquids used in electronic smoking devices and tools

The current tax rates are as follows:

• 100% on tobacco and related products, electronic devices and tools for smoking, liquids used in such devices, and energy drinks.
• 50% about carbonated drinks and sugary drinks.

Customs Duties

In the United Arab Emirates, a general customs duty of 5% is established on the cost, insurance and transport value of imports. However, different tax rates may apply for certain products, such as alcohol and tobacco, and specific exemptions and reliefs may be granted.

In addition, the United Arab Emirates imposes anti-dumping duties on imports of certain goods, such as car batteries, ceramic and porcelain tiles, and hydraulic cement. The types of anti-dumping duties vary depending on the Harmonized System codes of the goods and the country of export or origin. In some cases, the anti-dumping duty can reach up to 67.5% of the value of the transportation of the goods.

The United Arab Emirates is a member of the Gulf Cooperation Council (GCC) Customs Union, created in 2003 to eliminate customs and trade barriers between member states. Customs duties do not apply to intra-GCC trade, subject to certain conditions. In addition, duty-free importation is granted for most goods originating in member countries of the Great Arab Free Trade Agreement, Singapore, the European Free Trade Association (Norway, Switzerland, Iceland and Liechtenstein), Israel and India.

Although the free zones of the United Arab Emirates are located within the national territory, they are considered to be outside the customs area. Therefore, goods imported into free zones are not subject to customs duties. Customs duties apply only when goods are brought into the local GCC market.

Hotel Taxes and Tourist Fees

In the United Arab Emirates, most Emirates impose hotel taxes applicable to the rental of hotel rooms, as well as to recreational services and activities. These levies vary in their application and administration from one emirate to another.

In the emirate of Dubai, a fee known as the Tourism Dirham applies. This fee, which ranges from 7 to 20 AED per room per night, is charged to hotel guests and hotel apartment tenants, depending on the hotel's star rating. For example, a five-star hotel will charge a rate of 20 AED per room per night, while a two-star hotel will charge a rate of 10 AED per room per night.

In the emirate of Abu Dhabi, hotels must collect a tourist tax equivalent to 6% of room rent and a destination fee of 15 AED per night.

In addition to these tourist fees, the emirate of Dubai requires hotels to collect a 7% municipal tax on every hotel sale. In contrast, the emirate of Abu Dhabi imposes a municipal rate of 4%. For the purposes of these regulations, a hotel sale includes all revenues generated by the hotel through services provided to its guests, such as room rental, food, beverages and other related services.

All hotels in the United Arab Emirates collect an additional service fee equivalent to 10% of hotel sales revenues.