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Income Tax

United Arab Emirates (UAE) - Income Tax

One of the big attractions of life in the Emirates is the fact there is no capital gains tax, income tax ot VAT. Just imagine receiving all of your pay packet every month with no deductions. There was talk in 2007 of introducing a 1% income tax to help subsidise an unemployment benefit scheme but then it was decided it would be un-Islamic and unfair to expats who would have to pay in but were highly unlikely to claim.

No two people are the same when it comes to income tax and there are three things that should be taken into consideration:

Country of residence – where you usually live

Country of tax residence – usually the same as country of residence and the country you pay tax in

Country of domicile – usually the country of your passport and where you or your father was born in

The tax year in the UAE runs from 1st January until 31st December and it does depend on what time of year you move as to whether you pill pay any UK tax in that year. Many other factors affect tax liability, if you own property and earn an income from renting it out; this must be taken into account.

No income tax sounds great but don’t worry the UAE economy will get your money one way or the other. Indirect taxes are paid in the form of visas, road tolls, car tax, ID cards, health cards, parking fees and parking fines etc. There was talk in September 2010 of some of these prices being increased to bring in extra revenue.

Of course as in most countries anything that might be seen as pleasure comes with an added extra. Alcohol, tobacco and cigarettes, hotels, dining out, theatre tickets and more, tax will be added to these items at between 5 % and 50%, so not quite the tax-free zone everyone imagines.

In Dubai a new tax on housing was introduced towards the end of 2011 with the idea of covering 100% of the municipality by mid -2012. A year after this deadline the tax of 5% of the value of your annual rental contract presently covers about 70% of homes. It might mean you pay it but your neighbor doesn’t as it won’t apply to an individual property until the lease changes hands. It is collected by the Dubai Electricity Company & Water Authority each month and is called a “housing fee.” Emiratis do not pay the tax and it has been dubbed the expat tax.

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