There is no personal income tax in the UAE. Municipality service charges are levied on individuals living and working in the UAE. Service charge percentages vary among the emirates. A service charge of 5% to 10% is charged on food purchased in restaurants. Hotels charge a 10% to 15% service charge per night on room rates. These charges are usually included in the customer’s bill, which the municipality will collect from restaurants and hotels.
Most people don’t know that there are currently legislations in force in the emirates of Abu Dhabi, Dubai and Sharjah establishing a general corporate taxation regime – the Abu Dhabi income tax decree of 1965, Sharjah income tax decree of 1968, and Dubai income tax decree of 1969. In practice however, only oil & gas, petrochemical companies and branch offices of foreign banks are required to pay taxes.
In Abu Dhabi a property tax is charged to obtain and renew business licenses. In general, taxes are levied at a rate of 5% to 10% of the applicant’s annual office rental and 5% of the annual rental of the residence of the manager whose name appears on the license.
In Dubai, all residential properties are subject to an annual property tax paid to the Dubai Municipality. The amount of tax payable depends upon the employment status of the tenant. All professional, managerial and other senior employees in commercial, professional and industrial sectors are charged 5% of the annual rent of their property, whereas in the banking sector it is 15% of the annual rent of their property. Whilst it is the tenant’s obligation to pay the property tax, the Dubai Municipality will often collect the tax from the tenant’s employer through the Department of Economic Development at the time of issuing or at the annual renewal of the employer’s trade license.
In Sharjah, all leased residential properties are subject to an annual property tax payable to the Sharjah Municipality. This tax is equal to 2% of the annual rent shown in the tenancy agreement, subject to a minimum of AED 300, and is payable when the tenant notarizes the agreement.