Dubai’s Taxation Policies: What Businesses Should Know

1. Corporate Income Tax

Except for oil companies and foreign bank branches, most Dubai businesses today are not liable for corporate income tax. Starting in 2025, though, a 9% corporate tax on earnings above AED 375,000 will be instituted. Smaller companies with less profits will stay free; bigger companies should be ready for this shift.

2. VAT, or Value Added Tax

Approved in 2018, Dubai’s VAT is set at 5%, which applies generally to most goods and services. Companies with annual turnover more than AED 375,000 have to register for VAT and report regularly to the Federal Tax Authority (FTA). Businesses should keep accurate financial records since non-compliance with VAT could lead to major fines.

3. Tax on Excise Rates

Dubai levies an excise tax on goods detrimental to public health including:

• 100% on energy drinks and tobacco
• 50% on sweet beverages

Companies engaged in manufacturing or import of these goods have to follow excise tax laws by registering with the FTA and turning in regular tax returns.

4. Customs Duties

Although businesses operating in Dubai’s Free Zones often enjoy customs exemptions, provided they do not trade within the UAE’s local market, imports into Dubai are generally subject to a 5% customs duty.

5. Agreements on Double Taxation (DTAs)

Signing over 115 Double Taxation Agreements (DTAs), the UAE aims to avoid taxing companies twice on the same income. Dubai appeals for worldwide operations because these agreements provide lowered tax rates on dividends, royalties, and other foreign business activities.

6. No Personal Income Tax

Dubai does not impose a personal income tax, hence business owners and workers are not taxed on their earnings. Businesses should, however, offer expatriates tax advisory help since they might still have responsibilities back home.

7. Social Security Contributions

Businesses hiring UAE nationals have to pay 12.5% of the employee’s pay toward social security; the employee pays 5%. Foreign workers are not subject to this, although end-of-service perks are usually given.

8. Future Corporate Tax Reform

Profits above AED 375,000 will pay a 9% federal corporate tax set for 2025. While small and medium businesses (SMEs) will still gain from tax exemption, this will mostly affect big companies. Although businesses in Free Zones are supposed to keep their tax advantages, given this change they should review their compliance policies.

Final Thought

Particularly for companies running under Free Zones, Dubai’s tax policies have major benefits. Still, forthcoming changes—such as the corporate tax—mean companies have to remain alert and ready for changes. Knowing these tax rules helps businesses to keep compliance and keep advantage from Dubai’s business-friendly environment.