UNITED ARAB EMIRATES

 Name of country

UNITED ARAB EMIRATES

Region

Middle East, bordering the Gulf of Oman and the Persian Gulf, between Oman and Saudi Arabia

Population

9,856,612 (July 2021 est.)

note: the UN estimated the country’s total population was 9,771,000 as of mid-year 2019; immigrants make up 87.9% of the total population, according to UN data (2019)

General Introduction

The United Arab Emirates (UAE) is a Middle Eastern federation and a member of the Gulf Cooperation Council (GCC) and OPEC. It borders Oman to the southeast, the Persian Gulf to the north, and Saudi Arabia to the west and south on the Arabian Peninsula. It has seven Emirates: Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah, Sarja, and Umm al-Qaywayn. Each emirate enjoys significant political, judicial, and economic autonomy.

The emirates have a population of 9 million people. The capital is Abu Dhabi, but the most populous and well-known city is Dubai, which is one of the world’s most cosmopolitan cities. The official languages are Arabic and English. The United Arab Emirates Dirham is the official currency (AED).

According to the Doing Business Report 2019 compiled by the World Bank Group, the United Arab Emirates (UAE) is ranked 11th out of 190 countries listed in the report, which is the highest rank in the region.

The Doing Business Report observed that the UAE made starting a business easier by improving online registration. This is due to the efforts made by the UAE Government to on-board all the existing systems into an online format. In the real estate sector, registration of property has improved due to transparency in the land administration system.

Access to credit, which tends to be a key economic indicator, became easier partly due to the enactment of new legislation Federal Law No. (20) of 2016 on Pledge of Movables as Guarantee for Debts (Pledge Law), which intends to create a unified and modern collateral registry.

According to the Global Competitiveness Report 2018, which measures national competitiveness and levels of productivity, the UAE is ranked 27th and is the highest ranked nation in the Middle East.

The UAE achieved growth in its net annual foreign direct investment inflows in 2016, reaching about USD9 billion, compared with USD8.8 billion in 2015, a growth rate of 2.3% between those two years, with average growth between 2011 and 2016 reaching 4.9%.

The cumulative balance of foreign investments in the country reached about USD117.9 billion in 2016 from USD108.9 billion in 2015. The average growth rate during the period 2011 to 2016 was about 10.7%, mainly supported by the increased investments in the transformative industries and other heavy metals industries such as aluminum and petrochemicals, as well as other sectors such as tourism and aviation.

The UAE was ranked 2nd in the list of countries attracting the most foreign direct investment in the West Asia region in 2016 after it acquired a 32.2% share of the total investment inflows into the region, estimated at USD28 billion. It was ranked first in the countries of the Gulf Co-operation Council (GCC) and has acquired about 50% of the region’s inflow investment, estimated at USD17.9 billion.

Foreign direct investment in the UAE is diverse. Real estate, business services, wholesale and retail trade, financial institutions, insurance, transformative industries, and oil refining products all lead the way as preferred sectors.

In the coming years, the country is expected to witness further growth in the inflow of foreign direct investments.

The country is moving towards activating the policy of diversifying its sources of income, in addition to realizing its vision to build a diversified knowledge and innovation economy in a safe economic environment. It aims towards an investment climate, encouraging businesses and giant projects in the sectors of infrastructure, industry, renewable energy, tourism and aviation, adopting the UAE’s top science, technology and innovation policy.

This includes 100 national initiatives in the education, health, energy, transport, space, and water sectors, and the allocation of nearly USD100 billion to them.

Wifi Speed

UAE was the fastest, with an average connection speed of 273.87 Mbps, considerably higher than the runner-up South Korea, which registered average mobile connection speeds of 214.47 Mbps.

Electrical outlet

In the United Arab Emirates the power plugs and sockets are of type C, D and G. The standard voltage is 220 V and the standard frequency is 50 Hz.

Per Capita GDP

$67,100 note: data are in 2017 dollars (2019 est.)
$67,000 note: data are in 2017 dollars (2018 est.)
$67,184 (2017 est.)

note: data are in 2017 dollars

Climate

desert; cooler in eastern mountains

Residence-by-Investment

If you want to settle in the UAE and buy a house, you can apply for a Property Investor residence visa. You must invest at least AED1,000,000 in real estate in a government-designated and approved area. After purchasing the property, you may apply for a residence visa. This visa is renewable for up to two years as long as you own the property and visit the country at least once every 180 days. Absence for an extended period of time may result in the visa being revoked. The visa allows you to live in any of the seven Emirates; however, all government-related matters must be handled in the state where your UAE residence visa is issued. It is important to note that this visa does not entitle you to a work permit. Once you have obtained the visa, you can sponsor your relatives, who will be able to apply for a family visa that is linked to your residence visa. A man may not apply for a visa for his children unless he is accompanied by his wife unless the latter is deceased. There is no permanent residence visa, so you must renew your visa every two years. This visa will not grant you citizenship.

Processing Time

• Processing time is with in 2-3 months

Key Benefits

Temporary Residency Benefits

• Warm climate
• Low tax jurisdiction
• Banking, financial and medical hub
• Business-friendly policies
• Extremely safe, modern and livable country
• High quality of life
• Low crime rate country
• Well-connected airport
• No personal direct taxes
• Potentially profitable investment

Requirements

• Have a monthly income of at least AED10,000 or the equivalent in foreign currency; and
• Have medical insurance.
• The property must be of sufficient size to accommodate family members.
• You should be the owner of the property.
• The home should be a flat/apartment or a villa.
• It should be in the no-holds-barred zone (i.e. the area where foreigners are permitted to own properties).
• The property’s current value should be at least AED1 million.
• The property should not be leased to the owner or leased for 99 years;
• If the property is mortgaged, at least half of the property’s value should have been paid.
• The Land Department should issue the title deed.

Procedures and Time Frame

STEP 1 – If you are unable to enter the UAE without a visa, you can obtain an entry permit before applying formally. As a result, you’ll need to gather the necessary documentation and submit it through the Channels framework of the Federal Authorities for Identity and Citizenship. If your application is accepted, the authority will review it and issue you a 6-month multiple entry visa.

STEP 2 – Whether you apply in Dubai or Abu Dhabi, you must present it to the local authorities once you arrive in the UAE. You must complete your investment before submitting your application with all required documents.

STEP 3 – Once your application is approved, you will be contacted to schedule an appointment with the local authority to provide biometrics and obtain your resident permit.

Natural Resources

petroleum, natural gas

Ethnic Groups

Emirati 11.6%, South Asian 59.4% (includes Indian 38.2%, Bangladeshi 9.5%, Pakistani 9.4%, other 2.3%), Egyptian 10.2%, Filipino 6.1%, other 12.8% (2015 est.)

Languages

Arabic (official), English, Hindi, Malayam, Urdu, Pashto, Tagalog, Persian

Religion

Muslim (official) 76%, Christian 9%, other (primarily Hindu and Buddhist, less than 5% of the population consists of Parsi, Baha’i, Druze, Sikh, Ahmadi, Ismaili, Dawoodi Bohra Muslim, and Jewish) 15% (2005 est.)

note: data represent the total population; as of 2019, immigrants make up about 87.9% of the total population, according to UN data

 Median Age

total: 38.4 years
male: 40.4 years
female: 31.5 years (2020 est.)

Urbanization

urban population: 87.3% of total population (2021)
rate of urbanization: 1.5% annual rate of change (2020-25 est.)

Physician density

2.53 physicians/1,000 population (2018)

 Government type

federation of monarchies

Unemployment Rate

1.6% (2016 est.)
3.6% (2014 est.)

Taxes

Headline Personal Income Tax Rate (highest marginal tax rate) – 0%

There are no personal taxes in the UAE.

Headline Corporate Income Tax Rate (excluding dividend taxes) – 0%

The UAE imposes corporate tax only on foreign banks and oil companies. It is yet to apply corporate tax on other businesses established in other sectors/industries. Businesses registered in the free zones are exempt from corporate tax for certain period, which can be extended. However, businesses that make taxable supplies above the mandatory registration threshold (which is around USD103,000 a year) must pay VAT at the rate of 5%.

Each emirate applies hotel and tourism taxes that apply to services provided by hotels. There are currently no luxury taxes or wealth taxes that apply in the UAE.

Because the UAE does not levy personal income taxes, there is no legal definition of tax residency. Residents may, however, be able to obtain a UAE Tax Residency certificate under certain conditions.

A real property tax is levied on the transfer of properties, with rates ranging from 2% to 4% depending on the Emirate in which the property is located. Some municipalities, such as Dubai, levy an annual property tax based on the property’s assessed rental value.

The value-added tax (V.A.T.) rate, which was implemented in 2018, is currently set at 5% on the majority of goods and services.

In terms of corporate taxation, most economic activities are exempt from income tax, with the exception of companies engaged in oil and gas exploration and production and financial services. Except for companies incorporated in Free Zones and offshore companies, corporate foreign ownership is limited to 49 percent.

The UAE imposes corporate tax on businesses and legal entities that are engaged in the oil sector and that are categorised as foreign banks. It has not yet imposed a corporate tax on other industries. Each of the seven emirates is responsible for regulating the oil industry within its borders, creating a mix of production sharing arrangements and service contracts. In Abu Dhabi, the Supreme Petroleum Council (SPC) sets Abu Dhabi’s petroleum-related objectives and policies.

Oil and gas exploration and production companies are taxed at progressive rates up to 55% under the applicable emirate-level tax decree. Foreign banks are generally subject to a 20% tax on profits, which is not applied to national banks.

Businesses registered in the free zones are exempt from corporate or other direct taxes for certain periods, which may vary. That said, any business making taxable supplies above the mandatory registration threshold of USD103,000 a year must pay 5% VAT.

Any business that imports excise goods into the UAE or produces excise goods for consumption must pay excise tax at 50% for carbonated drinks, and 100% for tobacco products and energy drinks.

Each emirate charges a municipal tax on entities/individuals leasing property in the relevant emirate, which can vary from emirate to emirate. In Abu Dhabi, this fee ranges from 5% to 7.5% of the annual rent.

In Dubai, a guest renting a room in a hotel must pay a fee called the “tourism Dirham” for each night, which is calculated according to the classification of the hotel. This fee can range between USD2 to USD6.

In 2018, the Abu Dhabi Executive Council reduced the tourism and various other associated fees that apply in the sector. The tourism fee in Abu Dhabi is currently 3.5% and the municipal fee for each room has been reduced to about USD3.

The UAE is party to more than 100 international tax treaties. The UAE has an important treaty network with 90 double tax treaties currently in force, including with France, Germany, Italy, Spain and Russia. There are also 26 in the pipeline, such as the double tax treaty signed with Argentina on 3 November 2016 and a number of frontier markets, in certain leading African economies.

Generally, those double tax treaties contain no taxation of capital gains, dividends and other payments made to overseas shareholders. In addition, they do not contain any withholding tax or taxation on interest to overseas lenders.

The CRS was adopted in the UAE with an effective date of 1 January 2017. UAE regulatory authorities and the UAE Ministry of Finance have issued UAE CRS legislation to implement the CRS into domestic law.

The following authorities have been appointed as “regulatory authorities” for the purposes of implementing the provisions of the Multilateral Administrative Agreement for Automatic Exchange of Information and the CRS:

• The UAE Central Bank, in respect of a financial institution subject to its supervision under the applicable laws and regulations.
• The Securities and Commodities Authority, in respect of a financial institution subject to its supervision under the applicable laws and regulations of the Securities and Commodities Authority.

A financial free zone authority that has been designated a “regulatory authority” in respect of a financial institution that is registered in such financial free zone. These authorities would include, for example, the:

• Abu Dhabi Global Market (ADGM);
• Financial Services Regulatory Authority (FSRA);
• Dubai International Financial Centre (DIFC); and
• Registrar of Companies (RoC).
• The Ministry of Finance, in respect of any financial institution not otherwise regulated by any of the aforementioned regulatory authorities.

Update – 21st November 2022

The United Arab Emirates (UAE) government has issued a cabinet resolution that, for the first time, sets out rules to determine when a natural or legal person is to be considered a tax resident.

Until now, the UAE has not had a domestic legal definition of tax residency. If disputes arose, tax residency has been decided by the text of income tax treaties concluded with other jurisdictions and by criteria established by the Federal Tax Authority of the UAE. For individual taxpayers, these have included the availability of an annual lease agreement, together with a minimum of 180 days of residence in the UAE. For legal persons, the criteria have included availability of audited accounts and a minimum of one year of establishment.

Now, however, Cabinet Resolution No.85 of 2022 (the Resolution) lays down explicit tests of residence. Natural persons will be deemed tax-resident if any of various conditions are met.

Individuals will be tax-resident if their usual or principal place of residence is in the UAE and the centre of their financial and personal interests are in the UAE, or if they have been physically present in the UAE for a period of 183 days or more in a consecutive 12-month period. An individual will also be considered tax-resident if they have been physically present in the UAE for a period of 90 days or more over a consecutive 12-month period and are a UAE citizen, UAE resident or Gulf Cooperation Council national either holding a permanent place of residence or carrying out business in the UAE.
A corporate entity will be considered UAE-tax-resident where it has been established, formed or recognised in the UAE, excluding a UAE branch registered by a foreign entity, or if it is considered tax resident under the applicable tax law of the UAE. The legislation to implement this second test has not yet been enacted, but a public consultation document released by the Ministry of Finance in April 2022 indicated that a company established outside the jurisdiction may still be treated as a UAE tax resident if it is effectively managed and controlled in the UAE.

The Resolution also deals with the special case where an international agreement such as a tax treaty specifies certain conditions for determining tax residency. In such cases, the Resolution provides that the international agreement shall continue to apply, so that UAE persons who are assessing their tax residence for the purposes of applying a tax treaty would need to refer to the specific criteria set forth in the treaty itself.

Persons assessing their tax residency can apply to the tax authority for a tax residency certificate, under a procedure also set out in the Resolution. Such a certificate is often a formal requirement for UAE residents wishing to claim tax relief or other benefits in another jurisdiction under the relevant tax treaty.

The resolution will enter into force on 1 March 2023.