Is there really no income tax in the UAE?

One of the UAE's biggest draws for professionals and entrepreneurs is its tax environment. Here is an accurate picture of what taxes exist, and what don't, in the UAE.

Personal income tax: None

The UAE has no federal personal income tax. This means:

• Your salary, bonuses, and commissions are received entirely tax-free
• There is no withholding tax on employment income
• Investment returns, capital gains, and rental income received personally are not taxed at the personal level

This applies to all UAE residents, Emiratis and expatriates alike.

Corporate tax: 9% (from June 2023)

The UAE introduced a federal corporate tax effective for financial years starting on or after June 1, 2023:

• 0% on taxable income up to AED 375,000/year (~$102,000)
• 9% on taxable income above AED 375,000/year
• 15% for large multinational companies subject to the OECD Pillar Two rules (businesses with global revenues of AED 3.15 billion+)

Exempt from corporate tax:

• Businesses operating in designated free zones (subject to meeting "qualifying activities" criteria) continue to benefit from 0% corporate tax on qualifying income
• Natural resource extraction businesses (subject to emirate-level taxation)
• Government entities

For freelancers, self-employed individuals, and most small businesses: if you structure your activity as a sole establishment (not a company), personal income is not subject to corporate tax. If you operate through a company, the 9% rate applies above the AED 375,000 threshold.

VAT: 5%

The UAE introduced Value Added Tax (VAT) at 5% in January 2018. This applies to most goods and services, similar to Israel's VAT system (currently 17% in Israel). The UAE's 5% rate is significantly lower.

VAT-exempt or zero-rated categories:

• Healthcare services
• Education services
• Residential property rentals
• International transport
• Exports of goods and services

If you run a business with more than AED 375,000 in annual taxable turnover, you must register for VAT.

Excise tax

The UAE levies excise duties on specific goods:

• Tobacco: 100%
• Energy drinks: 100%
• Sugary drinks: 50%

This does not affect most professionals.

What this means for Israeli expats

Take-home pay advantage: A software engineer earning AED 40,000/month (~$10,900) keeps the full amount. In Israel, the same gross salary would result in approximately 30–40% in income tax and social security deductions.

Investment income: Dividends, capital gains, and interest earned by UAE residents personally are not subject to UAE personal income tax. This does not necessarily eliminate tax obligations in other jurisdictions.

Israeli tax obligations persist: Moving to the UAE does not automatically disconnect Israeli tax residency. You must actively sever Israeli tax residency (see our guide: How to disconnect from Israeli tax residency). Until you do so, the Israeli Tax Authority may still claim taxation on your worldwide income.

The Israel-UAE Double Tax Treaty: The two countries signed a tax treaty in 2021, entering into force in 2022. The treaty covers income tax, capital gains, and royalties. It provides mechanisms to avoid double taxation where both countries have a claim on the same income.

Common misconceptions

• "I'm free of all taxes" — Not entirely. If you're still an Israeli tax resident, Israel can tax you. If you have a company, corporate tax applies above the threshold.
• "Free zone companies pay zero tax" — True for qualifying income, but rules are specific. Non-qualifying activities are taxed.
• "VAT is zero" — VAT is 5%, not zero, and applies to most business transactions.

Summary