People in Dubai do not have to pay income tax, yet the government’s earnings are tremendous. Dubai’s economy is driven by corporate taxes, VAT, tourism, service fees and profits of government companies.
Would you believe that Dubai is completely tax-free? In fact, people here do not have to pay any income tax on their earnings. This is the reason why investors from all over the world are drawn here. But the question arises that if there is no income tax, then how does the government earn? In fact, the Government of Dubai has created one of the world’s strongest and diversified economies, which runs not just on taxes, but on services, international trade, tourism and strategic investment.
Earning from government fees and public service
A large part of the Dubai government’s income comes from administrative and service fees. Millions of expatriates living in Dubai have to pay fixed fees for visa fees, residency permits and work permits. Apart from this, to start or renew any business, companies have to pay huge license fees. The government also benefits greatly from services like waste management, water, electricity and property registration. The strict traffic rules and automatic fine system here not only maintain discipline but also contribute to the government treasury.
The web of corporate tax and indirect tax
Even though there is no tax on common people, the UAE government imposes tax on business. According to the rule, effective from 2023, a 9% corporate tax is imposed on companies earning more than Dh375,000. Additionally, 5% Value Added Tax (VAT) is charged on every good and service. In particular, the government keeps its economy stable by imposing heavy taxes of up to 55% on oil companies and up to 20% on foreign banks.
Tourism and aviation are the only sources of income
Dubai means paradise for tourists. Every year crores of people come to visit here. A tax called ‘Tourism Dirham’ is levied on hotel bookings, restaurants and entertainment venues. Not only this, exit and service fees are collected from every passenger passing through Dubai International Airport, one of the busiest airports in the world. Because of this, the aviation sector has become a major source of income for the country.
Bumper profits from government companies
The Government of Dubai owns many of the best companies in the world. The worldwide successful ‘Emirates’ airline earns huge profits for the government. Additionally, state-owned real estate companies that build spectacular buildings like the Burj Khalifa continue to fill the government’s coffers through investments, leases and tourism.