UAE Law and Practice Contributed by: Amir Alkhaja, Gerry Rogers, Daria Selivanova and Danila Kriuchkov, Habib Al Mulla & Partners
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers In the UAE, there is no federal personal income tax imposed on salaries or wages. This applies to all residency statuses, expatriates and UAE nationals. There is no payroll withholding tax on things like income, and no requirement for employees to file tax returns (since no income tax). Also, no capital gains tax, no wealth tax and no inherit - ance tax at the individual level in the UAE. Unlike some GCC countries, the UAE does not impose a formal Zakat (Islamic wealth tax) on companies or individuals. Any such payments are voluntary or personal. For UAE nationals, employers generally contrib - ute 12.5% of the employee’s gross salary to the General Pension and Social Security Authority (GPSSA), while employees contribute 5%. 5.2 Taxes Applicable to Businesses Companies doing business in the UAE are sub - UAE levies CIT on corporations and business entities at a standard rate of 9% on taxable profits exceeding a threshold of AED375,000 (approximately USD102,000). Profits up to AED375,000 are taxed at 0% to support small businesses. Value Added Tax (VAT) ject to the following taxes. Corporate Income Tax (CIT) VAT is levied at 5% on most goods and services. Businesses must register for VAT if their annual turnover exceeds AED375,000. They charge 5% on taxable supplies and can reclaim input VAT on business purchases.
one of the serious causes set out in Article 44 (in which case gratuity can be forfeited). Notice Period Activities During the notice period, the law allows an employee one day off per week to search for a new job (when the employer terminates). Both parties are expected to continue obligations dur - ing notice. If the employer prefers, it can pay in lieu of notice and end the contract sooner, but the payment should cover what the employee would have earned in the notice period. Collective Redundancies UAE law does not have special procedures for group layoffs or collective redundancy. There is no requirement to consult employee representa - tives or obtain government approval for redun - dancies (unlike in many European jurisdictions). Emiratisation If terminating a UAE national employee, employ - ers must also adhere to any MOHRE rules about notifying the Ministry (since the government tracks Emirati employment). Recent regula - tions require that termination of Emirati staff be reported and possibly justified, as the govern - ment is trying to protect Emirati employees from arbitrary dismissal. Failing to do so could affect company’s compliance status. 4.5 Employee Representations There is no legally mandated system of employ - ee representation (such as works councils or labour unions) in the UAE private sector. The UAE labour framework does not require employ - ers to institute employee committees for con - sultation or give employees a collective voice in management decisions. In fact, trade unions are not currently permitted under UAE law for private sector workers.
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