United Arab Emirates (UAE)

The United Arab Emirates (UAE) does not impose personal income tax on individuals, meaning that salaries, wages, bonuses and other personal earnings are entirely tax-free. This applies to employment income for both UAE nationals and expatriates. The UAE’s tax framework primarily targets corporate entities, with a federal corporate tax applying to taxable businesses and juridical persons, including Qualifying Free Zone Persons (QFZPs). A QFZP pays 0% only on qualifying income and 9% on taxable income that is not qualifying income; this is a preferential rate rather than a general free-zone exemption. Additionally, the UAE operates a Value Added Tax (VAT) system at a standard rate of 5% for goods and services. Overall, the income tax structure remains favourable for individuals, with the government relying more on corporate taxes, VAT and other fees for revenue.

While there is no personal income tax, payroll-related contributions apply but are structured differently for UAE nationals and expatriates. For UAE nationals employed before 31 October 2023, both employers and employees are required to contribute to the General Pension and Social Security Authority (GPSSA). The employer contributes 12.5% of the employee’s salary, while the employee contributes 5%. Additionally, the UAE government contributes 2.5% for UAE nationals working in the private sector, bringing the total contribution to 20% of the employee’s salary. For UAE nationals employed for the first time on or after 31 October 2023, a revised framework applies with a total contribution rate of 26%, consisting of 15% from the employer and 11% from the employee. Contributions are calculated on a capped monthly salary, with limits varying depending on the applicable scheme. Expatriate employees are not subject to pension and social security contributions, but employers are required to provide benefits such as end-of-service gratuity, workplace injury insurance and mandatory health insurance in certain emirates like Dubai and Abu Dhabi. Additionally, eligible UAE nationals and expatriates working in the private sector or federal government must be enrolled in the Involuntary Loss of Employment (ILOE) scheme. Subscription and premium payment are the employee’s responsibility, although an employer may arrange subscription on employees’ behalf without bearing the cost. Salaries must be paid through the Wage Protection System (WPS) by establishments registered with the Ministry of Human Resources and Emiratisation (MOHRE) and repatriation costs must be covered at the end of employment, unless otherwise arranged.

Employers must comply with reporting and payment obligations related to statutory contributions and employee benefits. For UAE national employees, pension and social security contributions must be paid to the relevant pension authority by the 15th day of the following month. This applies to both the employer’s and the employee’s share of the contributions. Abu Dhabi Pension Fund contributions may generally be paid by the 20th day of the following month. Salaries for all employees, both nationals and expatriates, must be paid through the WPS in accordance with contractual pay cycles. Delays or non-compliance may result in penalties, work permit restrictions and administrative sanctions. Employers must also ensure that employees who are subject to the ILOE scheme are informed of and able to comply with the mandatory subscription requirements. For expatriate employees who complete at least one year of continuous service, end-of-service benefits are not deducted from the employee’s salary but are accrued and paid out upon termination or resignation.

Employers must maintain comprehensive payroll records, particularly for UAE national employees subject to pension contributions. These records must include employee details, salary and wage information, pension contributions and proof of timely payments to the relevant authorities. Employers must also keep records of end-of-service benefits, leave balances and health insurance coverage, especially for expatriate staff. Documentation should be retained for at least two years after the employee’s service ends, under Article 13 of the federal Labour Law. Longer retention periods may apply under pension, tax, accounting, free-zone, health-insurance or other sector-specific requirements, in which case the longest applicable period should be followed and must be available for inspection by the GPSSA or the MOHRE. Compliance obligations include registering with the WPS, ensuring timely salary payments, maintaining valid employment contracts and adhering to all statutory benefit requirements. Non-compliance can lead to serious penalties such as fines for late or incorrect payments, restrictions on new work permits, potential legal action from employees and administrative sanctions. Repeated violations, particularly in relation to WPS, may also result in escalated enforcement actions and operational restrictions.