Will UAE introduce income tax in the near future?

Will UAE introduce income tax in the near future?

There is no expectation of a personal income tax (PIT) in the near future. UAE Deputy Minister of Finance, Younis Al Hurri, has confirmed that there are no plans to introduce a personal income tax for individuals in the country in the foreseeable future. This aligns with statements made earlier in July 2023.

In the latest IMF study for Gulf countries, two approaches regarding PIT were proposed from a tax policy perspective.

The first approach involves simulating the introduction of PIT without actual implementation. This approach is already effectively implemented in the UAE. The country has introduced VAT and excise taxes on alcoholic and sweetened beverages, as well as tobacco. Additionally, all Gulf countries have introduced (or expanded over the last decade) contributions to the Social Security Fund (SSF).

The second approach contemplates the full implementation of PIT on labor income (with a high exemption threshold for government and private employees). Specifically, it is proposed to initially set a relatively low PIT rate, gradually increasing it to align with PIT and maximum corporate income tax rates.

The IMF believes that, in the medium term, it is more realistic to focus on building the tax system towards the implementation of an effective PIT system.

This approach will enable the UAE to enhance the efficiency of the tax system, ensure tax fairness, and increase budget revenues.

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