Over the past few years, Dubai has become a magnet for foreign investors, companies, and expats alike. As the primary home to the famous Burj Khalifa, world-class five-star hotels, and stunning, sky-high infrastructures, this city offers more than architectural marvels; it also ranks as one of the most business-friendly environments globally. This can be attributed to several factors, including its strategic location, a fast-growing economy, and, most importantly, favorable tax policies. 

Unlike many other countries in the world (with similar economic size), payroll in Dubai is pretty straightforward. Expatriates enjoy 100% tax-free salaries, while UAE nationals contribute only 5% of their income to the social security system. Also, there are no personal income tax burdens on employees, including expatriates. 

However, if you’re planning to do business in Dubai, you must be familiar with the payroll and tax laws. This is because the city has favorable tax policies, and the UAE Government has strict compliance requirements for employers. For instance, failing to pay the social security contribution when due incurs a penalty of 0.1% of the total amount for each day of delay.

Luckily, we’ve done the heavy lifting for you. In this guide, we’ll walk you through everything you need to know about payroll and income tax in Dubai. Ready? Let’s jump into it!

What is the Payroll Tax in Dubai?

Payroll tax is a percentage of money withheld from employees’ salaries or wages to finance the country’s social security system. Typically, in many countries, including the UAE, employers are responsible for withholding payroll taxes from employees’ salaries at the end of each month. Then, it’s collated and paid to the local, state, or federal government. 

Definition and Purpose of Payroll Tax

Dubai doesn’t have the traditional “payroll” tax like other countries do. Instead, employers are responsible for deducting social security contributions (similar to payroll tax) from their employees’ salaries, excluding expatriates. This means if you plan to hire foreign talent to work in the UAE, or currently have expats working in your company in Dubai, you won’t need to deduct social security contributions (or payroll tax) from their salaries. 

Also, keep in mind that income tax differs from payroll tax. For context, income tax is the percentage usually deducted from an employer’s or employee’s income to fund public services or government-related activities in the country. This can be personal income tax (deducted from the employee’s salary) or corporate tax (deducted from the company’s profit). But the UAE government does not levy personal income tax on employees’ wages. Also, companies with taxable income below AED 375,000 are not required to pay tax. This is part of the UAE’s broader strategy to maintain a competitive and tax-friendly environment that attracts foreign investment. We’ll share more on this later.

Employer and Employee Responsibilities

In the UAE, every citizen, including both employers and employees, is required to pay social security contributions to the General Pension and Social Security Authority (GPSSA). This fund supports initiatives such as: 

  • Pensions 
  • Retirement benefits 
  • Disability allowances 
  • Survivor benefits 

The standard social security rate in Dubai is 20% of the employee’s gross salary.  The employee pays 5%, while you (the employer) cover the remaining 15%. However, if you run a private company and earn below AED 20,000, the UAE Government subsidizes 2.5% of your 15% share. This is part of their Emiratisation scheme and encourages them to hire more nationals in Dubai.   

For example, if your employee earns AED 18000 per month in your private company: 

ContributorRateAmount (AED)
Employee5%900
Employer12.5%2,250
Government Subsidy2.5%450
Total Contribution20%3,600

Only nationals of the UAE and GCC (Gulf Cooperation Council) are mandated to pay this tax. Expatriates are exempt from paying social security contributions, but they are entitled to receive an end-of-service gratuity under the UAE labor law.

Employment Insurance Scheme

In line with the Federal Decree Law No. 13 of 2022, all Emirati and foreign employees working in Dubai are mandated to enroll in the unemployment insurance scheme. And, as the name suggests, this scheme was created to provide temporary financial support to individuals who lose their jobs unexpectedly. This fee is payable by the employee, not the employer. 

The subscription fee is divided into two parts:

IncomeFee
AED 16,000 or lessAED 5
More than AED 16,000AED 10

This means that if your employee earns AED 20,000 monthly, they’re required to pay AED 10 into the scheme. This payment doesn’t apply to investors, domestic workers, or employees below the age of 18. 

Read more about the average salary in Dubai and employee benefits to better understand compensation expectations and legal entitlements.

Employer Payroll Tax Rates in Dubai

According to UAE law, all Emirati employers are required to register their employees with the General Pension and Social Security Authority (GPSSA) within the first month of their employment. The GPSSA fully manages the social security contributions. 

To be eligible for this contribution, the employee must be: 

  • UAE national
  • Within 18 – 60 years of age
  • Declared medically fit upon appointment by a medical authority and approved by GPSSA

As an employer, you’re eligible for withholding and remitting all your employees’ social security funds to the GPSSA. But if your employees are nationals of the GCC, their social security contributions will be in line with the insurance or pension system of their home country. 

Overview of Income Tax in Dubai

Employees living and working in Dubai do not need to pay personal income tax on their salaries, whether they’re UAE nationals or resident individuals. However, employers are required to pay taxes on their corporate income. 

Corporate Income Tax

The United Arab Emirates (UAE) operates a progressive tax system. This means that the higher your company’s turnover, the higher the tax you’re required to pay. This is a breakdown of the rates under the Emirate-level tax decrees: 

Taxable IncomeTax Rate (%)
Income below AED 375,0000%
Income above AED 375,0009%

Recently, the government implemented a Domestic Minimum Top-up Tax (DMTT) under the Federal Decree Law No. 60 of 2023. Under this law, multinational companies with a global revenue of EUR 750 million will pay a tax of at least 15% on their profits in all countries where they operate. This initiative is to align their tax system with global standards to attract international partnerships.

Employee Tax Deductions and Allowances

Dubai offers several deductions and allowances to reduce the tax burden on the payers. Some of them include: 

  • Social security contributions: UAE and GCC nationals are mandated to pay 5% of their gross salary to the GPSSA. Expats/non-GCC nationals are exempt from paying this tax. 
  • Unemployment insurance scheme: All employees, including nationals and expats, are required to pay AED 5 monthly to the federal unemployment insurance system. This is for those earning below AED 16,000. It’s 10% for workers earning above AED 16,000 per month. 
  • Personal income tax: All salaries, bonuses, and allowances are entirely tax-free. Expatriates take home 100% of their salary with no deductions for personal income tax or social levies.
  • Capital gains on dividends taxes: Dubai does not impose tax on capital gains from property, shares, dividends, or bank interest. 

Tax Treaties and Withholding Taxes

One thing we (really) love about Dubai is its friendly tax system to attract foreign investors into the country and reduce the burden on taxpayers. As a part of the UAE, Dubai doesn’t impose withholding tax on these outbound payments: 

  • Dividends from UAE companies to foreign stakeholders
  • Payments for royalties, such as intellectual properties, trademarks, or patents
  • Technical service fees
  • Capital gains
  • Management fees

This means foreign shareholders that invest in your Emirati company will receive dividends or royalties in full without any tax deducted at the source, thanks to the UAE corporate tax law.  

However, keep in mind that while the withholding tax is currently 0%, Dubai (under the UAE) has a legal framework for withholding taxes. This means that foreign companies earning income from the Emirate may be subject to tax in the future if the government chooses to introduce or adjust the rate. For now, Dubai withholding tax remains 0%.

Double Taxation Agreements

Dubai (under the UAE) has 193 active double taxation agreements (DTAs) to reduce tax burdens on payees. Some of these countries include: 

  • Albania
  • Algeria
  • Andorra
  • Argentina
  • Belgium
  • Bermuda
  • Brazil
  • Indonesia
  • Japan
  • Italy
  • Kenya
  • Pakistan
  • Yemen
  • Vietnam
  • Uruguay

This means if you’re a tax resident in Dubai but receive income from any of these countries (and vice versa), you won’t need to pay taxes on the same income in both places because of the DTA. 

For example, let’s assume you have a subsidiary company in Georgia that pays you dividends. Thanks to the DTA between Dubai and Georgia, you won’t be taxed on the dividend in both locations. This means that if Georgia withholds a certain amount as tax at the source, you can claim a tax exemption in Dubai so that you’re not taxed twice on the same income.

Dubai Payroll Tax Calculator

To simplify your payroll processing and ensure compliance with UAE regulations, use the Remote People Global Payroll Calculator to estimate your payroll expenses. 

How the Calculator Works

The RemotePeople Global Payroll Calculator is a handy resource that you can use to calculate payroll taxes for both local and foreign employees in any country. The calculator is pretty simple to use. You just have to select the country or City, which is Dubai in this case. Then, choose the employee type: local or expat.

Select the calculation period, such as monthly or annually, and enter the gross salary. The default currency for payroll calculation is set to the country’s national currency. You can also change the currency to USD, EUR, and other popular currencies for expats. 

Simplify Payroll and Tax Compliance in Dubai

Dubai might no longer hold its “tax haven” status, but one thing is sure: it remains one of the tax-friendliest places in the world. Foreign companies can hire talent (either expats or nationals), manage their compensation, and meet the statutory obligations without any strain. 

But to achieve this, you must register your Emirati employees with the GPSSA, calculate and deduct the social security contributions from their salaries at the appointed time. You’re also in charge of remitting the payment to the GPSSA. 

To streamline the process and ensure compliance as your workforce increases, use Dubai Payroll Outsourcing Services or hire an EOR provider in Dubai. These providers help you to file tax returns, calculate employee wages, and ensure all your tax payments comply with local and national taxation laws. 

Frequently Asked Questions

Yes, they’re payroll taxes (called social security contributions) in Dubai. The total amount payable is 20% of the employee’s gross salary. Here, the employee pays only 5%, while the remaining 15% is split between the employer and the Government (if it’s a privately-owned company). The employer pays 12.5% while the Government shoulders the rest, 2.5%. 

Dubai (under the UAE) does not impose personal income tax on employees, whether they’re Emiratis or expats. However, they’re required to pay a progressive tax for the Unemployment Insurance Scheme. 

Yes, salaries in Dubai are tax-free for foreign workers. UAE nationals are required to pay 5% of their gross salary to the Government for social security contributions. This fund is used for financing pensions, healthcare, and other Government-related activities in the country.