Obtaining tax residency in Dubai for digital nomads might not be as easy as you might think!
Dubai, the dazzling city located in the United Arab Emirates (UAE), is a thriving hub for digital nomads and entrepreneurs.
With its remarkable skyline, luxurious shopping, and vibrant nightlife, Dubai is a sought-after destination for both business and leisure. It is a global centre for tourism, trade, and commerce, attracting millions of visitors every year.
You will also know Dubai for its engineering marvels, including the world-renowned Burj Khalifa.
Furthermore, it hosts several man-made islands such as the Palm Jumeirah. The city also houses several state-of-the-art coworking spaces. Here can digital nomads connect and collaborate with each other.
Dubai’s rich culture is a fusion of traditional and modern influences. This makes it an exciting destination for those who crave adventure and exploration.
As I already mentioned, Dubai is a city (and emirate) that is part of the UAE. Consequently, most of the rules we will discuss, also apply for the UAE in general.
Yet, I understand most of you are specifically looking at Dubai. Therefore, I decided to put the focus of the article in that direction.
Living in Dubai
General rules
Visa requirements for Dubai depend on your nationality and the purpose of your visit.
Citizens from certain countries are granted a visa upon arrival, while others need to apply for a visa in advance.
Additionally, there are different types of visas available based on the purpose of your visit, such as a tourist visa, business visa, or work visa.
It is important to note that Dubai has strict laws regarding immigration. Overstaying your visa can result in severe consequences, including fines, imprisonment, and deportation.
Therefore, it is important to ensure that you have the proper visa and that you comply with all immigration regulations during your stay in Dubai.
Residency permit
If you want to stay for a longer period in Dubai (e.g. to establish tax residency), you will need a residency permit.
If you work for a company in the UAE, you can apply for a visa sponsored by your employer. This visa will be valid for one or two years.
Yet, most digital nomads don’t necessarily work for a UAE company.
Nevertheless, for people working for a foreign company, there is the remote work visa. The most important condition of this visa, however, is that you have a minimum income of USD 5.000 per month. Not really a low entry barrier.
If you are a freelancer or own your own business, you might want to structure this in Dubai. I’ll discuss more on this later on.
However, you need to know that setting up a company in Dubai could also enable you to apply for a visa. Nonetheless, you will need to invest at least AED 72.000 (around €18.000) in your business.
If you have some spare money to invest, you can also obtain a visa based on an investment in residential real estate in Dubai.
In order to qualify, you should invest at least AED 1.000.000 (around €250.000). You will initially obtain a visa for three years or for five years if you’re investment exceeds AED 5.000.000.
Dubai tax rules
Dubai is not only attractive from a lifestyle perspective but also if you look at it from a tax point of view.
A lot of digital nomads are attracted by the lack of taxation that Dubai offers.
Tax residency in Dubai
A lot of digital nomads are attracted by the taxation regime of Dubai.
However, in order to qualify as a tax resident of the UAE, you need to fulfil some conditions.
There are multiple ways you can qualify as a tax resident:
- Have your primary residence and centre of your financial and personal interests in the UAE;
- Spend at least 90 days in the UAE during twelve consecutive months while being a UAE national (or of any of the other member states of the Gulf Cooperation Council) or holding a residence permit and while having a permanent residence in the UAE or carrying on employment/business there;
- Spend at least 183 days in the UAE during twelve consecutive months.
The third and last option is probably the least attractive to digital nomads as this makes you stay in the country for at least six months every year.
Yet, if you want to apply for an international tax residency certificate this is your only option.
With the international tax residency certificate, you will be able to avoid double taxation in other countries.
For this reason, it’s not that easy to obtain personal tax residence in Dubai.
Furthermore, you will also need to take into account the cost of living.
Tax residency in Dubai for digital nomads: tax rates
Most people know Dubai for its tax-friendly environment, with no personal income tax imposed on its residents.
This means that individuals who live and work in Dubai are not subject to any income tax on their income.
Nevertheless, if you have your own business as a freelancer, different rules apply. In this case you will be subject to corporate income tax of 9% if your revenue exceeds AED 1.000.000 (~€250k).
In addition to no personal income tax, there are also no capital gains taxes or inheritance taxes in Dubai.
Tax residency in Dubai for digital nomads: social contributions
Furthermore, neither will you have to pay social contributions (disregarding some exemptions).
Setting up a company in Dubai
We already mentioned that setting up a company in Dubai could be your route to obtain a residence permit.
For this reason, working through a local company instead of as a sole-proprietor could be a good idea.
However, in 2023 the UAE introduced a corporate income tax of 9% if the taxable income of your company exceeds AED 375.000 (~€95k).
Some exemptions apply to this rule but they won’t apply to most digital nomads.
Yet, you could make sure to limit your tax burden by taking out a decent wage from your company which will lower its taxable income. However, this wage should always be at market level and not superficially high.
Tax residency in Dubai for digital nomads: conclusion
Tax residency in Dubai for digital nomads is definitely a worthy options for many nomads.
However, although most digital nomads know about the tax-friendliness of the place, not many know there are some conditions attached to it.
The most important condition in order to safeguard you from taxation abroad is that you need to spend 183 days in the UAE.
Reach out if you want to know more about how to structure your tax setup!
