Question 1

Is there income tax in the UAE?

Accepted Answer

No, the UAE does not levy personal income tax on salaries and wages. This applies to both UAE nationals and expatriates. Employees receive their full salary without any income tax deductions. However, UAE nationals working in the private sector are subject to pension contributions (GPSSA), and a 5% VAT applies to goods and services (though not deducted from salaries). Corporate tax (9%) was introduced in 2023 but does not affect individual employment income.

Question 2

What is the Wage Protection System (WPS) in the UAE?

Accepted Answer

The WPS is an electronic salary transfer system managed by the Central Bank of the UAE and MOHRE. It requires all private-sector employers to pay employee wages through registered banks, exchange houses, or approved financial institutions. WPS monitors salary payments to ensure employees are paid on time (within 10 days of the due date) and in the correct amount. Non-compliance can result in fines and work permit restrictions.

Question 3

How is End of Service Gratuity calculated in the UAE?

Accepted Answer

Under UAE Labour Law, employees who complete one year of service are entitled to end-of-service gratuity based on their basic salary: 21 days' basic salary for each of the first five years, and 30 days' basic salary for each subsequent year. The total gratuity cannot exceed two years' salary. Some employers in DIFC and ADGM zones use the DEWS (DIFC Employee Workplace Savings) scheme as an alternative.

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