The UAE’s “tax-free” reputation means your employees won’t see income tax taken from their paychecks. But as their employer, you’re still responsible for social security contributions, end-of-service gratuity, unemployment insurance, and corporate tax. This guide covers the five obligations you need to budget for and what you need to know about the Wage Protection System (WPS). There’s also an employer tax checklist to help you stay compliant from the start.
Key takeaways for employer tax in the UAE
UAE employers don’t withhold income tax. But you’re still responsible for gratuity, social security (for nationals), and WPS-compliant payroll.
General Pension and Social Security Authority (GPSSA) contributions apply only to UAE and Gulf Cooperation Council (GCC) nationals. You pay 12.5% of the gross salary, and the employee pays 5%.
End-of-service gratuity applies to all employees, expat and national. You must pay this within 14 days of the employee’s last day.
RemotePass handles UAE payroll. We also cover GPSSA calculations and gratuity accruals, even if you don’t have a local entity. Book a RemotePass demo to see how it works.
What the UAE’s zero income tax policy means for employers
The UAE doesn’t levy personal income tax. Across all seven emirates, government revenue comes from oil exports, not salaries.
As a result, you don’t have to calculate any withholding tax, manage income tax filings, or deal with that compliance overhead. But there are still several types of tax you’re responsible for as an employer.
Note: If you’re hiring expats, their home countries have their own income tax obligations. That’s your employees’ responsibility, but it’s worth mentioning during onboarding.
What taxes employers pay in the UAE (at a glance)
The UAE levies a 9% corporate tax on net profits exceeding AED 375,000. If you’re hiring UAE or GCC nationals, you’ll also contribute 12.5% to 15% of their gross salaries toward pension plans through the GPSSA.
Beyond corporate tax and pensions, your obligations include end-of-service gratuity for all employees and mandatory Involuntary Loss of Employment (ILOE) insurance. If your business reaches the threshold, you’ll also register for Value Added Tax (VAT). Here’s the full picture:
| Type of Tax | Whom It Applies To | Paid By |
|---|---|---|
| Social security (GPSSA) | UAE nationals | Employer + employee |
| ILOE unemployment insurance | All employees | Employee (employer facilitates) |
| End-of-service gratuity | All employees | Employer |
| Corporate tax (9%) | Business profits above AED 375,000 | Employer |
| VAT (5%) | Businesses meeting registration threshold | Employer |
Let’s take a look at what each tax responsibility means for your business.
#1 Social security contributions for UAE nationals
In the UAE, social security refers to the pension and benefits system for UAE nationals. The GPSSA administers this system.
The contributions fund retirement pensions, disability benefits, and death benefits, but the rules vary depending on whom you’re hiring.
GPSSA contribution rates that affect your payroll
If you’re hiring UAE nationals, you’re responsible for registering with the GPSSA, calculating contributions monthly, and remitting payments on time. The breakdown is:
- Employee contribution: 5% of gross salary (deducted from pay)
- Employer contribution: 12.5% of gross salary (paid on top of salary)
- Government contribution: 2.5% (added by the federal government)
Note: employers in Abu Dhabi contribute 15% rather than 12.5%.
The employee’s “contribution salary” is their basic salary plus certain allowances. This figure determines the amount of contributions. There’s a salary cap for contributions, so verify the current thresholds with the GPSSA.
How GCC nationals factor into your social security obligations
Bilateral agreements exist between GCC states. While working in the UAE, GCC nationals from Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia can be covered under their home country’s social security system.
You’ll coordinate with the employee’s home-country pension authority rather than the GPSSA, though the administrative process varies by nationality.
Expat employees don’t participate in the GPSSA system at all. Instead, UAE labor law entitles them to end-of-service gratuity, the expat equivalent of a pension benefit that their employer pays directly.
#2 Unemployment insurance requirements for UAE employers
The ILOE scheme is a mandatory insurance program covering all private-sector employees in the UAE, regardless of nationality. The scheme provides a safety net for workers who lose their jobs through no fault of their own.
Iloe contribution rates and payment deadlines
Contributions are based on two salary tiers:
- Basic salary up to AED 16,000: AED 5 per month (or AED 60 annually)
- Basic salary above AED 16,000: AED 10 per month (or AED 120 annually)
Employees can pay monthly or annually through approved insurance providers. The annual payment deadline is typically the end of the calendar year. Failure to maintain coverage can result in fines starting at AED 400.
While the contribution is technically the employee’s responsibility, you play a key role in enrollment. Many companies handle the deduction through payroll or guide their employees through the registration process.
Non-compliance can prevent your employee from renewing their work permit, which creates problems for your HR team down the line.
#3 End-of-service gratuity requirements for UAE employers
For mainland and free zone employers, gratuity is a mandatory lump-sum payment owed to employees when their employment ends.
It applies to all employees, expats and nationals alike, and represents a significant liability you’ll want to account for throughout the term of employment.
Gratuity is triggered by resignation, termination, contract completion, retirement, or death. Under UAE labor law, you must pay within 14 days of the end of the employment period. Late payments can lead to Ministry of Human Resources and Emiratisation (MoHRE) complaints and penalties.
Here’s how it’s calculated.
Gratuity calculation
The calculation depends on the employee’s years of service:
- First 5 years: 21 days of basic salary per year of service
- After 5 years: 30 days of basic salary per year of service
Example: An employee earns AED 10,000 basic salary per month and leaves after 7 years.
First, work out their daily rate: AED 10,000 ÷ 30 = AED 333 per day
Then calculate each period separately:
- Years 1–5: 21 days × 5 years × AED 333 = AED 34,965
- Years 6–7: 30 days × 2 years × AED 333 = AED 19,980
Total gratuity owed: AED 54,945
How DEWS works for DIFC employers
If you’re operating in the Dubai International Financial Centre (DIFC), you’ll follow the DIFC Employee Workplace Savings (DEWS) scheme instead of standard gratuity.
DEWS is a funded, defined-contribution savings scheme. You contribute monthly to an investment account in your employee’s name.
The employee owns the account and can take it with them if they move to another DIFC employer, which traditional gratuity doesn’t offer. Contribution rates depend on the employee’s length of service:
- Years 1–5: 5.83% of basic salary per month
- Years 6+: 8.33% of basic salary per month
You make payments through an approved DEWS provider, which invests the funds according to the employee’s chosen risk profile. These contributions replace your gratuity obligation for DIFC employees.
#4 Corporate tax for UAE employers
The standard corporate rate is 9% on taxable income exceeding AED 375,000. For income below that threshold, the tax rate is 0%.
Large multinational enterprises with consolidated global revenues exceeding EUR 750 million face a 15% Domestic Minimum Top-up Tax.
You’ll need to register with the Federal Tax Authority (FTA) and file annual returns within 9 months of your financial year-end.
Note: If your total revenue is below AED 3 million, you may qualify for small business relief. Check the FTA website for current eligibility criteria.
Corporate tax exemptions free zone employers can use
If you’re operating in a qualifying free zone, you can benefit from a 0% corporate tax rate on qualifying income if you meet specific substance and activity requirements. Even if your company is exempt, you need to register with the FTA and maintain proper documentation.
#5 Vat and other business taxes in the UAE
As well as direct employer obligations, your business may face additional tax requirements depending on your activities and revenue:
- VAT: The standard rate is 5%, and registration is mandatory if your taxable supplies exceed AED 375,000 annually
- Excise tax: Applies to tobacco products (100%), energy drinks (100%), carbonated drinks (50%), and sweetened drinks (50%)
- Municipal fees: Property-related fees vary by emirate but are typically 5% of annual rent for commercial properties
- Real estate transfer fees: Dubai charges 4% on property transactions, split between buyer and seller
VAT and excise tax don’t directly affect payroll, but they’re part of your overall compliance picture when operating in the UAE.
Those are the five main tax obligations. But there’s one more compliance requirement that affects every private-sector employer in the UAE, regardless of size or structure: the WPS.
WPS compliance: what every UAE employer must do
WPS is a mandatory electronic salary payment system that MoHRE requires for all private-sector employers. It tracks salary payments, ensuring they are timely and compliant with UAE labor law.
WPS monitors payments through approved banks and exchange houses. When you process payroll, you submit a Salary Information File (SIF) detailing each employee’s payment. MoHRE uses this data to verify you pay your employees on time and in full.
How to register and process payroll through WPS
- Register your company with MoHRE
- Open a corporate account with a WPS-approved bank or exchange house
- Generate and submit a SIF file with each payroll run
- Transfer funds to cover all employee salaries
The SIF file follows a specific format that includes employee details, salary amounts, and payment dates. Manual file creation is prone to errors, so most companies use payroll platforms to automate the process.
RemotePass local payroll, for example, automates SIF file generation and submission across all 43 UAE jurisdictions.
UAE employer tax compliance checklist
Whether you’re setting up your business for the first time or auditing your existing processes, here’s what you need to do.
1. Register with mohre and social security authorities
Before hiring your first employee, complete your business registration with MoHRE. If you’re hiring UAE nationals, also register with the GPSSA for social security. Keep your registration documents accessible for audits and renewals.
2. Set up WPS-compliant payroll
Choose a WPS-approved bank or exchange house and ensure your payroll system can generate the required SIF files. To identify any formatting issues, test your first payroll run before the actual payment date.
3. Calculate and remit monthly contributions
For UAE national employees, calculate GPSSA contributions monthly and remit them by the deadline, which is typically the 15th of the following month. Track ILOE enrollment for all your employees and keep payments current.
4. Accrue end-of-service benefits
Set aside funds for gratuity liabilities throughout the term of employment. Don’t wait until termination to calculate what you owe. For DIFC employers, make monthly DEWS contributions through your approved provider.
5. File and pay corporate tax annually
Register for corporate tax with the FTA, even if you expect to fall below the taxable threshold. File your annual return and pay any tax due within 9 months of your financial year-end. Keep financial records for at least 7 years.
Final thoughts on UAE employer tax requirements
In some ways, the UAE’s zero income tax makes payroll simpler, but gratuity accruals, GPSSA contributions, WPS compliance, and corporate tax filings add up quickly. This is especially true when you’re scaling a team or managing multiple jurisdictions.
If you want to cut through the admin, RemotePass handles all of it for you. Whether you already have a UAE entity or you want to hire without setting one up, book a RemotePass demo to see if it’s a good fit for your team.
FAQs about employer tax in the UAE
How much does an employer pay for employee taxes in the UAE?
UAE employers don’t withhold income tax from salaries, but they contribute 12.5% of gross salary to the GPSSA for UAE national employees.
For all employees, employers are responsible for end-of-service gratuity when employment ends. This equals 21 to 30 days of basic salary per year of service.
What is the employer contribution rate for UAE nationals?
Employers contribute 12.5% of gross salary to the GPSSA for UAE national employees. The employee contributes 5%, and the government adds 2.5%. This brings the total to 20% of gross salary.
Do employers pay taxes for expat employees in the UAE?
No income tax or social security applies to expat employees. However, employers are responsible for end-of-service gratuity when employment ends and for facilitating enrollment in ILOE unemployment insurance.
Is there income tax in dubai for foreigners?
Neither Dubai nor the UAE levies personal income tax on foreigners’ employment income. For tax purposes, gross salary equals net salary, though expats will need to report their earnings in their home countries.
What happens if an employer fails to pay gratuity in the UAE?
Employees can file a complaint with MoHRE, resulting in employers facing penalties such as fines or legal action. Under UAE labor law, gratuity is due within 14 days of the employment end date.
Can companies hire employees in the UAE without setting up a legal entity?
Yes. Companies can use an Employer of Record (EOR) service to remain compliant when hiring in the UAE without establishing a local entity. The EOR becomes the legal employer and handles all payroll, tax, and compliance obligations on your behalf.
