How Dubai Makes Money Without Tax

When you look around Dubai, it’s easy to see why all you might think of is opulence, luxury and wealth. People live in luxurious apartments or exclusive villages, drive around in luxury cars and shop for designer brands like there’s no tomorrow!

Despite growing from a small fishing village, Dubai blossomed into a mega city in a shorter time than other cities would. And it doesn’t collect income taxes!

So, how does Dubai make money without collecting taxes? Let’s find out!

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What are Dubai’s main sources of income?

Dubai makes money primarily through tourism, investments, fees, and oil and natural gas.

However, yes, the city also earns money from taxes charged on businesses, properties and other goods and services. They also collect fines from individuals and businesses that violate the city’s rules and regulations.

Tourism

The tourism sector is Dubai’s primary source of income. In 2017, tourism contributed USD 41 billion to the city’s GDP growing by a staggering 138% over the last 10 years.

Dubai’s tourism has been doing well ever since with more than 14.36 million tourist arrivals in the city in 2022 alone.*

Most of these visitors came from the GCC and Western Europe and India had the highest number of tourists entering Dubai at 1.8 million.

Dubai also ranked number one in tourist spending in the same year with more than USD29.4 billion, according to the World Travel and Tourism Council.

For many years, Dubai relied heavily on its oil and natural gas reserves for its income.

But former ruler Sheikh Rashid bin Saeed Al Maktoum realized that this resource is not infinite.

So, he started looking for ways to diversify Dubai’s economy to be more self-sufficient without relying on oil and gas. This is why the city invested substantially in making Dubai a more tourism-focused city.

It designed the world’s biggest man made island, the world’s tallest skyscraper and other landmarks that would make Dubai a magnet for tourists.

Since then, the city has been welcoming millions of tourists each year and this year, Dubai already surpassed its pre-pandemic international visitors by 20% in the first quarter alone.*

With 8.55 million visitors from different parts of the world, Dubai continues to be a powerhouse when it comes to tourism.

This also means that the city is earning well in this area with accommodations, transportation, attractions and other tourism-related services pooling in a substantial revenue for Dubai.

Investments

Aside from tourism, Dubai also focused heavily on improving its trade sector. Today, the city is one of the Middle East’s major trade hubs, especially in the areas of export, information technology and finance.

It’s even dubbed as the “Gulf Tiger” for its contribution to the UAE’s national GDP being its second wealthiest emirate. It’s booming faster than its counterparts investing substantially on infrastructure, transportation, information and communications technology.

Infrastructure Projects

With the construction boom in 2000, the city invested in some of the world’s biggest infrastructure projects including:

Port of Jebel Ali. The port is the world’s largest man-made harbor and the ninth busiest port that catapulted Dubai as a major trading hub in the Middle East.

The Palm Islands. One of the most ambitious projects to date, the Palm Islands consist of three artificial islands including Palm Jumeirah, Palm Jebel Ali and Deira Islands.

Burj Khalifa. The iconic skyscraper holds many architectural records and remains to be one of the most coveted addresses in Dubai for both individuals and businesses.

Dubai Marina. This massive luxury residential complex is the largest man made marina in the world.

Al Maktoum International Airport. This USD 80 billion project will be completed in 2025 and it will make Al Maktoum International Airport the largest airport in the world.

Business Bay. This prestigious address consists of 240 residential and commercial buildings. It’s also a highly coveted address for businesses in Dubai.

Dubai also invested in several free-trade zones where businesses to encourage foreign investors to set up their operations in the city:

Dubai Airport Free Zone. DAFZ is one of the top free economic zones in Dubai contributing to 4.7% of the city’s GDP.

Dubai World Trade Center. One of the first trade zones in the city, DWTC has been the venue for many trade events in Dubai since 1979.

Dubai International Financial Center. Spanning over 100 hectares, DIFC is the financial hub of the Middle East with businesses specializing in banking, insurance, wealth management and financial services.
Dubai Multi Commodities Center. DMCC is the largest free trade zone in the UAE that started in 2002. This area in the Jumeirah Lake Towers district caters to companies in four primary sectors: energy, precious commodities, steel and metals, and agricultural commodities.

Dubai Silicon Oasis. DSO is a free trade zone located in the Nadd Hessa area that caters to tech companies and has over 235 smart residential apartments and high-tech plug and play offices that businesses can rent.

Earlier this year, the Dubai government also announced that it will be investing in a USD 8.7 trillion economic plan that will be executed over the next 10 years.

The city’s ruler His Highness Sheikh Mohammed bin Rashid Al Maktoum tweeted that the government aims to make Dubai one of the top four global financial centers by increasing its FDI by USD 177 billion in the next decade.

He also added that more than 300,000 investors are helping the city to be the fastest growing global city in the world.

Transportation

Dubai’s transport, logistics and storage industry is one of the biggest contributors to its economy with over USD 12.5 billion in revenues in 2017 alone. It also accounts for 11.2% of the city’s economy.

This industry covers areas including:

Metro, Road and Rail. The Metro and Tram are Dubai’s primary transport services along with taxis. Salik, Dubai’s electronic toll gate operator also continues to enjoy good revenues over the years.

Ports and Shipping. The world-class Port of Jebel Ali is considered the largest box shipping port between Rotterdam and Singapore. It’s also seen as the largest in the region with a capacity of 19.3 million twenty-foot equivalent units (TEUs) per annum.

Air Freight and Passengers. Both the Dubai International Airport and Al Maktoum International Airport play significant roles not only in transporting passengers but also in moving freight across the world. DXB is considered the busiest airport in the world in terms of transit traffic and when completed, Al Maktoum International Airport will be the biggest of its kind.

Information and Communications Technology

Dubai’s information and communications technology (ICT) sector has been a strong contributor to its GDP accounting for 4.1% of its revenues in 2018 alone.*

With the city’s goal of becoming a pioneer in many major technological advancements, it invested in the Museum of the Future. This museum is dedicated to giving us a glimpse of what the future will be like and how technology will help us live better lives.

Dubai also invested in zones focusing solely on technology and inviting big tech companies like Samsung, IBM, Microsoft, Accenture, Oracle, Cognizant, Intel and Dell.

Dubai Internet City is the ICT hub of the city offering a space for companies to work on new innovations and technological advancements.

The city also supports different incubator and accelerator companies that are working towards creating technologies that will help reshape the future of the world.

Oil and Natural Gas Reserves

Dubai used to rely a lot on its oil and gas sector for its economy. Known as “black gold,” oil has made the city and the rest of the country one of the richest places in the world.

But today, the oil and gas sector only contributes less than 1% of Dubai’s GDP due to diversification, although it still plays an important role in the city’s revenues.

Dubai produces over 4 billion barrels of oil, the second largest production after Abu Dhabi that tops the list at 92 billion barrels.

The UAE government also announced in 2020 that it discovered more than 80 trillion cubic feet of gas resources in Jebel Ali. This will add to the city’s revenues once fully utilized.

Dubai Petroleum is the leading company in the city’s oil and gas sector operating on five offshore oil fields that all come from Jebel Ali:

Rashid Field. This field was discovered in 1973 and became fully operational in 1979 consisting of three platforms.

Fateh Field. The oldest field operated by Dubai Petroleum, it began production in 1969 with 47 platforms consisting of 31 satellite wellhead platforms and 16 central complex platforms.

South West Fateh Field. Discovered in 1972, this field began operations in 1979 with 23 platforms consisting of 13 satellite wellhead platforms and 10 bridge linked central complex platforms.

Jalilah Field. The newest among all offshore fields operated by Dubai Petroleum, this field currently has two platforms.

Falah Field. Discovered in 1972, this field started operations in 1978 and now has four platforms.

Fees and Fines

The city has a very strict rule on its roads and traffic violations often mean hefty fines including:

Driving in a way that poses a threat to the driver’s lives or the lives of others, and harms both private and public properties – AED 2,000

Jumping a red signal – AED 3,000

Driving under the influence of alcohol narcotics and other related substance – Amount determined by the court

Entering prohibited areas – AED 1,000

Operating construction, industrial or mechanical vehicles without permission from licensing authority – AED 1,500

Driving against traffic – AED 600

Driving an unlicensed vehicle or one without insurance – AED 500

Driving with an expired driving license – AED 500

Driving using a different license – AED 400

Is Dubai Tax Free?

It’s true that Dubai doesn’t charge income taxes to individuals. But the city – and the country – is not completely tax free contrary to popular belief.

In fact, Dubai still earns quite a sum from levying corporate taxes on some industries, especially foreign banks and oil companies.

It also charges excise tax on products that are deemed harmful to the environment or human health. Of course, there’s Value Added Tax on most of the goods and services being sold in the city.

You can also expect to pay taxes when transferring property rights when you’re purchasing a house. You also need to pay taxes for inheritance and in some cases, for the use of some tourist facilities.

Taxes may also be charged in some free trade zones.