Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Basic data
In 2021, the economy of the United Arab Emirates recorded a growth of 3.8%. The world exhibition EXPO 2020 in Dubai significantly revived the real estate market and, by extension, the construction industry. State developers have launched a number of mega-projects with investments in the order of tens of billions of USD. The role of Dubai as a significant world center of trade (gateway to Africa and Asia), air and sea transport, financial and tourist center is thus further strengthened. The UAE has a strong diversification vision and is doing everything to fulfill this vision. The share of industry in the creation of GDP is to increase from the current 17% to 25% in the next 10 years. The basis of the industry is to be the production of aluminum, glass and steel. Part of the economic diversification policy of the UAE is the significant development of renewable energy sources. As of 2020, unit I of the Barakah nuclear power plant (1400 MW), II. block was completed in 2021 and two more blocks are under construction. In 2050, their share in the energy mix is to be 40%. The policy of supporting science, research and innovation is the government’s main strategic vision for the further development of the economy. In the long term, a fundamental change will become more and more visible, and that is the strengthening of the centralization of the UAE, which means the strengthening of the influence of the most powerful emirate of Abu Dhabi on decision-making processes within the entire federation. Dubai will no longer develop independently and uncoordinated, but in greater connection with its stronger neighbor. The economy of the United Arab Emirates does not have sufficient production capacity and is largely dependent on imports from abroad.
According to cheeroutdoor.com, the contribution of the UAE’s non-oil sector to the country’s overall economic performance rose to 72.3% in 2021. Growth in the non-oil sector was fueled by hotels and restaurants, wholesale and retail trade, and the health and social services sectors, which accounted for 21.3%, 14.1% and 13.8% of GDP in 2021, respectively.
The share of individual emirates in the creation of GDP: Abu Dhabi 55%, Dubai 35%, Sharjah 5%, the other 4 emirates in total 5%.
Table from MOP + additionally balance of payments, indebtedness/GDP.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 1.7 | -5.5 | 3.8 | 5.3 | 5.1 |
| GDP/population (USD/PPP) | 70,093.20 | 66,773.80 | 70,160.00 | 75,450.00 | 79,950.0 |
| Inflation (%) | -1.9 | -2.1 | 0.2 | 4.4 | 3.5 |
| Unemployment (%) | 2.2 | 3.2 | ON | ON | ON |
| Export of goods (billion USD) | 315.9 | 259.5 | 346.5 | 431.2 | 443.2 |
| Import of goods (billion USD) | 267.9 | 226.4 | 307.4 | 359.6 | 395.6 |
| Trade Balance (Billion USD) | 74.8 | 62.3 | 78.8 | 118 | 98.7 |
| Industrial production (% change) | ON | ON | ON | ON | ON |
| Population (millions) | 9.8 | 9.9 | 10.1 | 10.3 | 10.5 |
| Competitiveness | V.63 | IX.63 | ON | ON | ON |
| OECD export risk | 02.VII | 02.VII | 02.VII | ON | ON |
Source: EIU, OECD, IMD
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | 2 |
| Public debt (% of GDP) | 75.7 |
| Current account balance (billion USD) | 37.1 |
| Taxes | 2022 |
| AFTER | ON |
| F.O | ON |
| VAT | 5% |
In addition to the separate budgets of the individual emirates, the United Arab Emirates also has a federal budget. The federal budget is always designed with a zero deficit. In recent years, the budget ends with moderate surpluses. The economy of the 3 most important emirates of Abu Dhabi, Dubai and Sharjah accounts for 95% of the GDP. The Federal Budget of the United Arab Emirates for 2022 is 58.931 billion AED (approx. 16 billion USD).
Budget breakdown:
- Social development: 32.9%
- Social benefits: 8.21%
- Government Affairs: 36.5%
- Infrastructure and economic resources: 3.86%
- Financial investment: 4%
- Other federal expenditures: 14.5%.
Regarding the issue of the state budget, it is necessary to state that part of Abu Dhabi’s income from the sale of oil is not reported as budget income, but is directly transferred to reserve funds, the largest of which is ADIA (Abu Dhabi Investment Authority) owning assets with an estimated value of approximately USD 900 billion.
The state budget balance in 2021 was 2% of GDP, the public debt was 75.7% and the current account balance was USD 37.1 billion. Value added tax was introduced in January 2018 in the amount of 5%. The United Arab Emirates also decided for the first time in its history to introduce a corporate tax of 9% on net profits exceeding AED 375,000/year (approx. USD 100,000) from 1/6/2023.
Banking system
Approximately 20 local and 29 foreign banks operate in the UAE, as well as two investment banks (Arab Emirates Investment Bank Ltd., Wardley Middle East Ltd.), one specialized bank (Emirates Industrial Bank), two investment institutions (Abu Dhabi Investment Authority and Abu Dhabi Investment Council), two institutions for development (Abu Dhabi Fund for Arab Economic Development and UAE Development Bank) and 40 foreign banks have their representative offices here. The largest Emirati bank is First Abu Dhabi Bank (FAB), which was created on April 1, 2017 by the merger of National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB). First Abu Dhabi Bank has capital of $2.97 billion and assets under management of $182 billion. The second largest bank is Dubai’s Emirates NBD. These two banks, along with Abu Dhabi Commercial Bank and Mashreq Bank, control more than two-thirds of the market.
The organization of the banking and financial system in the UAE is entrusted to the Central Bank of the UAE (Central Bank of UAE), which, on the basis of Federal Law No. 10 of 1980 on the establishment of the Central Bank, the functioning of the monetary system and the organization of banking services, issues guidelines and measures to fulfill this of the law. The Central Bank issues licenses to commercial banks, regulates and controls their activities. In 1996, it tightened the conditions for the establishment of branches of foreign banks in the UAE by, among other things, establishing a minimum subscribed capital and reserves of approximately USD 500 million and demonstrable at least ten years of (successful) activities in the field.
Tax system
Personal income tax, corporate income tax and consumption tax are not introduced. The only exception is the taxation of profits of foreign banks (20%) and oil companies (55%). For this reason, there is not even a so-called DIČ (tax identification number) for companies (with the exception of registration for paying VAT, which was introduced from 1 January 2018).
In Dubai, the so-called “Municipality tax” is introduced, which replaces the real estate rental tax. Tenants of real estate pay 5% (10% for legal entities) of the average annual rental value of the real estate. Municipality tax is also applied to hotels and accommodation facilities, where a 10% service charge and 10% municipality tax are added to the room price. From January 1, 2017, the Emirate of Abu Dhabi also introduced a property rental tax in the amount of 3% of the annual rent, the so-called “municipality fee”, which the tenant pays in his monthly water and electricity bill. In the Emirate of Sharjah, there is a property rental tax of 2.5% which is payable at the annual lease renewal. The absence of a primary tax burden is to some extent compensated for, in addition to the indirect taxes mentioned above, by burdens in the form of high living costs (rents, services, various fees,
From 1 January 2018, a value added tax of 5% was introduced. About 100 items and services falling under the health and education sector, transport services, and the sale of used residential real estate are exempt from the tax. VAT registration is mandatory. The Federal Tax Authority was established to collect and administer VAT.
The United Arab Emirates has decided for the first time in its history to introduce a corporate tax of 9% on net profits exceeding AED 375,000/year (approx. USD 100,000) from 1 June 2023. Of the GCC countries, only Bahrain remains, which has not yet introduced this tax. The highest corporate tax of the GCC countries is Saudi Arabia (20%), while Oman has 15% and Qatar and Kuwait 10% across the board. At 9%, the UAE will remain with the lowest corporate tax in the entire region.
