General Accountant, Elnaggar & Partners
In recent years, the United Arab Emirates (UAE) has become an undeniable tourist hotspot. Its mix of modern skylines, rich cultural history, and luxury experiences that cannot be found anywhere else has captivated travelers. From the awe-inspiring design of Dubai to the historical treasures of Abu Dhabi, the UAE has become a magnet for travelers looking for a taste of luxury and adventure. But behind this tourism lies a financial facet that underpins the nation's thriving tourism sector: the tourist tax.
The tax landscape in the UAE extends far beyond just the Value Added Tax (VAT). In this dynamic fiscal environment, various forms of taxes and levies are in place to support government revenues and ensure the smooth functioning of public services. While VAT is a significant contributor, there are several other types of taxes and charges that individuals and businesses should be aware of including service charges, municipality fees, and city taxes.
One notable taxation element in the UAE is the tourist tax. This specific tax is defined separately from the aforementioned service charges, municipality fees, and city taxes. The tourist tax is distinct in that it primarily targets visitors and tourists who are staying in accommodations such as hotels, resorts, and other lodging establishments. This tax is levied in addition to any city or municipality taxes that might apply.
The tourist tax is an essential source of revenue for the UAE as it helps offset the costs associated with tourism infrastructure, marketing, and promotion. It also ensures that the burden of financing these activities is shared between tourists and the local population. The revenue generated from the tourist tax is crucial for maintaining and enhancing the country's status as a top tourist destination while providing visitors with world-class experiences during their stay.
Among all these varying charges imposed, this Practice Note focuses only on the tourist tax as defined above which may be applied in addition to city or municipality taxes.
In the UAE, a tourist tax is imposed in three Emirates: This tax is imposed and administered differently in each Emirate, namely:
In contrast to their counterparts, Fujairah, Ajman, Sharjah, and Umm Al Quwain do not specifically institute a tourist tax. Instead, these Emirates predominantly rely on a mix of other forms of taxation for tourists: city or municipality taxes, service charges, and the Value Added Tax (VAT).
The fixed tourist tax applies per room and per night in the following accommodations:
The proportional fee applies on the total hotel bill.
The current scenario is less complex in comparison to making reservations directly with hotels. The majority of tour operators include all applicable taxes and charges associated with hotel accommodations into the overall cost of the vacation package. The majority of tour providers, but not all.
Depending on the Emirate, the tourist tax rate will vary:
In addition to these temporary adjustments, Abu Dhabi also applies other charges to hotel bills. These include a municipal tax of 4% (which was reduced to 2% between 2018 and 2020), a service charge of 10%, a 5% VAT, and the tourist tax of AED 15 per night (reduced AED 10 between 2018 and 2020). It is important to mention that the "Tourism Dirham" fee is not dependent on the star rating of the hotel and is charged uniformly unlike Dubai and Ras Al Khaimah which has its own classification of categories.
Overall, the tourist tax plays a pivotal role in sustaining the UAE's position as a top tourist destination and helps ensure that the costs associated with tourism are shared between tourists and the local population. As the nation continues to attract visitors with its blend of modernity and cultural richness, the careful administration of these taxes remains crucial for supporting the country's growth and enhancing the visitor experience.
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