Are Personal Loans Taxable in the UAE ?

By Nitesh - 18 Jun 2022 Last Updated: 05 Jul 2022
Are Personal Loans Taxable in the UAE ?

The UAE tax system is a simple but also a bit complicated process to understand . This  is a guide to let you know everything that you should know when it comes to the topic of Taxation in the Gulf Country – from the absence of income tax and special zones for businesses that are tax-free to VAT and property levies.

One  most important  fact is that  when it comes to the tax system in UAE there is no federal income tax! However, despite this economical fiscal perk, you should not yet start packing up your bags thinking that you can get away with no tax. This guide will help in detailing the taxes that one still has to bear as an individual or as a business while residing in the UAE .

Overview of UAE Tax System

UAE’s tax system, or rather, the lack of taxes paid or any tax details showing up in one’s salary slip, is one of the main reasons that attracts many of the expats to this region. The employees are not required to pay any income tax, and there is no system for inheritance and corporate taxes, among much more. 

Until January of the year 2018, there wasn’t any VAT either. This Value Added Tax that is levied on the sale and supply of the goods and services was introduced at a comparatively low percentage i.e., 5% - but comes with an addition of an excise tax. This is a tax that is charged  by the government on some products that are considered to be harmful to the environment or to human health.

Let’s Understand What is Personal Loan in UAE?

The personal loans are the unsecured loans and  to obtain them you do not require the collateral or any guarantors in UAE. The bank provides the personal loan to the amerity and UAE resistance. You are the forefinger but you have the resistance visa and can apply for the personal loan in the UAE. Personal finance is the loan you can utilize for higher education, international trips or starting a new venture.

Employed individuals in the UAE who are also GCC nationals (including UAE) are subject to 17.5% of a social security regime. The employees that are UAE nationals have to pay 5% which is automatically deducted and reflected in their salary slip and further the 12.5% is borne by the employer. 

The residents of the GCC region may be charged with different contributions to the security basis in their home country.Personal loan, one of the fastest growing types of loans around the world, does not have a security backing in an asset. Therefore, the banks call it an ‘unsecured loan’ and amounts are never as high as those one would get for a secured loan. For UAE expats, the maximum amount one can get is either AED 1 million or 20 times of monthly salary, whichever is lower. The maximum loan period is 48 months i.e. 4 years

Read More- Personal Loan Interest Rate and Personal Loan Calculator in Dubai

Types of Tax in UAE Regime

There two types of tax which every individual need to know before taking loan:-

VAT

The rate of VAT charged is 5% in the UAE. However, it is 0% for the following:

  • Goods and services  as well as   exports that are for outside the GCC

  • International transportation

  • Freshly constructed properties that are residential

  • Investment-grade precious metals

Some of the healthcare and education services rate is 5% for the Emirates. Companies must register for the Value Added Tax if their taxable supplies along with imports exceed the value of AED 375,000. The companies may register voluntarily if they are unable to meet the amount of AED 375,000 but they meet a benchmark of AED 187,500.

Excise Tax

Excise tax came into existence in the year of 2017 and is an indirect tax charged on the goods that are considered to be of harm to human health or the environment. The UAE Government is levying excise tax to reduce consumption of unhealthy and harmful commodities while also raising revenues for the government that can be spent on beneficial public services.

Read more- How can I Start a Business in the UAE to Save Money on Taxes?

Best Personal Loan in UAE

Some of the following Personal Loan in UAE are as follows-

ADCB personal loan

  • Interest Rate Flat:- 4.75%

  • Reducing Interest Rate:- 8.86%

  • Minimum Salary: AED 5000

  • Salary Transfer: Mandatory

Rak Bank

  • Interest Rate Flat 3.99%

  • Reducing Interest Rate 5.99%

  • Minimum Salary: AED 3000

  • Salary Transfer: Mandatory

Dubai islamic Bank

  • Interest Rate Flat:6:00%

  • Reducing Interest Rate 11:00%

  • Minimum Salary: AED 3000

  • Salary Transfer: Not Mandatory

Emirates NBD

  • Interest Rate Flat 8.39%

  • Reducing Interest Rate 14.99%

  • Minimum Salary: AED 10,000

  • Salary Transfer: Not Required

FAB

  • Interest Rate Flat 4.99%

  • Reducing Interest Rate 9.29%

  • Minimum Salary: AED 7000

  • Salary Transfer: Mandatory

ADIB

  • Interest Rate Flat 4.82%

  • Reducing Interest 8.74%

  • Minimum Salary: AED 8000

  • Salary Transfer: Mandatory

Mashreq

  • Interest Rate Flat: 6.49%

  • Reducing Interest: 9.29%

  • Minimum Salary: AED 7000

  • Salary Transfer: Mandatory

 

Noor bank

  • Interest Rate Flat: 3.33%

  • Reducing Interest:6.29%

  • Minimum Salary: AED 8000

  • Salary Transfer: Mandatory

Conclusion

Taking a loan is easy in the UAE and the interest rate is lower as compared to other countries . Since it's a long process, before taking a loan any individual should consult with a professional like "Dhanguard LLC" to get the best piece of advice and support .Contact our experts at Dhanguard in Dubai if you require assistance regarding Banking Services in UAE.

Getting Personal loan is made simple and hassle-free with Dhanguard Personal finance service in Dubai, UAE. We provide you online Personal loan service with the minimum possible trouble including paperwork & payments.

By Nitesh

18-Jun, 2022

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Personal Loan Related FAQ

Frequently Asked Questions

  • Will the demise of the personal loan applicant affect the family?

    Personal loans that are taken from banks are automatically insured at a nominal fee and in the event of any premature demise the partner insurance company covers the entire loan amount, protecting the family from any financial risk.

  • Do I need to provide security for my loan?

    Assets are not required as security against your personal loan.

  • Is there any advance costs involved when applying for a personal loan?

    Normally, the only advance costs pertaining to a personal loan are dispensation and insurance fees.

  • What is Payment Deferment?

    According to the issuer's policy, some lenders enable the borrower to 'defer' or postpone a month's payment once every few months. To take advantage of these benefits, the borrower must make timely payments. Deferred payments do not reduce the principal amount, and hence will not lower the lowering personal loan interest rate in UAE.

  • What are Top Up loans, exactly?

    Top-up or add-on personal loans are renewable loans that can be used to supplement an existing loan after the borrower has paid a certain number of payments. Top-up personal loans in the UAE are used to reward loyal, non-delinquent borrowers by providing longer tenors or reduced interest rates, depending on the bank's policy.

  • Is it Possible for a Student to Apply for a Personal Loan in the UAE?

    No, unless the bank expressly states otherwise or the student has a guarantor, a student cannot apply for this loan. The loan's eligibility restrictions include a minimum monthly salary and a maximum age range of 21 to 65 years. Some lenders may require a salary transfer and confirmation of employment with a lender-approved organization. However, some lenders offer personal loans in the UAE without requiring a company listing. As a guarantor, you can always apply for a student/education loan.

  • Should You take out a Personal Loan to fund my Startup in the UAE?

    It would be up to you to decide. You should be informed that you must pay the loan's EMI from the beginning of the month, followed by the disbursal. You can take out a loan if you're confident that you'll be able to pay the monthly EMIs at the very least.

  • What happens if You don't pay my Personal Loan EMI?

    If you're having trouble paying your loan EMI, contact your bank to see if there's anything you can do. If you try to avoid the problem, it will only get worse. Banks will issue warnings before dispatching debt collectors. If you do not respond, they may designate you as a defaulter and may even take you to court for the unpaid personal loan in UAE. As a result, it is preferable that you call the bank and explain your circumstances. They may be able to lower your EMIs in some cases.

  • Is there any Benefit to taking out the Personal Loan's Life Insurance Plan?

    Almost all personal loans include a life insurance plan for applicants. This insurance coverage protects the borrower from having to make payments in the event of a fatal disease, permanent incapacity, or death. Some personal loans in Dubai also include life insurance plans that pay back the entire loan amount to the policyholder's family members in the event of the policyholder's death.

  • How may a Personal Loan in Dubai be used to Pay Off Credit Card Debt?

    A personal loan can be used to pay off credit card debt. By consolidating the debt, the loan might assist in the payment of the credit card bill. When compared to credit cards, it has lower interest rates. Even if the applicant has a personal loan minimum wage of AED 2,000, you can return the loan in easy monthly installments over the following few years.

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