The absence of inheritance and gift taxes in the United Arab Emirates offers significant advantages in transferring wealth between generations; however, planning remains important. Thoughtful planning of asset transfers – whether through a will or during one’s lifetime – can save tens or even hundreds of thousands of dollars, especially when dealing with assets that have high capital gain potential or tax implications in other countries. In this article, we will highlight the advantages of investments in the United Arab Emirates, compare the situation to Israel and other countries, and discuss the importance of planning and drafting a will for efficient inheritance realization.
Currently, the United Arab Emirates (Dubai, Abu Dhabi, etc.) does not impose any tax on the transfer of assets through inheritance or gift – not from the testator, not from the donor, and not from the recipient. This fact makes it an attractive destination for the intergenerational planning of assets and family investments.
Why is it still important to plan asset transfers in advance?
Despite the absence of inheritance tax in the United Arab Emirates, it’s important to understand that asset transfer planning is not just a tax matter – but primarily a legal, regulatory, and family issue. Early inheritance planning allows for efficient handling of bureaucratic procedures, prevention of objections, and anticipation of potential tax liabilities in other countries.
Inheritance Taxation in Israel Compared to the United Arab Emirates
In Israel, like the United Arab Emirates, there is no estate tax or inheritance tax. However, in certain cases, tax may be imposed on the full value of the inheritance received, such as capital gains tax when selling the asset.
The tax treaty between Israel and the United Arab Emirates includes provisions that can prevent double taxation. Still, it’s important to plan the reporting and filing accurately to avoid double payment.
To read the Israel-UAE tax treaty in English on the Ministry of Finance website, click here.
International Comparison: Inheritance Tax in Different Countries Around the World
Many countries worldwide implement inheritance tax policies, with tax rates varying significantly from country to country:
- South Africa: Tax rate of 20%-25%
- France: Tax rate of 5%-60%
- Germany: Tax rate of 7%-50%
- Belgium: Tax rate of 3%-80%
- Netherlands: Tax rate of 10%-40%
- Brazil: Tax rate of 4%-8%
On the other hand, several countries have chosen to completely abolish inheritance tax, including Austria, Norway, and Sweden, similar to the United Arab Emirates.
Making a Will in the United Arab Emirates – The Key to Tax Savings and Dispute Prevention
Despite the absence of inheritance tax, making a will in the United Arab Emirates is important due to local inheritance laws. Heirs don’t always receive the inheritance smoothly. Sometimes complex procedural steps are needed to obtain a probate order or permission to realize the assets. A will allows you to determine the distribution of assets according to the testator’s wishes and prevents future disputes.
Creating an organized and detailed will can ensure that assets are transferred smoothly and efficiently to the heirs. The will should include the wishes of the deceased but must also be adapted to the requirements of the law so that its validity is not compromised.
In the United Arab Emirates, for Muslim residents, inheritance is primarily regulated by Sharia law, which dictates a fixed distribution of assets among legal heirs. Making a will allows the testator to bequeath up to one-third of their estate to someone who is not an heir according to Sharia law.
In contrast, non-Muslim residents and foreigners can choose to apply the inheritance laws of their home country or create a will that explicitly states how their assets will be distributed. This choice can have a substantial impact on inheritance planning and its future realization.
If you own assets in the United Arab Emirates, our recommendation is to make a will to ensure that the transfer of assets is done as smoothly as possible. A will can prevent misunderstandings or lengthy legal processes and ensure that the process proceeds in an orderly manner even after the death of the deceased.
Practical Information on Realizing Inheritance in the United Arab Emirates
Realizing an inheritance in the United Arab Emirates, especially for non-Muslim residents, can be a complex process. Documents typically required include the deceased’s death certificate, a will (if one exists), copies of the heirs’ ID cards, property ownership documents, bank account confirmations, and more.
It should be considered that the process of realizing an inheritance can take between several months and a year or more, depending on the complexity of the testator’s estate, the number of heirs, the existence of a will, and other factors.
Received an Inheritance in the United Arab Emirates? 6 Steps for Proper Realization of Inheritance from the United Arab Emirates
1. Clarification of Factual and Legal Background
First, check the type of asset that is to be inherited, its location, the identity and status of the heirs, the value of the asset, and more.
2. Checking the Timing and Location of Inheritance Realization
Consider whether it’s advisable to realize the asset now, and if so, where is it better to realize it – in the United Arab Emirates or in Israel?
3. Regulatory and Banking Aspects
It is recommended to check the costs of money transfers, whether there is a need to open an account in [Country Name] or another country for the purpose of transferring funds, what approvals are required, etc.
4. Planning the Asset Transfer
Consider whether to transfer the asset itself or its proceeds, and what the implications are in terms of tax, exemptions, deductions, etc.
5. Checking the Future Effects on the Asset
It is recommended to examine the future effects on the asset – for example, a future sale of the asset will often be subject to capital gains tax in Israel as well.
6. Transferring the Asset to Israel
Performing all necessary actions, submitting documents, handling matters with banks in the United Arab Emirates and Israel, and executing the asset transfer.
How Can We Help?
The goal is to transfer the inheritance to heirs in Israel in the most tax-efficient way, while addressing legal issues in Israel and the United Arab Emirates and issues related to banking and regulation. For example, whether it’s better to realize a certain asset in the United Arab Emirates or transfer it to Israel; how to transfer inheritance funds to a bank account in Israel; how to use various exemptions between heirs; whether to give gifts during lifetime; whether to establish a trust, and more. Strategic planning, according to law and tax treaties, is essential to minimize tax liabilities.
Nimrod Yaron & Co. has extensive experience in personally and professionally accompanying Israelis with assets or inheritances in many countries around the world, including the United Arab Emirates, from the first stage of planning, through dealing with authorities in the United Arab Emirates and Israel, to transferring inheritance funds to the heir’s bank account.
We work with all relevant professional entities in the United Arab Emirates and Israel and offer legal solutions both in terms of taxation and banking, tailored to the circumstances of the case.
If you have inherited an asset or wish to bequeath assets in the United Arab Emirates in the future, our team of lawyers specializing in international taxation and inheritance law will be happy to advise you on this matter – contact us for an initial consultation.
Q&A
Do I need to pay tax in Israel on an asset inherited from Dubai?
No. There is no inheritance tax in Israel. However, capital gains tax may apply after selling the asset. It’s important to check what is the recommended timing for selling the inherited asset.
Why is it important to plan the transfer of assets between generations in advance?
The transfer of assets between generations from abroad is not just a family matter but also a tax and economic issue. Early planning, considering legal issues in Israel and abroad, can save a lot of money and prevent legal complications.
What are the implications in case there is no will?
If you are a Muslim resident, in the absence of a will, the inheritance will be distributed among the legal heirs according to Sharia law. If you are not Muslim, you have the option to apply the inheritance laws of your country of birth or according to civil law.
What documents are required for the process of realizing an inheritance in Abu Dhabi?
To realize an inheritance in the United Arab Emirates, documents such as a death certificate, will (if exists), copies of heirs’ ID documents, asset ownership documents, bank account confirmations, and more are required.
How long does the process of realizing an inheritance in the United Arab Emirates take?
It should be considered that the process of realizing an inheritance in the United Arab Emirates can take between several months to a year or more, depending on the complexity of the deceased’s estate, the number of heirs, the existence of a will, and other factors.
