Abu Dhabi named world's most tax-friendly city as UAE gains favour with the wealthy

Al Etihad

3 days ago

25 July 2025 00:53
ISIDORA CIRIC (ABU DHABI)Abu Dhabi has been ranked the most tax-friendly city in the world in a new report by Multipolitan, with Dubai following close behind in second place. The UAE's twin financial centres outperformed traditional financial hubs like Singapore due to their low effective tax exposure, treaty coverage and strong governance frameworks, strengthening the country's status as a preferred destination for cross-border wealth.The index, published in Multipolitan's 'Wealth Report 2025 – The Taxed Generation', ranks cities located within the world's 20 most tax-efficient countries. It combines three weighted metrics — tax rates across five key categories, double taxation treaty coverage, and regulatory quality based on World Bank indicators.Cities were included only if they met thresholds for macroeconomic and political stability, narrowing the original pool of 164 jurisdictions.Abu Dhabi led with a score of 637.1, just ahead of Dubai's 635.1. While both benefit from the UAE's zero personal income tax regime, the capital edged out its neighbour due to slightly lower property-related fees — transfer and municipality charges that are often seen as proxy taxes in jurisdictions without formal levies.The report's authors said their approach focused on 'real-world outcomes' rather than political rhetoric, measuring where wealth 'faces the fewest frictions'. In practice, that meant evaluating five tax categories (personal, corporate, inheritance, wealth, and capital gains), before layering in treaty networks and regulatory stability. The UAE's broad Double Taxation Avoidance Treaty network helped lift both cities on the index's second metric, while high scores on the World Bank's Regulatory Quality indicator added an extra boost to their leadership.'Dubai, Doha, and Abu Dhabi perform strongly across all three metrics, with Abu Dhabi and Dubai retaining the top position when combining tax environment an governance considerations,' the report said. 'When factoring in double taxation avoidance as an indicator of tax system accessibility, Abu Dhabi, Dubai, Doha, and Kuwait City emerge as top performers.'While the UAE's tax regime has evolved in recent years — introducing a federal corporate tax in 2023 and a 15% minimum tax for large multinationals beginning in 2025 — it has maintained a favourable overall environment for individuals. Qualifying Free Zone entities can still access 0% corporate tax rates, and reforms around audit standards, beneficial ownership disclosures, and FATCA/CRS compliance have been designed to bring the system closer to international norms without alienating mobile capital.The Multipolitan rankings are the latest in a string of research highlighting the UAE's draw for high-net-worth individuals. In April, Savills ranked Dubai and Abu Dhabi as the top two cities worldwide for wealthy individuals to live and work, citing lifestyle, governance, climate, and safety alongside tax factors. The report found that more than 6,700 ultra-wealthy individuals relocated to the UAE last year, many from higher-tax jurisdictions like the UK, where marginal rates can reach 45%.Then in June, the Henley Private Wealth Migration Report projected the UAE would attract 9,800 new millionaires in 2025 — more than any other country. The value of capital associated with these moves is estimated at $63 billion, with the UAE recording a 98% growth in its millionaire population over the past decade.Multipolitan's report also looked at longer-term trends through two other metrics — the Wealth Preservation Cities Index 2015-2025 and the Smart & Sustainable Cities Index — with both UAE cities making the top 25.On the Wealth Preservation Cities Index, Abu Dhabi ranked 22nd and Dubai 24th on this list, marking the only Gulf entries in a group otherwise dominated by Western cities. The methodology here focused on inflation, currency stability, earnings, asset growth, and governance, before evaluating urban hubs on indicators such as property values and quality of life.The Smart & Sustainable Cities Index, meanwhile, ranked Abu Dhabi in 23rd and Dubai close behind at 25th. The index examines long-term potential for preserving wealth through digital readiness, climate resilience, and political stability.
The report places the UAE's performance within a broader trend of the Gulf region's coordinated drive to attract mobile capital. Seven cities from the region landed in the global top 20, including Manama (4th), Doha (5th), Kuwait City (8th), Riyadh (12th) and Muscat (17th).