UAE's Tax Authority Updates on the Social Security Scheme for Emirates employees

The UAE Federal Decree Law No. 57 of 2023, effective from October 2, 2023, marks a significant overhaul in the pension’s framework, superseding the previous UAE Federal Law No. 7 of 1999 as amended.

 Outlined within the decree are five pivotal provisions:

·Augmentation of monthly contribution rates under the new scheme.

·Enhancement of the pensionable salary cap.

·Clarity in defining service periods.

·Establishment of retirement guidelines and exceptions.

·Emphasis on the accuracy of data submitted to authorities and precise calculations and payments of contribution amounts owed  to GPSSA.

These reforms signify a substantial shift in the pensions landscape, aiming to improve contribution rates, redefine eligibility criteria, and ensure precision and reliability in data submission and contribution disbursements to GPSSA.

Certainly, here's a streamlined version:

1.New Contribution Scheme Details:

   ·Employers: 15% (or 12.5% for those with an applicable salary of AED 20,000+)

   ·Employees: 11% (increased from 7.5%)

   ·Government: 2.5% (applicable if the monthly salary is below AED 20,000, covering the difference to support Emiratis)

2.Pensionable Salary Caps:

   ·Public Sector: AED 100,000 (previously AED 50,000)

   ·Private Sector: AED 70,000 (previously AED 50,000)

3.Eligible Service Periods:

   ·Consolidation of prior service periods allowed for pension calculation.

   ·Contributions continue during leave periods, except for specific circumstances.

4.Retirement Guidelines and Exceptions:

   ·Minimum retirement age: 55 years with a minimum subscription period of 30 years.

   ·Flexibility for working mothers and individuals pursuing further education.

   ·Option to purchase additional service periods under specific conditions.

5.Data Accuracy and Submission:

   ·Employers required to submit accurate data affecting contribution calculations to GPSSA.

6.Calculation and Payment of Contributions:

   ·Pension calculation based on the average salary of the last six years.

   ·Transitional phase for existing employees until January 1, 2024, to adjust to new contribution rates.

   ·New employees must adhere to the new rates (26% or 23.5%) upon joining from October 2023.