Tax advisory and planning in the UAE.

UAE corporate tax at 9% applies to taxable income above AED 375,000 for most UAE-incorporated companies and foreign entities with a permanent establishment in the UAE. Income up to AED 375,000 is taxed at 0%, giving smaller businesses a full exemption at the lower threshold.

Key exemptions and special treatments include:

• Qualifying Free Zone Persons (QFZPs): eligible for a 0% rate on qualifying income, subject to adequate substance, active conduct of business and compliance with de minimis rules under Cabinet Decision No. 55 of 2023
• Extractive businesses: oil, gas and natural resource extraction remain subject to emirate-level taxation and are carved out of the federal CT regime
• Government entities and qualifying public benefit organisations: exempt by default

Misclassifying free zone income as qualifying when it does not meet the conditions is one of the most common (and most costly) errors under the current regime. See our guide to corporate tax in UAE free zones for a detailed breakdown of the qualifying conditions.

A foreign company becomes subject to UAE corporate tax when it has a permanent establishment (PE) in the UAE, even without a locally incorporated entity. A PE can arise from a fixed place of business such as a branch, office or construction site operating beyond six months, from a dependent agent who habitually concludes contracts on the foreign company’s behalf or from service activities carried out in the UAE for an extended period.

Foreign companies earning UAE-sourced income that does not flow through a PE may still be subject to withholding tax, depending on the payment type and applicable treaty. The UAE’s domestic WHT rate is currently 0% on most payment types, but treaty provisions and substance requirements affect how that income is treated at the receiving end.

The UAE requires related-party transactions to be priced on an arm’s length basis in line with OECD Transfer Pricing Guidelines, as incorporated under the Corporate Tax Law and Ministerial Decision No. 97 of 2023.

Documentation obligations apply to:

• Companies with revenues above AED 200 million, which must prepare a Local File and Master File
• Members of multinational groups with consolidated revenues above AED 3.15 billion, which are also subject to Country-by-Country Reporting (CbCR)
• All taxpayers with related-party transactions, who must disclose these in their tax return via a Disclosure Form regardless of size

Documentation must be contemporaneous – prepared before the filing date, not after an FTA review is triggered. Common areas of scrutiny include intercompany loans, management fee arrangements and IP licensing. For an overview of UAE corporate tax filing obligations more broadly, see our UAE taxation overview article. 

The UAE has over 140 double tax agreements (DTAs) in force, one of the broadest treaty networks in the world. These treaties can reduce or eliminate withholding tax imposed by the foreign jurisdiction on dividends, interest, royalties and service fees paid to a UAE entity.

To access treaty benefits, a UAE entity must hold valid UAE tax residency, which for companies requires incorporation or effective management in the UAE, and obtain a Tax Residency Certificate (TRC) from the Federal Tax Authority, issued annually. The TRC, along with any jurisdiction-specific claim form, must be submitted to the foreign counterparty or authority before the payment is made.

Many treaties also include limitation-on-benefits or principal purpose test provisions, which can deny treaty access where the structure lacks commercial substance. Substance requirements under the Economic Substance Regulations are therefore directly relevant to treaty planning.

UAE Economic Substance Regulations (ESR), introduced under Cabinet Resolution No. 57 of 2020, require businesses carrying out certain activities to demonstrate genuine economic substance in the UAE. The regulations were introduced in response to EU and OECD pressure on UAE tax practices and remain in force.

Relevant activities that trigger ESR obligations include:

• Banking, insurance, and investment fund management
• Lease-finance, headquarters, and shipping activities
• Holding company, intellectual property, and distribution and service centre activities

Businesses carrying out a relevant activity must file an annual ESR notification and, where they earn income from that activity, an ESR report demonstrating adequate employees, physical presence and core income-generating activities conducted in the UAE. Non-compliance can result in penalties of up to AED 400,000 and automatic exchange of information with foreign tax authorities under international reporting frameworks. For a broader overview of ongoing compliance obligations, see our guide to UAE corporate compliance requirements.

The UAE imposes no withholding tax on dividends, interest or royalties paid to foreign shareholders or group entities, making it one of the most favourable jurisdictions globally for profit extraction. There is no capital gains tax on the disposal of shares in UAE entities and no personal income tax on distributions received by individual shareholders.

In practice, efficient repatriation depends on more than the UAE’s domestic position. The recipient jurisdiction may tax incoming dividends or apply controlled foreign company rules regardless of what the UAE charges at source. Access to double tax treaty benefits requires genuine commercial substance in the UAE and structures must be designed with BEPS rules in mind,  particularly interest limitation provisions, anti-hybrid measures and principal purpose tests that apply in many of the jurisdictions into which UAE profits flow.

Structures that look efficient on paper can create material risk at the receiving end if these factors are not addressed at the design stage.