UAE Tax Guide for Entrepreneurs

The UAE does not impose any personal income tax. This means salaries, freelance income, investment returns, capital gains, and dividends received by individuals are all tax-free. This is one of the primary reasons high-net-worth individuals and entrepreneurs choose to relocate to the UAE. There is no wealth tax, inheritance tax, or gift tax at the federal level.

The UAE introduced a federal corporate tax effective from June 2023. The key rates and thresholds are:

• 0% on taxable income up to AED 375,000 — supporting small businesses and startups.
• 9% on taxable income above AED 375,000 — one of the lowest rates globally.
• Free zone companies can maintain a 0% rate on qualifying income if they meet substance requirements and do not derive income from mainland UAE business.
• Large multinationals with global revenue exceeding EUR 750 million may be subject to a 15% minimum tax under OECD Pillar Two.
• Transfer pricing rules apply to related-party transactions and must be documented.

VAT was introduced in the UAE on 1 January 2018 at a standard rate of 5%. Businesses with taxable supplies exceeding AED 375,000 must register for VAT. Registration is optional for businesses with taxable supplies between AED 187,500 and AED 375,000. Most goods and services are subject to the 5% rate, though certain categories (healthcare, education, first sale of residential property) are either zero-rated or exempt.

Qualifying free zone entities can benefit from a 0% corporate tax rate on qualifying income. To qualify, the business must: maintain adequate substance in the UAE (staff, assets, decision-making), derive qualifying income (generally income from transactions with entities outside the UAE or with other free zone entities), and comply with transfer pricing regulations. Non-qualifying income (e.g., direct business with mainland UAE) is taxed at the standard 9% rate.

The UAE has signed double taxation avoidance agreements (DTAs) with over 100 countries, including the UK, France, Germany, Netherlands, Italy, and Spain. These treaties help prevent the same income from being taxed in both the UAE and your home country. They also provide mechanisms for reduced withholding tax rates on dividends, interest, and royalties. Proper tax structuring using these treaties is essential for entrepreneurs maintaining interests in multiple jurisdictions.

While the UAE is highly tax-efficient, entrepreneurs should consider their global tax obligations. Many countries tax their residents on worldwide income, and simply relocating may not immediately remove those obligations. Key planning areas include: establishing genuine tax residency in the UAE (183-day rule), properly severing tax residency in your home country, substance requirements for UAE companies, and the interaction of UAE structures with home-country controlled foreign company (CFC) rules. Professional tax advice is essential.