Taxation in Dubai: A Complete Guide for International Entrepreneurs in 2025

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In a world where international mobility is becoming the norm, many entrepreneurs and professionals are choosing Dubai as their base to grow their businesses. The favorable tax system of the United Arab Emirates is one of the main attractions of this destination. At Amary, a French accounting firm based in Dubai, we support international entrepreneurs daily in understanding and optimizing their tax situation.

Dubai’s Tax System: Key Principles

No Personal Income Tax

Dubai does not levy personal income tax. This means that your salary, dividends, or rental income generated in Dubai are not taxed locally. For example, an executive earning an annual salary of $100,000 in Dubai will keep the full amount, with no direct tax deductions.

In most Western countries, that same income would be significantly reduced by taxes.

Corporate Taxation in Dubai

Corporate tax was introduced in the United Arab Emirates, including Dubai, starting June 1, 2023. This major shift applies to businesses with annual profits exceeding AED 375,000. A 9% tax rate is applied to profits above this threshold, while income below it remains tax-free.

Dubai’s corporate tax system is structured around this AED 375,000 annual threshold. Businesses earning below this amount benefit from full exemption. Accounting and financial management in Dubai must take this mechanism into account. Above the threshold, the 9% rate is applied only to the portion of profits exceeding AED 375,000, making the system particularly attractive compared to global tax standards.

• Mainland companies: Subject to 9% corporate tax on profits exceeding AED 375,000
• Free zone companies not exempt (if they operate outside their designated zone)
• Companies eligible for the Small Business Relief (SBR): With annual revenues below AED 3 million
• Businesses engaged exclusively in international activities: May benefit from sector-specific exemptions
• Government entities or entities controlled by the Emirati government
• Companies in the oil extraction and non-extractive natural resources sectors
• Non-resident investors with interests in the UAE
• Multinational corporations: Subject to the global minimum tax of 15% under the OECD agreement

The introduction of corporate tax in Dubai and the UAE has not diminished the country’s economic appeal. The 9% rate remains one of the lowest in the world. This change aligns with international standards while maintaining fiscal competitiveness. Free zone companies can still enjoy tax benefits, and the system continues to support small businesses through its AED 375,000 exemption threshold.

Free Zones: A Tax Optimization Strategy

Free zones in Dubai offer strong opportunities for tax optimization. They provide businesses with a favorable regulatory environment, including 0% corporate tax and the ability to repatriate 100% of profits. These advantages make free zones especially attractive to investors aiming to maximize profitability.

Companies established in Dubai’s free zones can benefit from tax exemptions for up to 50 years, with the possibility of renewal.

To maintain these benefits, businesses must engage in “qualifying activities” exclusively within the free zone and must not conduct commercial activities on the Emirati mainland. If non-qualifying income exceeds a certain threshold, the standard 9% corporate tax applies.

Dubai is home to more than 30 specialized free zones, each tailored to specific industries. The Jebel Ali Free Zone (JAFZA) focuses on heavy industry, the Dubai Airport Free Zone (DAFZA) supports logistics businesses, and the Dubai Multi Commodities Centre (DMCC) attracts companies in trade and finance. Each zone offers unique incentives suited to different types of businesses.

Value Added Tax (VAT) in Dubai

Introduced in 2018, the Value Added Tax (VAT) in the United Arab Emirates is set at 5%—a rate significantly lower than that of most developed economies. Many sectors benefit from exemptions or a zero rate, including:

• Financial services
• Healthcare services
• Education
• Local passenger transport
• Residential real estate (first sale only)

At Amary, we observe that this moderate VAT rate allows our entrepreneur clients to maintain competitive pricing while preserving their profit margins.

Dubai vs. International Tax Systems: Comparative Advantages

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This comparison highlights Dubai’s significant tax appeal compared to major global economic regions.

Dubaï vs Europe 🇪🇺

European tax rates are among the highest in the world, with substantial social contributions and progressive income taxes often reaching 40–50% for top income brackets. In Dubai, the absence of direct taxes allows for significantly greater savings and investment potential.

Dubai vs. North America🇺🇸

While the United States and Canada have corporate tax rates that are generally more moderate than those in Europe, they maintain a complex tax structure involving multiple layers of federal, state/provincial, and local taxes.

In comparison, Dubai offers unparalleled tax simplicity, making it a much more straightforward environment for businesses.

Dubaï vs Asia 🌏

Some Asian jurisdictions, such as Singapore and Hong Kong, offer competitive tax regimes. However, Dubai stands out with its complete absence of personal income tax and its numerous specialized free zones, providing even greater advantages for international entrepreneurs.

International Tax Obligations for Dubai Residents

The United Arab Emirates has signed tax treaties with over 100 countries to avoid double taxation. These agreements define the applicable rules for tax residency and can impact the taxation of international income.

Declarations in the Home Country

Many countries maintain reporting obligations for their expatriate citizens, even when they are no longer tax residents. These requirements vary significantly, such as:

• Some countries (such as the United States) tax their citizens on their worldwide income, regardless of their country of residence
• Others require tax declarations for several years after leaving the country
• Some only tax income generated within their own territory

At Amary, we consistently advise our clients to stay informed about their specific obligations and to keep their declarations up to date in order to avoid any risk of tax reassessment.

Taxation of Foreign-Sourced Income

If you retain income from your home country—such as rental income, capital gains, or dividends these are generally still taxable in that country, even if you are a tax resident in Dubai.

Tax Residency Criteria in Dubai

To fully benefit from Dubai’s favorable tax regime, you must establish tax residency in the United Arab Emirates and sever tax ties with your home country. The main criteria include:

• Having a permanent home in Dubai
• Spending at least 183 days per calendar year in the UAE
• Having your economic and personal center of interests in Dubai
• Not maintaining a primary residence in your home country

As many tax authorities are becoming increasingly vigilant regarding expatriation cases, we assist our clients in building a solid file that clearly demonstrates their effective tax residency in Dubai.

Tax Optimization in Dubai: Recommended Legal Structures

Depending on your business activity and objectives, different structures can be considered:

• Freezone Company: Ideal for consultants and international service providers
• Mainland LLC: Suitable for businesses requiring a strong local presence
• Offshore Company: Relevant for certain holding or investment activities

At Amary, we regularly support international entrepreneurs in choosing the optimal structure that allows them to provide their services while legally optimizing their overall tax situation.

Director’s Compensation

The balance between salary and dividends is a key lever for tax optimization in Dubai. Unlike many countries where dividends are heavily taxed, this distinction has little direct fiscal impact in the UAE.

However, the chosen compensation structure can affect:

• Visa acquisition and renewal
• Social coverage and benefits
• How the business is perceived by commercial partners

Common Pitfalls and Misconceptions to Avoid

1 - Total Tax Exemption Is Not Automatic

The absence of tax in Dubai does not automatically exempt you from all tax obligations in your home country. Dubai tax residency must be established based on clear, documented criteria.

Among the common mistakes we observe at Amary:

• Maintaining a primary residence in the home country
• Frequent and prolonged stays outside of Dubai
• Keeping the majority of economic interests in the home country
• Lack of tangible proof of a long-term settlement in Dubai

2 - Recent Legislative Developments

The international tax landscape is evolving rapidly, particularly under the influence of the OECD and its BEPS (Base Erosion and Profit Shifting) initiative. As a result, the United Arab Emirates has introduced several reforms in recent years:

• Implementation of VAT in 2018
• Introduction of Corporate Tax (CT) in June 2023 with a 9% rate for businesses earning over AED 375,000
• Strengthening of economic substance requirements
• Signing of automatic exchange of tax information agreements

At Amary, we maintain constant monitoring of these developments to adapt our guidance and protect the interests of our international clients.

How Amary Can Support You

At Amary, a French accounting firm based in Dubai, we provide tailor-made support to optimize your tax situation, including:

• Analysis of your personal and professional situation
• Advice on the most suitable legal structure
• Support with administrative procedures in the UAE and internationally
• Ongoing accounting and reporting follow-up
• Tax monitoring and regular updates to your strategy

We understand the unique challenges of international relocation to Dubai and put our expertise at your service to ensure a smooth and optimized transition.

Frequently Asked Questions About Taxation in Dubai

Do I still have to pay taxes in my home country if I live in Dubai?

That depends on your home country and its tax legislation. If you establish tax residency in Dubai by meeting the criteria mentioned earlier, you are generally no longer liable for taxes on income earned in Dubai.

However, income generated in your home country will often remain taxable there. It’s important to assess your specific situation and consult local tax laws or an expert to ensure full compliance.

How to Obtain a Tax Residency Certificate in Dubai

The UAE Ministry of Finance issues Tax Residency Certificates. We assist you throughout this process, which requires several supporting documents to be collected and submitted accurately.

Can my home country challenge my tax residency in Dubai?

Yes, many tax authorities can challenge your Dubai residency status if they believe your ties to your home country remain predominant. This is why professional support during your relocation is crucial to ensure your residency is properly established and defensible.

Will corporate tax in Dubai apply to my small business?

Since June 2023, a 9% corporate tax applies to businesses with annual profits exceeding AED 375,000 (approximately €92,000 or $100,000). Companies below this threshold—or those established in a qualifying free zone are generally exempt from this tax.

Will the OECD’s global minimum tax rules affect my business in Dubai?

The new global minimum tax rules (OECD Pillar Two) primarily apply to large multinational groups with annual consolidated revenues of at least €750 million. Most small and medium-sized enterprises (SMEs) are not directly affected. However, the regulatory environment is evolving rapidly, so it's important to stay informed.