Company Formation in Dubai and the UAE
Mainland, free zone or offshore — chosen after we know where the account will open and where you are tax resident, not before.
Information as of October 2026. Rules change often — confirm the current position with us before acting.
The UAE is the most-used jurisdiction in our practice, and also the one most often chosen for the wrong reasons. Since June 2023 it is no longer a zero-tax country, free-zone status is conditional rather than automatic, and the rules changed again in 2024 and 2025. What follows is the current position, with the parts that matter for EU-resident and India-resident owners set out separately.
| Position as at 2026 | |
|---|---|
| Corporate tax | 9% on taxable income above AED 375,000; 0% below. Qualifying Free Zone Persons keep 0% on qualifying income only |
| Personal income tax | None |
| VAT | 5% |
| Withholding tax on outbound dividends | None |
| Foreign ownership | 100% permitted for over a thousand activities; eight strategic sectors remain restricted |
| Audit | Required for most entities |
| Residence visa through the company | Yes — investor and employment routes |
| Apostille | Not available — the UAE is not a party to the 1961 Hague Convention; full consular legalisation applies |
| Our fee | From $2,700 |
Mainland, free zone or offshore: three different animals
Mainland
A mainland company is licensed by the emirate’s economic department and may trade anywhere in the UAE, including with government entities. Federal Decree-Law No. 32 of 2021 governs commercial companies. Foreign ownership was liberalised for more than a thousand activities; the exceptions are the eight strategic-impact sectors listed in Cabinet Resolution No. 55 of 2021 — security and defence; banks, exchange houses and finance companies; insurance; currency printing; telecommunications; Hajj and Umrah services; Quran memorisation centres; and fishing-related activities.
A mainland company pays 9% corporate tax above the AED 375,000 threshold. There is no free-zone relief to lose, which for many owners is a feature rather than a defect: the compliance position is simpler and does not depend on annually re-qualifying.
Free zone
A free-zone company is licensed by its zone authority. The commercial attraction is the 0% rate available to a Qualifying Free Zone Person, but that status is conditional and is easy to lose. Cabinet Decision No. 100 of 2023 requires adequate substance in the zone: the core income-generating activity carried on there, adequate assets, an adequate number of full-time qualified employees, and adequate operating expenditure. Outsourcing is permitted with adequate supervision.
The list of qualifying and excluded activities is now in Ministerial Decision No. 229 of 2025, issued on 28 August 2025 and applying retrospectively from 1 June 2023. It replaced Ministerial Decision No. 265 of 2023 — a point worth checking against any material you have read elsewhere, because most published guides still cite the repealed decision.
The de minimis rule and the four-year penalty
Non-qualifying revenue must not exceed 5% of total revenue or AED 5 million, whichever is lower. Breach it and the company ceases to be a Qualifying Free Zone Person from the start of that tax period — and stays disqualified for the following four tax periods. This is the single most expensive detail in the free-zone regime and the one clients are least often told about.
Offshore
An offshore vehicle (RAK ICC, JAFZA Offshore) cannot trade inside the UAE, does not obtain a residence visa and is used as a holding or asset-ownership layer. It is not a substitute for an operating company, and banks treat it with more caution than a licensed free-zone or mainland entity.
Corporate tax: what the 9% actually covers
Federal Decree-Law No. 47 of 2022 applies to financial years beginning on or after 1 June 2023. The rate is 0% up to AED 375,000 of taxable income and 9% above it, set by Cabinet Decision No. 116 of 2022.
Participation exemption
Gains on the sale of shares fall within the tax base but are exempt under Article 23 if the conditions are met: a holding of at least 5% (or an acquisition cost of at least AED 4 million under Ministerial Decision No. 302 of 2024), a continuous holding period of at least 12 months, taxation of the participation at a rate of at least 9%, and an asset test. This is what makes a UAE holding company workable for a group with operating subsidiaries elsewhere.
Group relief and restructuring
Article 26 provides qualifying group relief where there is 75% direct or indirect common ownership; Article 27 provides business restructuring relief where the transfer is for valid commercial reasons. Both carry a two-year clawback: the relief is lost if assets or shares leave the group within two years.
The 15% minimum tax for large groups
Cabinet Decision No. 142 of 2024 introduced a domestic minimum top-up tax of 15% for multinational groups with consolidated revenue of at least EUR 750 million in at least two of the four preceding financial years, for financial years beginning on or after 1 January 2025. The UAE has not adopted the income inclusion rule or the undertaxed profits rule. If your group is below the threshold — as almost every privately held structure is — this does not apply to you, and anyone raising it as a general concern is padding.
Transfer pricing
Articles 34 to 36 impose the arm’s length principle. A master file and local file are required where group revenue reaches AED 3.15 billion or the taxpayer’s own revenue reaches AED 200 million; documentation must be produced within 30 days of a request. The related-party disclosure form is filed with the return, within nine months of the year end, where transactions with related parties exceed AED 40 million in aggregate.
Residence, tax residence and the certificate
A UAE residence visa and UAE tax residence are two different things, and confusing them is the most common and most expensive mistake we see. The visa lets you live here. It does not, by itself, make you tax resident anywhere or stop you being tax resident where you came from.
Cabinet Decision No. 85 of 2022, in force since 1 March 2023, sets the domestic test. An individual is UAE tax resident if any one of three conditions is met: their usual or principal place of residence and centre of financial and personal interests is in the UAE; they were physically present for 183 days or more in any consecutive 12 months; or they were present for 90 days or more, are a UAE national, UAE residence-visa holder or GCC national, and have a permanent home or carry on employment or business in the UAE.
Ministerial Decision No. 27 of 2023 clarifies the mechanics: all days and parts of days of physical presence count, they need not be consecutive, and a permanent home may be rented — ownership is not required.
The tax residency certificate is issued by the Federal Tax Authority through the EmaraTax portal. Fees are AED 50 to submit, AED 500 to AED 1,750 to process and AED 250 for a printed copy. Where a treaty applies, the treaty definition of residence overrides the domestic one.
Where a UAE company itself is tax resident
A company incorporated in the UAE, including in a free zone, is UAE tax resident. A foreign company can be treated as UAE tax resident where its place of effective management is here. The reverse is equally true and rather more dangerous: a UAE company run day to day from Munich, Milan or Mumbai can be treated as tax resident there. Substance in the UAE is not a formality — it is what keeps the structure in the country you chose.
Substance, beneficial ownership and reporting
Economic substance regulations have ended, the requirement has not
Cabinet Decision No. 98 of 2024 removed the obligation to file economic substance notifications and reports for financial years ending after 31 December 2022. Obligations for earlier periods, the authority’s power to request information and liability for penalties already imposed all survive. The substance requirement itself simply moved into the corporate tax regime, where it now conditions free-zone status.
Beneficial ownership
Cabinet Decision No. 109 of 2023 has applied since 16 November 2023. A beneficial owner is an individual who directly or indirectly owns at least 25% of the capital or voting rights, or has the right to appoint a majority of directors; failing that, whoever controls by other means; failing that, the person holding the senior management position. Companies maintain three registers — shareholders, beneficial owners and nominee directors. First disclosure is due within 60 days, changes within 15 days, and responses to registrar requests within 14 days. Repeated breaches can lead to licence suspension. DIFC and ADGM operate their own regimes.
Information exchange
The UAE has operated the Common Reporting Standard since 2017, ratified the multilateral competent authority agreement by Federal Law No. 48 of 2018 and the mutual administrative assistance convention by Federal Law No. 54 of 2018. It has a Model 1B FATCA agreement with the United States, which is non-reciprocal. The practical consequence is straightforward: a UAE account held by someone tax resident in an EU Member State or in India is visible to that country’s tax authority independently of what the client reports.
For EU nationals and EU-resident owners
The UAE is not on the EU list of non-cooperative jurisdictions. It was removed from Annex I on 10 October 2019 and appears on neither annex in the current list adopted by the Council on 17 February 2026. That removes the defensive measures that apply to listed jurisdictions — but it does not remove the rules that operate in your own Member State.
Controlled foreign company rules are national, not European
The Anti-Tax Avoidance Directive (EU) 2016/1164 sets a floor, not a uniform rule. Article 7 catches an entity where you hold more than 50% of votes, capital or profit entitlement and the tax it actually pays is less than half of what would have been charged in your Member State. Each Member State then chose either the categorical passive-income model or the non-genuine-arrangement model, and set its own thresholds. There is no single European CFC rule, and any adviser who describes one has not read the directive.
| Member State | Provision | Low-tax test |
|---|---|---|
| Germany | §§ 7–14 AStG | Effective rate below 15% — reduced from 25% with effect from 1 January 2024 |
| France | Article 209 B CGI | Foreign tax 40% or more below the French charge (Article 238 A CGI). The 50% control threshold drops to 5% in anti-fragmentation cases |
| Spain | Article 100 LIS | Foreign tax below 75% of the Spanish charge |
| Italy | Article 167 TUIR as amended by D.Lgs. 209/2023 | Effective foreign rate below 15%, plus a passive-income test of more than one third; optional 15% substitute tax |
A UAE company paying 9% — or a Qualifying Free Zone Person paying nothing — will frequently fail the German and Italian low-tax tests. Whether that matters depends on whether the substance carve-out applies, which is precisely why the substance discussion above is not academic.
Leaving your Member State is not the same as arriving here
Three national rules catch people who move to Dubai and assume the matter is closed.
- Germany — § 2 AStG extends limited tax liability for ten years where a German national was subject to unlimited liability for at least five of the previous ten years, moves to a low-tax country and retains substantial economic interests in Germany. The UAE is a textbook low-tax country for this purpose. Separately, § 6 AStG imposes exit tax on shareholdings of 1% or more.
- Italy — Article 2(2-bis) TUIR presumes that an Italian citizen who deregisters and moves to a State on the list in the Ministerial Decree of 4 May 1999 remains Italian tax resident. The UAE is on that list. The presumption is rebuttable, but the burden is on you, and it is the most aggressive of the rules examined here.
- Spain — Article 8.2 LIRPF keeps Spanish nationals taxable for the year of the move and the four following years, but only where the destination is on the Spanish list under Order HFP/115/2023. The UAE is not on it, so a Spaniard moving to Dubai is not caught by this rule.
Portugal’s list under Portaria 150/2004, as amended in 2025, does include the UAE, with consequences under Portuguese domestic law. National lists move: Seychelles came off the Spanish list on 28 June 2026 and Hong Kong came off the Portuguese one. Check the position on the date you act, not the date an article was written.
Reporting and disclosure
DAC6 (Directive (EU) 2018/822) requires reporting of certain cross-border arrangements within 30 days, primarily by intermediaries. Hallmark D catches arrangements that undermine CRS reporting and opaque ownership chains, and applies without any main-benefit test. DAC8 (Directive (EU) 2023/2226) extended automatic exchange to crypto-assets from 1 January 2026 — relevant if you hold crypto through a UAE entity.
One thing you may have read that is wrong
The “Unshell” directive (ATAD 3) is not law and is not pending. The Council concluded in June 2025 that work should not continue, and the Commission signalled withdrawal in its 2026 work programme, with the substance to be folded into DAC6.
For Indian residents
For a person resident in India, incorporating in the UAE is an exchange-control transaction before it is a tax question. The Foreign Exchange Management (Overseas Investment) Rules and Regulations 2022 have applied since 22 August 2022, consolidated in the Reserve Bank’s Master Direction on Overseas Investment. Getting the sequence wrong is not a technicality: the bank cannot remit until the paperwork is right.
What a resident individual may and may not do
- Overseas direct investment is permitted within the overall Liberalised Remittance Scheme limit of USD 250,000 per financial year. Acquisitions by gift or inheritance are not counted against it.
- The foreign entity must be an operating entity carrying on bona fide business, and must not have a subsidiary or step-down subsidiary in which the resident individual has control. Where a resident individual has invested without control and the entity later acquires a subsidiary, the individual may not then acquire control.
- No ODI is permitted into a foreign entity engaged in financial services activity.
- Rule 19(1) prohibits, for every person resident in India, real estate activity — buying and selling real estate or trading in transferable development rights — as well as gambling and rupee-linked financial products without approval. Development of townships, residential or commercial premises, roads or bridges for sale or lease is expressly outside that definition.
- A no-objection certificate is required first if the client’s account is an NPA, they are a wilful defaulter, or they are under investigation by a regulatory or investigative agency.
Sequence and deadlines
| Step | Requirement |
|---|---|
| Before any remittance | Form FC filed with the authorised dealer bank and a Unique Identification Number obtained. The bank cannot remit without it. A UIN is not an RBI approval |
| Routing | All transactions through a single designated authorised dealer bank |
| Annual filing | Annual Performance Report for each foreign entity by 31 December, on audited accounts; certified by a chartered accountant where statutory audit does not apply. Not required where the individual holds under 10%, has no control and no other financial commitment |
| Disinvestment | Proceeds reported within 30 days of receipt |
| Late filing | Late Submission Fee of ₹7,500 plus 0.025% × amount × years of delay, capped at the amount involved; available for up to three years from the due date |
The cost of the remittance itself
Tax collected at source applies to remittances under the Liberalised Remittance Scheme above ₹10 lakh in aggregate per financial year — a threshold raised from ₹7 lakh with effect from 1 April 2025. For remittances for investment purposes, including capitalising a UAE company, the rate on the excess is 20%, and the Finance Act 2026 left it untouched even while cutting the education and medical rates to 2% from 1 April 2026. The tax is creditable against your income tax liability and refundable if excess, but it is real cash out of the door at the moment of transfer.
Round-tripping
Rule 19(3) no longer prohibits investing back into India outright. It prohibits a financial commitment in a foreign entity that has invested or invests into India where the result is a structure with more than two layers of subsidiaries. Within that limit the automatic route applies; beyond it, prior Reserve Bank approval is needed. How the layers are counted remains genuinely unsettled in law, not merely unclear to us — so we structure conservatively rather than test it. Note also that even a compliant two-layer structure still meets the Schedule III bar on a resident individual holding control in an entity with a subsidiary.
Where you are tax resident, and where your company is
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the 1961 Act. Anything written in the old section numbering is now wrong for the current tax year. Residence is in section 6: 182 days, or 60 days plus 365 days across the four preceding years, with the 60 days read as 120 for a visiting Indian citizen or person of Indian origin whose non-foreign income exceeds ₹15 lakh. Section 6(7) deems an Indian citizen resident, regardless of days, where non-foreign income exceeds ₹15 lakh and they are not liable to tax anywhere else by reason of domicile or residence.
That last rule is why the UAE tax residency certificate matters commercially rather than decoratively. Under Article 4 of the India–UAE treaty as amended by the 2007 protocol, an individual is UAE resident if present here for at least 183 days in the calendar year.
Not-ordinarily-resident status is the practically important one: a person who was non-resident in nine of the ten preceding tax years, or present for 729 days or less in the preceding seven, is outside the Indian net on foreign income — unless that income is derived from a business controlled from India. Which is the same factual question as place of effective management under section 6(10), where a foreign company managed from India becomes Indian tax resident on its worldwide income. Guidance under Circular No. 6 of 2017 and the ₹50 crore turnover carve-out in Circular No. 8 of 2017 have not, to our knowledge, been formally re-issued under the 2025 Act — we treat the carve-out as applicable in practice but not as settled.
Disclosure
Schedule FA in the Indian return must be completed by a resident and ordinarily resident, on a calendar-year basis rather than the Indian financial year — a frequent source of error. It covers foreign accounts, shareholdings, immovable property, signing authority and trust interests, whether or not any income arises.
The Black Money Act is not a theoretical risk
Undisclosed foreign income and assets are taxed at 30% under section 3 of the 2015 Act, with a penalty of three times that amount under section 41. Sections 42 and 43 impose a flat ₹10 lakh penalty for failing to disclose a foreign asset, subject to a carve-out where non-immovable assets total ₹20 lakh or less, introduced with effect from 1 October 2024. Prosecution under sections 49 and 50 carries rigorous imprisonment of six months to seven years. The CBDT has run successive compliance campaigns using automatic exchange data — in the first, 24,678 taxpayers disclosed ₹29,208 crore of foreign assets. The department sees the account before you file.
The treaty
| Payment | India–UAE rate |
|---|---|
| Dividends | 10% |
| Interest | 5% where the lender is a bank or similar financial institution; 12.5% otherwise |
| Royalties | 10% |
| Fees for technical services | No separate treaty provision — falls to business profits and domestic law |
The treaty entered into force on 22 September 1993 and was amended by protocols in 2007 and 2013, the 2007 protocol adding a limitation-of-benefits article. Claiming treaty relief requires a tax residency certificate and the prescribed form — renumbered from Form 10F to Form 41 under the 2026 rules.
How the process runs
| Stage | What happens | What we need from you |
|---|---|---|
| 1. Scoping | Activity, ownership, where the revenue comes from, where you are tax resident. Several options usually fall away here | A description of the business and the plan |
| 2. Banking outlook | We assess where an account is realistically openable for this beneficial owner before anything is filed | Passports, residence status, source of funds |
| 3. Structure and licence | Mainland, free zone or offshore; activity list; share capital; visa quota | A decision on the comparison |
| 4. Incorporation | Name reservation, initial approval, memorandum, licence issue, establishment card | Notarised documents, KYC forms |
| 5. Visa and Emirates ID | Entry permit, medical, biometrics, residence stamping | Personal attendance in the UAE |
| 6. Account opening | Business-model narrative for compliance, signatories, banking mandate | Contracts, invoices, description of flows |
| 7. Ongoing | Corporate tax registration and returns, VAT where applicable, audit, UBO register, licence renewal | Source documents |
Timelines vary by zone and activity; we quote them for your specific case rather than in general. Consular legalisation of foreign documents should be started early — because apostille is not available for the UAE, this step is routinely the longest item on the critical path.
Banking
A company without an account solves nothing, and the bank assesses the beneficial owner rather than the jurisdiction of incorporation. Nationality, tax residence, source of funds, the geography of your counterparties and the currency of settlement all drive the outcome. The same free-zone licence in two different pairs of hands clears compliance with very different probability.
We assess this before incorporation, not after, and we do not sell “company with bank account” as a package. Where the outlook is poor we say so while you can still change the plan.
When the UAE is not the answer
It is a poor fit where the business is genuinely run from an EU Member State or from India and no real management will move — the place-of-effective-management rules will simply relocate the company back. It is a poor fit where the activity is financial services and the owner is an Indian resident, because the ODI rules bar it outright. It is a poor fit where the plan depends on documents being apostilled quickly. And it is a poor fit where the only reason for choosing it is the headline rate, since a free-zone 0% that fails the de minimis test costs more than a mainland 9% that never had to qualify.
It is a strong fit where you are genuinely relocating, where the counterparties are in the Gulf, Asia or Africa, where a residence visa is part of the objective, and where the group can support real substance in the country.
Frequently asked questions
How much does it cost?
Is the UAE still a zero-tax country?
What is the difference between a free zone and the mainland?
Do I need to live in the UAE?
Does a residence visa make me UAE tax resident?
I am an EU citizen. Will my home country tax the UAE company?
I am moving from Germany or Italy to Dubai. Is that clean?
I am resident in India. Can I simply set up a Dubai company?
Will India tax my Dubai company?
Is the UAE on any blacklist?
Do I need an apostille on my documents?
Is my ownership confidential?
Do I still need to file economic substance reports?
Can I open the company remotely?
What if the UAE turns out to be the wrong choice?
Compare with the other jurisdictions
Choosing between two or three options is normal at this stage. Each page below sets out the same ground — tax, audit, reporting, residence and the rules that apply where you are resident — so the comparison is like for like.
Or start from the full comparison of all six, which sets them side by side on tax, audit, residence and EU list status.
Let us look at your situation
Tell us where you are tax resident, where your counterparties are and what the money is for. We will tell you whether the UAE fits — and if it does not, which of the alternatives does.