Want to do business in one of the wealthiest cities in the world? Then find out all the details on company setup in Dubai by reading this post.
February 14, 2025
By: Bobby Casey, Managing Director GWP
When you think of “Dubai,” what pops into your mind? Chances are, you envision a major business hub. There’s an incredible amount of wealth in the city, and if you can set up shop there, you’re golden.
Dubai has been particularly interesting for entrepreneurs because not only is there no personal income tax, there was also no corporate tax—that is, until June 1, 2023. There’s a new 9% corporate tax, but it only applies to some companies and it’s still pretty low. So it’s still worth it to look into company setup in Dubai, especially if you do your research first.
In this article, we’ll answer all the important questions regarding company formation in Dubai.
What Are the Main Types of Companies That Can Be Formed in Dubai?
You can choose from three main structures for business formation in Dubai, and each has its own legal and tax implications. They are mainland, free zone, and offshore companies.
Mainland Company
A mainland company is registered with Dubai’s Department of Economic Development (DED). You must have physical office space in the city, but you can conduct business anywhere in the UAE and internationally.
Mainland companies may need a UAE national as a local service agent, depending on the activity. As for corporate taxes, you’ll pay 9% for taxable profits exceeding AED 375,000.
Free Zone Company
A free zone company has 100% foreign ownership and no local sponsor is required. You’re limited to doing business within the free zone or internationally unless you use a UAE distributor.
What are free zones? These are also known as free trade zones and each has its own regulations regarding trade within its borders. There are over 30 of them in Dubai, including IFZA, DMCC, DIFC, JAFZA, and Dubai Internet City.
There are no customs duties on imports and re-exports for free zone companies. Also, you pay 0% corporate tax if you’re eligible under free zone tax exemption rules.
Offshore Company
An offshore company is mainly used for asset protection and international business. It’s registered in JAFZA (Jebel Ali Free Zone), RAKICC (Ras Al Khaimah), or Ajman Offshore.
You can’t conduct business within the UAE mainland. However, you won’t have to pay corporate taxes, VAT, or import/export duties.
What’s the Corporate Tax Rate in Dubai?
As we’ve said before, the corporate tax rate used to be 0%. However, as of June 1, 2023, there’s a 9% corporate tax rate on companies that make profits of over AED 375,000.
In addition, large multinational companies that make over €750 million are subject to a 15% tax under the OECD’s global minimum tax rule.
Are There Any Personal Income Taxes in Dubai?
No; as stated in a previous section, there’s no personal income tax in Dubai. You won’t have to pay taxes on your:
- Salary
- Dividends
- Capital gains
- Investment income
Are There Any Tax Benefits for Free Zone Companies?
Dubai free zone company formation can be beneficial for you as a business owner. There’s 0% corporate tax if you meet the free zone tax exemption criteria, and there are 0% import/export duties within the free zone. In addition, you’ll enjoy no withholding tax on dividends, royalties, or interest.
Free zone companies also have no foreign exchange restrictions. And there’s 100% repatriation of profits and capital. However, you don’t get all these benefits without doing anything.
To maintain the 0% tax benefit, your company must only conduct business within the free zone or internationally. You can’t deal with the UAE mainland directly either (unless it’s through a distributor). Most importantly, you must meet the “Qualifying Free Zone Person (QFZP)” criteria that’s set by UAE tax authorities.
Do I Need to Pay VAT?
Yes; Dubai follows the UAE’s VAT system, which was introduced on January 1, 2018. There’s a 5% VAT applied to most goods and services. Exemptions include:
- Healthcare
- Education
- Certain financial services
- Real estate transactions
The mandatory VAT registration threshold is annual revenue exceeding AED 375,000. The voluntary threshold is between AED 187,500 and AED 375,000.
Once registered, you must charge 5% VAT on taxable goods and services. Also, you have to keep proper accounting records for tax audits and you have to file VAT returns quarterly.
How Does Withholding Tax Work in Dubai?
The good news is that Dubai doesn’t impose withholding tax on the following:
- Dividends
- Interest
- Royalties
- Service fees
This makes it a key advantage for multinational businesses and foreign investors.
Are There Any Tax Treaties That Benefit Companies in Dubai?
Yes; in fact, there are over 140 double taxation agreements (DTAs) that the UAE has with countries all over the world. They include:
- USA
- UK
- Germany
- India
- China
- Canada
If you’re from one of these countries, then you’ll have reduced or completely eliminated withholding tax on international transactions.
How Can I Reduce My Tax Liability in Dubai?
Luckily for you, there are several tax-saving strategies you can use to lower the cost of setting up a business in Dubai.
First, you should set up in a free zone, as this qualifies you for 0% corporate tax. You should also use UAE’s DTAs, which reduce withholding tax on international transactions.
Also, if you have proper VAT planning, this will prevent unnecessary expenses. And you should always comply with the Economic Substance Regulations (ESR) to avoid penalties and audits.
What Are the Steps for Company Formation in Dubai?
The first thing you need to know is that you don’t necessarily have to be a Dubai resident to enjoy the above tax benefits. However, if you want to avoid taxes in your home country, then having tax residency in Dubai is a good idea. It’s pretty easy to do this; just stay at least 183 days of the year in Dubai or the UAE.
With that out of the way, here are the steps to set up your company in Dubai.
Choose a Business Activity
You’ve probably already done your research and know what business you want to conduct. In that case, ensure that it’s permitted in Dubai.
If it is, then you’ll want to check if it requires special licenses. For example, those in finance and healthcare will have to go through these extra steps.
Select a Business Structure
Will you want to do mainland, free zone, or offshore company formation in Dubai?
If you need help deciding, then scroll back up to read about each. That way, you can determine which applies best to your personal situation.
Choose a Trade Name
The trade name you pick must comply with UAE naming guidelines. In addition, it can’t include offensive or religious words.
Obtain Initial Approvals
If you’re starting a mainland company, then submit documents to DED. For a free zone company, send your documents to a free zone authority.
Lease Office Space
Mainland company owners are required to have a physical space in Dubai. However, free zone companies have flexible workspace options available, so that’s something to keep in mind when you’re choosing between the different business structures.
Submit Your Documents and Register
At this point, you’ll have to submit passport copies, your business plan, lease agreement, etc. After doing so, you should receive your business license.
Open a Corporate Bank Account
A corporate bank account is required for all businesses, regardless of the structure. Some banks may also request proof of business activities, so be prepared.
Company Setup in Dubai Shouldn’t Be Difficult
As you can see, Dubia is a tax-friendly destination for entrepreneurs. There’s no personal income tax, no withholding tax, and free zone tax exemptions for qualifying companies.
For the above reasons, you may want to do a company setup in Dubai. This is entirely possible, as long as you carefully manage corporate tax, VAT, and compliance requirements when setting up your business.
Get in touch with us now if you’re interested in starting a location-independent business. Global Wealth Protection can assist with properly structuring your business, getting residency, and reducing your tax obligations.
