Setting up a UAE Holding Company is a Strategic Choice

UAE Holding Company – No Dividend Income Tax

Dubai has emerged as a premier destination for international investors and entrepreneurs seeking to establish a UAE holding company. This is largely driven by the UAE’s attractive dividend income tax regime, combined with Dubai’s world-class infrastructure, regulatory transparency, and dynamic business environment.

A Tax-Efficient Holding Structure in the Middle East

With the introduction of a competitive 9% corporate tax, still among the lowest globally, the UAE continues to reinforce its standing as a global business hub. The country has adopted international standards on compliance, anti-money laundering (AML), transparency, and economic substance, aligning itself with OECD guidelines. These reforms further enhance the UAE’s credibility and appeal as a location for holding and operating cross-border businesses.

UAE Holding Company: Understanding the UAE Dividend Income Tax Regime

Under the UAE Corporate Tax Law and regulations set by the Federal Tax Authority (FTA), dividend income received by a UAE-based holding company, from both domestic and foreign subsidiaries, may be fully exempt from corporate tax through the participation exemption mechanism.

This exemption also applies to other types of qualifying income such as capital gains and management fees, provided that specific conditions and substance requirements are met.

Participation Exemption: Key Conditions for Tax-Free Dividends

To benefit from the UAE’s dividend income tax exemption, the following criteria must be satisfied:

1. Ownership Threshold
   – The holding company must own at least 5% of the subsidiary’s shares.
2. Minimum Holding Period
   – The shares must be held for 12 consecutive months or more.
3. Taxable Subsidiary
   – The subsidiary must be subject to at least a 9% corporate tax rate in its home jurisdiction.
4. Eligible Income
   – Only dividend income and capital gains qualify for the exemption. Other income types may be exempt as well, subject to meeting additional conditions and demonstrating adequate UAE substance.
5. No Double Tax Relief
   – Exempt income is not eligible for foreign tax credits. While the subsidiary may be taxed in its home country, dividends are not taxed again in the UAE.
6. Jurisdictional Compliance
   – The subsidiary must not be based in a jurisdiction with a corporate tax rate below 9%, commonly classified as a tax haven.

Beyond Dividends: Exempting Other Types of Income of a UAE Holding Company

UAE holding companies may also receive management fees, royalties, or other service-based income from subsidiaries. These can qualify for tax exemptions if the services are performed within the UAE and the company demonstrates sufficient economic substance, including staff, premises, and operational oversight.

You may find more tax details here.

Why Set Up Your Holding Company in Dubai?

• Strategic Location bridging East and West
• Business-Friendly Ecosystem with modern infrastructure
• No Withholding Tax on dividends, interest, or royalties
• Robust Legal & Regulatory Framework in line with international best practices
• Over 135 Double Taxation Treaties for enhanced global tax efficiency

Need Strategic Guidance on UAE Dividend Tax Planning?

Setting up a tax-efficient holding company in Dubai involves careful planning and in-depth knowledge of international tax frameworks. Whether you’re consolidating international assets or expanding a multinational group, our team at viiCON Consulting offers expert advice and tailored solutions to help you optimise your structure.

Contact us today to explore how Dubai can become the tax-efficient cornerstone of your global business strategy.

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