Imagine the cold shower if you suddenly discovered that Dubai's famous corporate taxes were no longer automatically zero for your company. Since the introduction of the Corporate Tax, the mistake of believing that Dubai remains an unconditional tax haven could cost you dearly, as a rate of 9 % now applies to many structures that are ill-informed about the distinction between Mainland and Free Zone. This guide details the exemption criteria that are still valid, and reveals the strategic adjustments you need to make now to protect your profitability in the face of this new tax regime. historic transformation of taxation.
Corporate tax in Dubai: the rules of the game have changed
The end of an era: the arrival of corporate tax
Forget the stereotype of an absolute tax haven. Dubai is no longer a «zero-tax» zone, and it's a 'zero-tax' zone. a major innovation that will shake things up entrepreneurs.
The axe fell on 1 June 2023. This tax now applies to tax years beginning on or after that date. This change marks a decisive turning point for the Emirates' entire business ecosystem.
Rest assured, despite this change, the taxation remains very attractive compared with Europe, and particularly with France's tax burden.
The principle: a 9% rate... but not for everyone
The standard rate is set at 9% of corporation tax. In practice, it only applies to net profits above a certain threshold. This is absolutely not indiscriminate taxation on sales.
The key threshold is AED 375,000 in annual net profit (around €93,000). Any profit below this threshold remains imposed on 0%.
The main aim of this measure is to protecting SMEs and young start-ups.
VAT, the other tax not to be forgotten
Don't forget about VAT (Value Added Tax). Its rate is 5%, in force since 2018. This is much less painful than France's (20%), but it is still an obligation.
Most goods and services are affected. However, there are significant exemptions, particularly for health, education and food.
Free zone vs. mainland: the strategic choice for your tax situation
Now that the foundations have been laid, the real question for an entrepreneur is to know where to locate your company, This is where it all comes down to it.
The mainland: freedom comes at a fiscal price
A Mainland company, registered with the Economic Department, offers a major advantage: total freedom to trade throughout the Emirates and internationally without restriction.
This freedom has a counterpart. These structures are fully subject to corporation tax of 9% as soon as profits exceed the threshold of AED 375,000.
If you are targeting the local market, you need to opt for a Mainland company with a clear head.
Free zones: the bastion of 0% under certain conditions
Free Zones are special economic zones with their own regulations. They remain the’the preferred option for foreign investors looking for an environment that is optimised for international business.
The crucial point? A Free Zone company can still benefit from a corporation tax rate of 0%. However, this exemption is no longer automatic the rules have changed.
Everything now depends on the status of «Qualifying Free Zone Person» and «qualified income». It is vital to choosing the right Free Zone for secure this tax advantage.
Conditions for staying at 0% free zone
For keep the 0% rate, In this case, rigour is the order of the day. Your company must meet strict criteria to satisfy the authorities.
Here are the rules to follow :
- Maintaining real economic substance in the Emirates (offices, employees).
- Generate «qualified income» (transactions outside the Emirates or within the Free Zone).
- No trading with the Mainland (with limited exceptions).
- Comply with the requirements of accounting and transfer pricing documentation.
Caution: trading with the Mainland puts the company in the 9% scheme for all its benefits. This is a major risk to be avoided.
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Who pays what? Details of rates and exemptions
The choice between the Mainland and the Free Zone is one thing, but the details of rates and possible exemptions are another. Let's take a closer look.
The corporation tax scale dissected
Forget the tax complexities you may be familiar with in Europe. Here, the system stands out for its binary simplicity Either you are below the profitability threshold and pay nothing, or you are above it and contribute moderately.
| Net taxable profit band (in AED) | Applicable tax rate |
|---|---|
| From AED 0 to AED 375,000 | 0% |
| More than AED 375,000 | 9% |
Note: A specific rate (OECD Pillar 2) may apply to multinationals with revenues in excess of €750m, but this is not subject to tax. does not concern the majority of entrepreneurs.
Small business relief: a lifeline for smes
Many entrepreneurs miss out on this opportunity. Small Business Relief is a massive tax relief package designed specifically for small structures. This is a major advantage for residents managing small entities, even in the Mainland.
The rule is simple: if your annual turnover remains below AED 3 million, the tax authorities consider that your taxable profit is zero. The result? You pay no tax, regardless of your actual profit. However, this tax gift is temporary and valid until the end of 2026 for the time being.
What's left for 0%: personal income and dividends
This is often where confusion reigns, so let's be clear: corporation tax makes absolutely no difference to your personal tax situation. If you are a tax resident, there is always no personal income tax in Dubai.
Better still, when your Emirati company pays you dividends, the State does not deduct a cent. Whether you are a resident or not, this income, like capital gains on disposals, remains tax-free. fully tax-exempt. This is a huge competitive advantage.
Compliance and tax residency: avoiding the pitfalls
Understanding rates is all well and good, but comply with the rules and avoid the double taxation trap, is even better. That's where a lot of people make mistakes.
New administrative obligations to be aware of
The days of lax administration are over in the Emirates. This new tax imposes a total transparency for all companies, Without exception. Even with a rate of 0 %, you can no longer dodge the paperwork.
To stay on track, here's the imperative procedure :
- Register with the FTA (Federal Tax Authority) to obtain a taxpayer number (TRN).
- Keeping detailed accounts in line with IFRS.
- File an annual tax return within 9 months of the end of the financial year.
Ignoring these steps exposes your organisation to the following risks financial penalties. A rigorous accounting remains your best defence against penalties from the federal authority.
The tax residence headache: don't play with fire
Owning a company does not make you a protected resident. This is a common misconception: the tax residence requires a real physical presence. You can't just run your business from a sofa in Paris.
The criteria are strict: you must spend more than 183 days a year on Emirati soil. You must also provide proof of permanent accommodation, a valid visa and an active bank account. Please note that the tax authorities will check whether the your economic and family interests is well out of place.
The risk of requalification by the French tax authorities
The threat of double taxation is very real. If Bercy considers that you are still a French resident, the bill will be high. Your worldwide income and the profits of your company in Dubai will become instantly taxable in France.
The tax treaty exists, but it does not validate artificial arrangements. You need to build up your case to not to be subject to an adjustment. Let us help you avoid costly mistakes from the outset of the project.
The era of automatic zero tax may be over, but Dubai is still one of the world's most attractive cities. exceptional growth lever. Success now depends on clear strategy between Mainland and Free Zone, coupled with rigorous compliance. Don't navigate by sight: expert support is essential to secure your assets and ensure the long-term future of your business.
What is the corporate tax rate in Dubai today?
From 1 June 2023, the standard rate of corporation tax is set at 9 %. However, this rate only applies to the share of net profits that exceeds the threshold of AED 375,000 (around €93,000). Below this amount, the rate remains at 0 %, which effectively protects start-ups and small businesses.
Is Dubai still a tax haven for companies?
The image of absolute «zero tax» has evolved into a more regulated but still extremely attractive tax system. While the term tax haven is technically a thing of the past for Mainland companies, Dubai remains one of the most competitive environments in the world in the world. In addition, Free Zone companies can retain a rate of 0 % if they comply strictly with the «Qualifying Income» criteria and do not trade with the local market.
Why is tax not paid in Dubai in some cases?
The absence of tax persists on several levels. Firstly, there is still no tax on personal income or dividends for tax residents. Secondly, companies eligible for Small Business Relief (turnover of less than AED 3 million) are temporarily exempt from corporation tax, as are Free Zone structures that do not operate in the Mainland.
What is the VAT rate applied to businesses in Dubai?
Value Added Tax (VAT) is set at a single rate of 5 % on most goods and services, which is very low by European standards. VAT registration becomes compulsory as soon as your business exceeds a taxable turnover of AED 375,000 over the last 12 months.
Why set up a company in Dubai despite the new tax?
Even with a corporate tax rate of 9 %, Dubai remains much more advantageous fiscally than France (25 %). The absence of employers' social security contributions, the total exemption on personal income and the ease of management make the Emirates an attractive place to do business. a powerful lever for optimising profitability and accelerate your international growth.
