Dubai Income Tax Treatment of Offshore Companies and Individuals
Taxation of a Dubai Offshore Company
A Dubai Offshore Company will not be subject to its foreign earned income, meaning payments from companies or persons outside of the UAE will not be subject to taxes in the UAE. In addition, the FZCO would also not pay taxes on income received from companies formed in other Dubai Free-Zones.
The FZCO will only be taxed in the UAE on its income received from mainland sources (payors from inside mailand dubai not located in Free Zones) at a 9% tax rate.
Legal basis:
The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses of the UAE, Article 3 – Corporate Tax Rate, states:
2) Corporate Tax shall be imposed on a Qualifying Free Zone Person at the following rates:
a) 0% (zero percent) on Qualifying Income.
b) 9% (nine percent) on Taxable Income that is not Qualifying Income under Article 18
of this Decree-Law and any decision issued by the Cabinet at the suggestion of the
Minister in respect thereof.
Taxation of a Dubai Mainland Company
Mainland companies are subject to a 9% income tax on its taxable income, meaning net taxable income, exceeding AED 375,000, which equals no less than US$100,000 or €95,000.
Any net taxable income above AED 375,000 will be subject to a 9% corporate income tax rate.
Personal Income Tax in Dubai
There is no personal income tax rate in Dubai, hence, your foreign-earned or your Dubai local-earned income will not be subject to income tax, this includes salary paid by your, or received from your, Dubai Offshore Company (Free Zone Incorporated).
Do you have to pay income tax or social security tax on your Salary received from your Dubai Free Zone Company?
No, foreigners are not subject to income tax, and will not be subject to Social Security payments.
What if you are a tax resident in Dubai and in another jurisdiction?
It is possible that you can be a tax resident in 2 or more jurisdictions. The UAE has signed several tax treaties to avoid double taxation, so if you truly relocate to Dubai, for double taxation purposes, you will be taxed only in Dubai.
If you get a Dubai Residency Visa, but live in another jurisdiction, hence are a tax resident of this second jurisdiction, this second jurisdiction will have the right to tax your foreign earned income, as being a tax resident in another jurisdiction will not counter being a tax resident in another jurisdiction.
Put simple, if you open a Dubai Offshore Company and get a residency visa, but live in a country or jurisdiction where you become a tax resident by exceeding the yearly threshold to become a that resident for that year, having a Dubai Residency will not counter having this second tax residency. That is why Double Taxation Avoidance Agreements exist, so you are only taxed in one of the jurisdictions you are a tax residency in.