What should I know before incorporating a UAE company?

Before establishing a UAE company, it is advised to look at the company structure as a whole: other group entities (if any), tax residency of the ultimate beneficial owners and the place from which the UAE company will be effectively managed (if managers do not reside in the UAE). Even though income of a UAE company is not taxable, having such company might be related to additional tax liabilities in other countries due to rules such as Controlled Foreign Corporation (CFC) or Permanent Establishment (PE).

In case a company in the United Arab Emirates is receiving passive income (such as royalties, interest, or dividends), it is also worth checking the provisions of treaty for the avoidance of double taxation with the paying country (if present). In certain cases, the paying entity might apply high withholding tax rates. Accordingly, the fact that the UAE does not apply a corporate income tax would not make the transaction tax efficient.

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